Amazon's Convenience Store Plans: Why Morrisons' New U.S. Owners Won't Be Cheering

Eight months after it dipped its toe into the fast-growing UK convenience store market, Amazon is preparing a 260-outlet rollout in the course of the next three years.

The online retailer will open as many as 100 stores a year, according to internal documents reported by City A.M.

The aim is to challenge Tesco and Sainsbury in the small store format.

But the move could be more complicated for Morrisons.

The document suggested as many as 60 stores could open in a first wave during 2022. The growth programme will soon match the 100-stores annual opening target of its better-established rivals.

A slowly growing city-focused Amazon network poses few short-term problems for Tesco and Sainsbury, which have much wider geographical spread. Tesco has 1,900 small convenience stores, and Sainsbury 800.

Both chains could ride out the initial excitement caused by Amazon arrivals.

However, the fallout could be more acute for Morrisons, which has been nurturing a small-store format at the same time as partnering Amazon’s online grocery delivery business in the UK.

Morrisons added 50 stores to its existing 30 convenience stores during 2021 and sees it as a major growth area.

Morrisons also supplies around 1,200 smaller convenience stores operating under the McColl fascia. As many as 350 McColls are to be rebranded as Morrisons.

Over the summer some commentators speculated that an Amazon offer for Morrisons could make the perfect solution to both businesses' needs. In the end Morrisons' accepted a £7B takeover proposal from U.S. private equity firm Clayton, Dubilier & Rice.

In the U.S. the Amazon Fresh format is substantially larger than the earlier AmazonGo format, both of which rely on payment via an app. Amazon Fresh is roughly double the size of Go at around 25K SF, although some stores have been 30K to 40K SF.

So far the UK rollout has moved slowly, internal documents concede.

Earlier this summer former Tesco executive Tony Hoggett was recruited as senior vice president of physical stores.