Sainsbury’s Deliveroo partnership could be “problematic” thanks to Amazon

Sainsbury’s recently announced tie-up with Deliveroo could cause problems for the grocer thanks to Amazon’s recent investment, according to analysts.

Earlier this week Sainsbury’s launched a two-month trial with the last mile delivery giant which is set to see it deliver freshly baked pizzas directly to customers homes.

The initiative will allow customers in Cambridge, Selly Oak, West Hove, Hornsey and London to order hot pizza, as well as sweet and savoury snacks and drinks.

READ MORE: Sainsbury’s teams up with Deliveroo to offer hot takeaways

However, GlobalData’s retail analyst Thomas Brereton believes handing over its customer service to a third party could be a risk.

“A growing list of retailers have been forging alliances with foodservice delivery companies,” he said.

“For grocers, there are two short-term benefits: it enables a small but immediate foothold in the growing on-demand foodservice industry and it paves the way for potential expansion beyond foodservice to full food and grocery fulfilment (for small basket sizes).

“However, ceding control over the last-mile has its complications. Customer care sits at the core of Sainsbury’s business strategy, but this partnership puts the most customer-facing side of delivery in the hands of an external organization.”

READ MORE: Amazon makes major investment in Deliveroo

This could be exacerbated by Amazon’s recent multimillion pound investment in Deliveroo, meaning that Sainsbury’s last mile delivery service will effectively be run by a rival retailer.

“Moreover, e-commerce giant Amazon recently invested £460m in Deliveroo, and if the deal progresses, it may cause a problematic scenario Sainsbury’s in which it is over-reliant on a competitor.

“If Amazon decides to significantly increase its presence in the UK food and grocery market, supermarket partnerships with certain foodservice operators are likely to be reviewed and possibly removed.”

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