U.S. online retailer Amazon.com Inc has launched an Internet grocery service in Britain, it said on Wednesday, joining a fast-growing but competitive market.

The move poses a challenge to supermarket groups Tesco, Wal-Mart's Asda and J Sainsbury, as well as online specialist Ocado, though Amazon will not offer the one to two-hour delivery slots provided by these operators.

It also comes a day after Ocado said it was aiming for a heady valuation of over 1 billion pounds ($1.5 billion) in an initial public offering later this month.

Online sales of groceries are booming in Britain and, although they account for only a small percentage of the overall market, grocery specialists IGD forecast they will almost double to 7.2 billion pounds ($10.9 billion) by 2014.

Amazon, which already sells groceries online in the United States and recently launched in Germany, said it would sell over 22,000 products from brands like Kraft, Pepsi and Procter & Gamble.

An undisclosed number of the products will be provided by third-party members of its Amazon Marketplace.

The service will offer Amazon.co.uk's full range of delivery options, which include free delivery for an annual membership fee of 49 pounds, and next day delivery.

But it will not offer the one or two-hour delivery time slots provided by Britain's biggest online grocers, and products from third parties will be sent separately, a spokesman said.

(Reporting by Mark Potter; Editing by Hans Peters)

($1=.6581 Pound)

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