Morrisons and Amazon have announced a new supply agreement which will see hundreds of Morrisons goods sold through the online retailer.
The deal means Morrisons will provide a wholesale supply service to Amazon, allowing customers to purchase Morrisons ambient, fresh and frozen products through Amazon Prime Now and Amazon Pantry. The service will reportedly be available from later this year.
Investment group Shore Capital said the entrance of Amazon into the UK grocery sector presented challenges to the trade.
The firm’s Darren Shirley said: "Clearly, the advance of Amazon as a participant in UK grocery is a potential challenge to the whole trade in time. Any new entrant is, but particularly the American behemoth.
"For Morrisons, with low exposure to London and the South-East, and the eCommerce channel in particular, there is strategic merit in exploring a commercial tie-up with Amazon in our view."
The agreement comes at a difficult time for the UK grocery sector, with the traditional big four supermarkets fighting for market share amid the continued rise of discount retailers. Morrisons has been one of the retailers particularly badly hit.
Morrisons said the agreement would allow the firm to build a broader business which complimented its supermarkets.
David Potts, chief executive, said: "Today’s agreement is built on Morrisons unique strengths as a food maker. The combination of our fresh food expertise with Amazon’s online and logistics capabilities is compelling.
"This is a low risk and capital light wholesale supply arrangement that demonstrates the opportunity we have to become a broader business. We look forward to working with Amazon to develop and grow this partnership over the coming months."
Morrisons has also been in discussions with online retailer Ocada to grow its online offering at Morrisons.com. This involves Morrisons taking space in Ocado’s new Customer Fulfilment Centre and would expand the online reach of Morrisons, working with Ocado, to the whole of Great Britain.