An already very bad dream just got worse for Britain’s food retailers. Their world has already been turned upside down, the major players very much responding to the the tune of the discounters. There are too many stores, and having failed to learn how to be good enough at selling non-foods, the economics of large stores in particular are often compromised. We have now had 12 consecutive months of price deflation, averaging around -7% yoy across the total product offer. And the first 6 months of the year saw the total value of spend down on last year. So waking up to find that Amazon is about to enter the UK market is less than welcome news.
Some might take comfort from the fact that Amazon seem to be entering the UK market very early. After all, its various food retail trials across the US are still exactly that – trials. The company has clearly yet to master the challenges of a totally different market to the books, music and films it is built on. Some may think they will never make money in food but this misses the point.
There is clearly no growth in the food retail market right now, nor will there be for some time. The value players are investing massive sums in growing their businesses and this alone will deliver them market share growth. That growth might be a bit slower than it has been in recent years, but they will be winning more share than they already have. Amazon will be another mouth to feed and however challenging it finds food retailing, it will take market share from existing players. Even before the market has learned to deal effectively with the discounters’ disruption, Amazon will emerge to create still more.
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