Amazon (AMZN) is to offer free grocery delivery to UK customers through its Amazon Fresh service.
Amazon Prime subscribers will be able to order groceries through Amazon Fresh, with free delivery on orders over £40 ($51), from Tuesday.
The service will be available to customers in around 300 postcodes, covering London and the South East of England. Amazon said this will be expanded to millions more across the UK by the end of 2020.
Amazon also said it will speed up delivery times to make same-day delivery available to grocery customers in more than 40 postcodes across the south-east.
The Amazon Fresh service offers tens of thousands of grocery items supplied by Whole Foods (WFM) and high-end UK supermarket chain Booths, as well as a many brand suppliers such as Pepsi (PEP), Danone (BN.PA), Warburtons and Britvic (BVIC.L).
The move poses a challenge to UK supermarkets as online grocery sales surged during the coronavirus lockdown, as more shoppers wanted food to be delivered to their doors.
Amazon is looking to cash in on the record growth in supermarket sales during lockdown as the market expanded at its fastest rate since records began.
The supermarket sector grew by 16.9% between mid-April and mid-July, market research firm Kantar said last week, marking the fastest growth since Kantar began monitoring the industry in 1994.
Online grocery sales surged by 92% in the last month, as Amazon looks to rapidly expand its grocery delivery business across the UK.
Ocado (OCDO.L), the biggest name in the space, grew its market share from 1.4% to 1.7% between mid-April and mid-July. Ocado shares fell in the immediate open on Tuesday morning as Amazon revealed its free delivery service, but later recovered.
Kantar said the “Big Four” supermarkets all experienced strong sales growth during lockdown, with Morrisons (MRW.L) sales rising by 17.4%, Tesco (TSCO.L) sales up 15.1%, Sainsbury’s (SBRY.L) sales climbing 13.5% and Asda up 11.0%.
Russell Jones, country manager at Amazon Fresh UK, said sales have been “particularly strong” following the lockdown, but stressed that the latest move had been in the works long before coronavirus hit the UK.
Jones said: “Prime members love the convenience of grocery delivery at home, which is why we’ve made Amazon Fresh a free benefit of Prime.
“Grocery delivery is one of the fastest growing businesses at Amazon and we think this will be one of the most-loved Prime benefits in the UK.
“We will keep improving the grocery shopping experience so by the end of the year, millions of Prime members across the UK will have access to fast, free delivery of groceries.”