In the coming months, the new deal will allow Amazon Prime customers to order fresh and frozen Morrisons products online - Those living in one of the cities where Amazon Prime Now is available will even have the option of one hour delivery. Although the range of products that will be on offer is limited, this is Amazon’s first move beyond hard goods in the UK, and confirms their much suspected intent to compete with the leading supermarkets.

The UK offering will be called Amazon Pantry and will only be available to Amazon Prime customers (Amazon Prime costs £79 per year in the UK). Amazon has been heavily promoting its Prime service recently, and by offering grocery delivery as part of the service, the retail giant hopes to entice yet more users. Prime customers shop 50% more often than regular customers, so building Prime is a priority.

There are several factors that may have encouraged Morrisons to partner with Amazon. The supermarket currently has a 25 year contract to sell it’s own-brand service through Ocado, an online grocery delivery company. In order to expand beyond this, they need to work with a third party - as Amazon was looking for ways to expand into food delivery, it seems like a perfect match.

Another motive for Morrisons would be the e-Commerce opportunities: despite having a competitive app and a strong online presence, Morrisons only has a moderate coverage of the UK. With this new deal, their online reach would be expanded to the whole of the UK, allowing them to become a major player in the food delivery industry.

Also, Morrisons’ partnership with Amazon could see a drop in the number of people who shop in their supermarkets as more shoppers decide to order their groceries online. It is possible that reduction in footfall could allow Morrisons to consolidate its retail estate, turning itself into a leaner, more convenience or up-sell focussed operation, offering services such as Amazon click & collect, and growing ancillaries such as dry cleaning, catering and more.

The challenge for Amazon will be whether or not they can maintain their margins (which are generally low in favour of growth). Amazon have created one of the biggest logistics operations in the world, but delivering fresh and frozen food will present new challenges.

What does the deal mean for retailers? Well, as ever, it’s certainly worth keeping an eye on Amazon’s next moves - could they sign a deal to deliver a larger range of food from Morrisons, or perhaps start delivering food from other supermarkets as well? Amazon recently expanded their logistics reach with a move into maritime shipping, so perhaps we could see Amazon offering its logistics services to more third parties as time goes on. With the convenience of next day or even next hour delivery, Morrisons is becoming one to watch in the UK online grocery market. A partnership with the largest retailer in the world could rejuvenate the retailer. Perhaps Amazon is testing the water for an acquisition.