Could Amazon’s collaboration with Morrisons be detrimental?

Marsh Mills Plymouth 13 March 2009

By Bradley Walker

The new partnership between Amazon and Morrisons has the right to startle competitors. Amazon already dominates the online shopping market, and has its foot in many doors; providing next day delivery and an online streaming service through Amazon Prime, creating their own tablets and e-readers and offering an alternative online music service. The service however has struggled to provide a consistent grocery delivery service that would allow them to deliver perishable goods. By teaming up with Morrisons, Amazon avoids this challenge completely as the supermarket chain already have an established business, producing a variety of their own products; farming their own meat and dairy and already having shares in the online shopping market in the form of Ocado.

Is Amazon becoming too much of a superpower? The online giant is established across many forms; is stepping into another domain just too much? In the past ten years Amazon has gone from an online retailer to providing a variety of products, even going so far as creating their own. This expansion however could be dire for smaller stores, in particular smaller, local food stores which are already struggling due to the popularity and expansion of supermarkets. Amazon may further push the smaller stores to the brink of collapse and further eradicate the individuality of smaller markets by bringing the largest online competitor to another market.

The monopoly being created by Amazon raises a key question: should this kind of business be limited? With a foray into the grocery market Amazon is still growing, should this growth be limited slightly to stop the domination of one business over all others? Amazon has already been the source of controversy for many reasons, the business only just started paying sales taxes to the UK in May of last year and have also been under fire for the treatment of their employees. Should such a controversial company be allowed to expand at the rapid rate that it is? Surely the implications of this partnership should be explored before it is allowed to go forward.

The partnership may also undermine the power of other businesses. Within hours of the news breaking Ocado’s stocks dropped by eight per cent. It may also spell trouble for other online retailers. With Amazon finally taking online shopping in the UK seriously, other supermarkets may feel the effects of Amazon’s foray into the grocery market. Many will choose to shop with Amazon due to the convenience of being able to buy all of your goods from one place. This may take customers from other supermarket chains such as Tesco and Asda who, while having an easy to use and convenient shopping service, do not offer the diversity of products offered by Amazon already.

It does however have some benefits. The move will further expand Morrisons as a business, and finally allow them to compete on the same level as other supermarkets in the online shopping market. The move will be beneficial for the supermarket and give people in secluded communities a convenient and more cost efficient way of bulk buying their shopping and other goods. These benefits however are overshadowed by the sheer force that would be carried by Amazon if they step into this market. They may just bulldoze the competition.

It’s tough to say what the effects of this partnership will have on the stock market and businesses in general, however it does show that Amazon is massive force to be reckoned with and it is only a matter of time before it steps into more unique territories.