Amazon price matching Tesco is a bold step in its grocery ambitions

Anyone who has been into a Tesco supermarket or Express store recently can’t have missed the eye-catching discounts being offered to Clubcard members. Simple ‘money off’ discounts have always been shoppers’ preferred promotion mechanic, and with deep discounts to match, consumers will find these offers extremely appealing.

Now Amazon has decided to price match Tesco on hundreds of products each week, including Clubcard deals, for those subscribing to its Fresh service.

There are several interesting points at play here. Not many retailers are willing to take on Tesco, and certainly not on price. Amazon has done both.

Supermarkets like to position themselves as ‘consumer champions’, but Amazon may have decided the time is right to stride ahead with its own grocery ambitions via a shopper ‘landgrab’, with price supporting its existing customer service credentials. Grocery turnover at Amazon is already well over £1bn a year throughout its entire operation. Its supply chain is solid. 

Its Amazon Fresh service is not yet national, but it is available in several major cities including London, Leeds, Sheffield and Newcastle. And Amazon is encroaching on many traditional grocery channels – whether that’s through cashless payment technology, selling products into convenience stores or opening its own retail estate (19 and counting).

This ‘small-scale’ activity inevitably underpins some very bold ambitions, which shouldn’t be underestimated.  Amazon has other super-strengths that support its bold move to price match Tesco. The customer experience is second to none and Amazon invented ‘frictionless’. So that’s a big tick for price/value and another for customer experience. Amazon’s relentless use of data drives their ‘customer obsession’ focus to deliver results. It’s interesting to note that Tesco is focusing on its Clubcard programme, and Morrisons has recently reviewed its loyalty programme. Data is king for those who have it and use it best.

The significance of this move is highlighted by research conducted by TWC a year ago, which revealed something quite seismic – younger consumers told us they envisage a time when they won’t need or want to shop in supermarkets again, doing all or most of their shopping either online or in local physical outlets, not in supermarkets/superstores of old.

How far can Amazon go? TWC executives last year calculated Amazon could become the sixth-largest supermarket in the UK. For this to happen, each Amazon Prime customer would only need to do one £40 grocery shop a month with Amazon. Some might argue it’s a case of when, not if.

But this is not a given. Just when we thought nothing could stop Amazon’s onward progress to unlimited success, research from TWC out this month has revealed a reasonable build-up of ‘Marmite’ appeal (love/avoid). Younger consumers and Londoners – historically its core market – over-index in avoiding Amazon.

Maybe Amazon has reached the ‘too big’ tipping point for some? But price matters a lot to shoppers when times get tough economically – and taking the battle to Tesco will encourage shoppers to switch their shopping habits. Amazon is flexing its muscles and gaining publicity. It’s all to play for.