--- Updates with more detail, broker comment and share price ---
As if the UK grocery market wasn't hot enough, the world’s biggest online retailer, Amazon.com Inc (NASDAQ:AMZN) has now launched its much anticipated supermarket service here.
Initially, it will only be available in London, but the group has plans to roll out Amazon Fresh throughout the UK.
Such a service has been running in the US since 2007.
Online food shopping has revolutionised the supermarket landscape in the last few years.
The so-called big four - Tesco PLC (LON:TSCO), J Sainsbury plc (LON:SBRY), Wal-Mart Stores Inc's Asda (NYSE:WMT) and WM Morrison Supermarkets PLC (LON:MRW) all offer such an option.
But they now face growing competition from online rivals and are unlikely to welcome a heavyweight such as Amazon into the market.
As well as dealing with the uptake of online services such as Ocado PLC (LON:OCDO) , the big four also have been trying to fend off competition from increasingly popular discounters like Lidl and Aldi.
The online market is forecast to double to be worth £17.2bn in the five years to 2020, according to one industry research group.
Jamie Constable at broker N+1 Singer said: “I see the market remaining fine for the convenience stores but for the supermarkets it’s a bit like the M&S story, ie. overspaced and seeing core sales attrition as the online operator(s) eat into their market.”
Amazon has long offered dried foods, and grocery options, but started the fresh food service in 2007 in the US.
There has been speculation that it could buy a rival such as Ocado to kick-start its move into the UK market.
Ocado has taken time to establish itself and analysts voiced concerns about whether its business strategy of picking products from its own warehouses, rather than stores as the supermarkets do, would ultimately work.
Amazon has taken another route by striking a wholesale deal with Morrisons earlier this year, allowing it to sell Morrisons fresh food as well as products from local producers.
Shoppers can choose from 130,000 products, including fresh fruit and veg, at prices Amazon claims will be more competitive than the main grocers.
Amazon Prime members in the UK pay an annual subscription of £79.
They can also sign up for a 30-day trial of Amazon Fresh.
Sainsbury's shares nudged 0.6% higher in early deals; Morrison's lost 0.16% and Tesco shed 0.12%.
Shares in Amazon rose US$1.22 to US$727.86 in early Wall Street trading.