Wm Morrison Supermarkets PLC (LON:MRW) has broadened its relationship with online shopping behemoth Amazon.com Inc (NASDAQ:AMZN) to offer a service called “Morrisons at Amazon”.
Amazon Prime customers in selected areas of London and Hertfordshire can now order Morrisons goods online via the ‘Prime Now’ app. Orders will be picked at a local Morrisons store and delivered same day by Amazon.
The new offering broadens the Morrisons wholesale supply services available to Amazon customers. Morrisons wholesale supply to Amazon launched in June and has started well, the supermarkets group said.
Morrisons said the new agreement would not require a lot of capital investment on its part and would contribute to the £50mln-£100mln “incremental profit opportunity” it outlined in its full-year results statement back in March.
Clive Black, retail analyst at Shore Capital Markets, said the announcement “suggests that Morrisons' initial experiences with Amazon (and vice versa) have been encouraging, whilst the store based retailer's broader ambitions and capabilities online appear to be extending”.
Black added that this development might not please Ocado Group PLC (LON:OCDO), which also has a home-delivery tie-up with Morrisons. Ocado’s shares were down 4.8% in the first hour of trading following the announcement from Morrisons.
Black described the Amazon deal as “a new dimension that extends, deepens and enables Amazon's online capabilities in the convenience market whilst doing the same for the Morrisons brand in many respects too”.
“We also point out that with its low market share and especially shallow reach in London and the South East, through Amazon Prime customers, the Morrison brand can gain welcome extension. If successful, this arrangement should help store volumes, so leverage, whereas the initial agreement utilised Morrison factory and distribution centre to service Amazon's facilities,” Black said.
“If successful, it could also catapult Morrison's access to the convenience market where it has no physical presence,” Black noted. Morrisons sold its 140 M local convenience stores just over a year ago for around £25mln in cash.
Shares in Morrisons rose 0.5% on the news.