Shares in Ocado dived more than 3% after fears that the online grocer faces increased competition from Amazon and is struggling to sign up an international partner.
The British retailer took a hit on Wednesday after Amazon said this week it would rapidly expand its grocery delivery service in the UK. Ocado shares have now fallen 8% since Christmas Eve, closing at 315p on Wednesday.
Amazon Pantry, which launched in November, offers a range of 4,000 grocery and household products, from big brands such as Kellogg’s, Ariel , Colgate and Kronenbourg. The company charges £2.99 for the delivery of one large box of goods to people signed up to its Prime subscription service.
Related: Amazon UK to expand grocery range as supermarkets look on warily
Christopher North, the UK boss of the online retailer, told the Guardian this week that Amazon was “really happy with the early numbers,” on Pantry in the UK. It plans to add thousands more products over the coming months. The service is seen as a first step towards Amazon upgrading its delivery service in the UK to fresh food, which would provide a more direct challenge to UK supermarkets, and Ocado.
Analysts said Amazon’s focus on London added further pressure on Ocado, which has a strong customer base in the capital. Investors and analysts had speculated that Amazon might seek to buy Ocado as a shortcut into the British grocery market, but the US company’s determination to build its own service indicates that a bid is unlikely.
Amazon’s UK grocery ambitions have also compounded fears that the British company could face competition in marketing its IT and warehouse technology to other retailers. Ocado had expected to sign up retail partners who would use its systems outside the UK by the end of this year. Ocado has been linked to deals with France’s Carrefour and US group Safeway as part of plans to extend its business. But with just one day to go before 2015 is up, the retailer looks unlikely to meet its ambition.
Related: Amazon takes aim at UK supermarkets with launch of Pantry service
“It’s nearly the last day of the year and there’s been no deal and so some people are giving up saying it’s never going to happen,” said Bruno Monteyne at Bernstein Research. “Ocado is not priced as a food retailer. It’s priced as a technology company but if the tech opportunity gets smaller and the food is under pressure from Amazon the share price is going to suffer.”
Since signing a deal to handle online deliveries for Bradford-based retailer Morrisons, Ocado it would sign similar agreements with retailers outside the UK to use its technology.
The Morrisons deal transformed the view of Ocado, sending its share price soaring. But sales growth at the online grocer has been affected by a bitter price war between the supermarkets as they try to fend off competition from the fast-growing discounters Aldi and Lidl.
Earlier this month, Ocado boss Tim Steiner described a challenging and competitive grocery retail environment, but he said he expected Ocado to continue to outperform the rest of the online grocery market.
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