Amazon is to overtake Tesco as the UK’s largest retailer within the next four years, with UK sales expected to reach £77.1bn by 2025, according to a report from Edge by Ascential’s syndicated research arm, Edge Retail Insight.
In 2020, Amazon UK’s total sales were £36.3bn, while Tesco’s sales were almost double at £64bn.
However, by 2025, Edge predicts that Tesco sales will rise to £76.1bn, representing CAGR growth of 3.5%, just shy of Amazon’s predicted sales. These numbers represent total sales. In the edible grocery category, Amazon still represents a relatively small player in the UK, despite growth of 17.6% in 2020 at the height of the pandemic when health concerns saw more people buying essentials online, many for the first time.
The United Kingdom retail landscape and go-to-market planning report, based on forecasts powered by Edge’s proprietary data analytics technology, suggests that Sainsbury’s will hold on to its position as the UK’s third largest retailer, with CAGR sales growing by 4.5% to reach £42.2bn by 2025.
CAGR sales at Asda, which has recently been purchased from Walmart by the British owners of the EG Group, are expected to grow by 2.4% to £26.7bn by 2025 to come in as the fourth largest retailer by 2025.
The report analyses 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.
Both Tesco and Sainsbury’s recently reported bumper food and online sales in their full 2020-2021 financial year results, but costs related to Covid-19 and adding to fulfilment capacity to meet a steep incline in demand, cut into earnings for both retailers. Nonetheless, both firms said they expected profit to bounce back next year, with the focus firmly on their online operations.
Edge by Ascential’s data forecasts Sainsbury’s Argos to be the fastest-growing leading player over the next five years, expanding at a 2020-2025 CAGR of 17.3%.
In addition, data from Edge reveals that a third (33.4%) of all UK chain retail sales is expected to occur online by 2025, up from 26% in 2020, outperforming all physical channels by a stretch.
It predicts e-commerce sales will grow from £105.2bn in 2020 to £176.2bn by 2025.
The only other channel Edge expects to grow market share over the next few years will be the discounters, which will account for 8.2% of UK chain retail share by 2020, up from 7.9%. All other channels, including supermarkets, will lose market share by 2025. Food service will remain static.
Deren Baker, CEO at Edge by Ascential, said: “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 e-commerce 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.
“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. “