Amazon UK to expand grocery range as supermarkets look on warily

Online retailer has announced it is adding thousands more products to its Pantry service, as big four struggle with changing shopping habits

 Christopher North, UK boss of Amazon, said Black Friday was ‘phenomenal’ this year. Photograph: Linda Nylind for the Guardian

Graham Ruddick

Tuesday 29 December 2015 01.00 ESTLast modified on Tuesday 29 December 201502.13 EST

Amazon is preparing to crank up the pressure on Britain’s struggling supermarkets by dramatically expanding the range of grocery products it sells. Christopher North, the UK boss of the online retailer, has said it plans to expand its Pantry service rapidly in the new year.

The news that Amazon is to ramp up its grocery delivery business will come as a blow to the “big four” supermarket chains – Tesco, Asda, Sainsbury’s and Morrisons – which are already under pressure as a result of changing shopping habits. Large grocers have been battling falling sales as households abandon the weekly shop in favour of discount supermarkets, regular local top-up shopping and online ordering.

Amazon Pantry, which launched in November, allows customers to buy from a range of 4,000 grocery and household products, from big brands such as Kellogg’s, Ariel , Colgate and Kronenbourg.

The service allows households to quickly stock up on items, with Amazon charging £2.99 for one delivery of a large box. North said the company now plans to add thousands of extra goods. “We are really happy with the early numbers,” he told the Guardian. “In the new year we are going to be adding a lot more products.”

Pantry does not sell fresh food but the venture’s success could pave the way for the launch of the Amazon Fresh service in the UK. At present the company only offers the full grocery service on the west coast of the US and in New York, but there is speculation it could launch in London.

North said: “When we believe we have got the offer right, and the economics, we will roll it out internationally.”

The expansion of Pantry comes on the back of a productive year for Amazon in the UK. It enjoyed a record day on Black Friday, generating 7.4m orders compared with 5.5m last year. It also reportedly added millions of users to its Prime membership scheme – and signed up Jeremy Clarkson to a new series that will launch on its video streaming service next year.

North said Black Friday was “phenomenal” for Amazon. “We were a little nervous going into the day, it was a hard record to beat,” he said. “I don’t know how it worked offline versus online, but we have spent six years working out how to hold great Black Friday events. The consistency year in and year out has been important.”

North said the company’s Prime service, which offers one-hour delivery in major cities, had been a key factor of its success on Black Friday, and it will also be expanded in 2016.

“The themes of speeding up delivery, bringing a more diverse range of products, and investing in our digital offering are the biggest areas for Prime,” he said.

Despite Amazon’s growth, North could not confirm whether the company will pay more corporation tax in the country in 2016.

Amazon revealed in May that it would start recording UK sales in the UK rather than Luxembourg, the home of its European headquarters. It came after the chancellor, George Osborne, announced a diverted profits tax that imposes a 25% levy on groups deemed to be artificially routing profits overseas.

The company has always claimed that the Luxembourg structure was not tax motivated but was due to the fact that it uses 29 warehouses across Europe to deliver its range of 150m products to UK customers.

North insisted that customers had driven the change to the corporate structure, rather than tax policy. “The motivation for the branches is the requirement to get closer and closer to customers and bring the best innovations to them,” he said. “We are constantly looking at our structure and making sure we are serving customers the best way possible.”

When asked whether Amazon will pay more tax in the UK as a result of the change, North said: “I don’t want to speculate on that.”

The group made $8.3bn (£5.6bn) of sales from British online shoppers last year, but Amazon.co.uk Limited recorded just £679m of sales, £34m of pre-tax profit, and paid £11.9m in tax.

“The way I think about it is the thing that dictates what any company pays is the amount of profit they make,” North said. “As our profits continue to be low and we continue to make heavy investment our taxes will be based on those profits.”