Thursday 3 June 2021 10:21 am

Amazon to dethrone both Tesco and Sainsbury as UK’s largest retailers within four years

Amazon is to overtake Tesco as the UK’s largest retailer within the next four years, with sales expected to hit more than £77bn by 2025, according to new research, shared exclusively with City A.M. this morning.

Last year, Amazon UK’s total sales were £36.3bn while Tesco’s sales were almost double at £64bn. However, by 2025, Edge by Ascential’s syndicated research arm, Edge Retail Insight, predicts that Tesco sales will rise to £76.1bn in total sales, representing annual sales growth of 3.5 per cent but not enough to stay ahead of Amazon’s overall UK sales expansion.

The predictions suggests that Sainsbury’s will hold on to its position as the UK’s third largest retailer, with sales growing by 4.5 per cent to reach £42.2bn by 2025. 

Meanwhile, sales growth at Asda, which has recently been purchased from Walmart by the British owners of the EG Group, are expected to grow by 2.4 per cent to £26.7bn by 2025 to come in at fourth place by 2025.

The firm analysed the performance of chain retailers and channels performance in the UK as of March and explores unique market characteristics to determine where suppliers should focus their investment to win in the market.

In the edible grocery category, Amazon still represents a relatively small player in the UK, despite growth of 17.6 per cent in 2020 at the height of the pandemic when health concerns saw more people buying essentials online, many for the first time.

Bumper sales

Both Tesco and Sainsbury’s recently reported bumper food and online sales in their full 2020-2021 financial year results, but costs related to the Covid-19 and adding to fulfilment capacity to meet a steep incline in demand, cut into earnings for both retailers.

But both firms said they expected profit to bounce back next year, with the focus firmly on their online operations.

The data forecasts Sainsbury’s Argos to be the fastest-growing leading player over the next five years, expanding at a 2020-2025 rate of 17.3 per cent.

Moreover, a third of all UK chain retail sales is expected to occur online by 2025, up from 26 per cent in 2020, outperforming all physical channels by a stretch. 

E-commerce sales will grow from £105.2bn in 2020 to £176.2bn by 2025.

Discounters

The only other channel to grow market share over the next few years will be the discounters, which will account for 8.2 per cent of UK chain retail share by 2020, up from 7.9 per cent.

All other channels, including supermarkets, will lose market share by 2025. Food service will remain static.

The firm also highlight the rapid growth of ecommerce in UK grocery retail, with online penetration rising from 8.2 per cent to 10.9 per cent by 2025.

Leading retailers are  adapting to the shift in consumer spending patterns at pace,  innovating in last-mile delivery with delivery intermediary partnerships and investing in automation in warehouses.

“The UK is one of the largest retail markets in Europe, and a key market for many brands around the world. Our data shows that ecommerce is expected to grow in the UK over the next few years, and this will be driven by digital marketplace giants like Amazon, and omnichannel marketplace giants like Tesco,” Deren Baker, CEO at Edge by Ascential, told City A.M.

“Over the past year, Amazon has grown its online retail footprint in the UK and expanded into the high street, with the launch of three Amazon Fresh shops in London and a high-tech hair salon, where it can trial technology and product innovation and increase brand presence in the fast-growing beauty sector,” he added.

Deliveroo and Uber Eats

Growth will also be driven by leading players looking to improve delivery speed, including partnerships with last-mile delivery specialists such as Deliveroo and Uber Eats.

Baker stressed that physical stores will remain an important channel but consumer packaged goods (CPG) brands must prioritise their online strategies to capture growth opportunities, particularly in mature digital markets, like the UK.

“That means understanding how to convert shoppers online through digital touchpoints, such as marketplaces like Amazon, where many now begin their purchase journeys. The next five years will be defined by the ability of CPG firms to leverage the might and skill of marketplaces to acquire customers.”

“This is next-generation retail – Retail 5.0 – marketplaces mastering personalisation at scale. CPG brands must focus investment on winning market share through the online platforms most relevant to them,” he concluded.

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