Amazon could be set to overtake Tesco as the UK’s largest retailer within the next four years, according to a new report.
Analysis from Edge Retail Insight shows that Amazon’s UK sales are expected to reach £77.1 billion by 2025, taking it above Britain’s current largest retailer, Tesco.
In 2020, Amazon sales in the UK stood at £26.5bn while Tesco sales reached more than double at £64bn.
By 2025, research predicts that Tesco sales will rise to £76.1 billion, meaning Amazon will take a narrow edge into the lead as Britain’s largest retailer.
Fuelling this growth is an eCommerce boom in the wake of the coronavirus pandemic, which has prompted more consumers than ever to use online retailers.
Data from Edge show that eCommerce sales are expected to grow from £105.2bn in 2020 to £176.2bn by 2025, with one-third of UK chain retail sales also expected to occur online by 2025.
Deren Baker, CEO at Edge by Ascential, said the UK is one of the largest retail markets in Europe and represents a key market for global brands.
“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,” he said.
Edge analysts also highlighted the rapid growth of eCommerce in UK grocery retail, with online penetration rising from 8.2% to 10.9% by 2025.
Despite a positive overall outlook, there are still key spaces in which Amazon lags behind industry heavyweights. According to Edge research, Amazon still represents a “relatively small player” in the UK edible grocery category, ranking 19th out of all UK grocers.
However, data shows that Amazon has capitalised on the increase in online shopping since the onset of the pandemic last year, recording growth of 17.6% in 2020 – and the firm shows no signs of slowing down.
By 2025, Edge expects Amazon to become the 15th biggest seller of edible grocery products, surpassing Shell, McColls, BP and Wilko.
Robert Gregory, Advisory Research Director at Edge by Ascential, said that despite positive growth in the online grocery space, Amazon will continue to face stiff competition.
“While Amazon has seen sales grow strongly, so have the larger grocers, with the likes of Tesco, Sainsbury’s and Asda all being able to expand capacity for their online services,” he said.
“Tesco recently revealed a 77% increase in online sales during its 2020-21 full year results after doubling its online capacity to 1.5 million slots a week.”
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In addition to expanding its online retail footprint over the past 12-months, Amazon has also begun venturing deeper into UK high streets.
It recently launched three Amazon Fresh shops in London as well as a high-tech hair salon, through which it hopes to increase its presence in the beauty sector.
The launch of Amazon Fresh shops in London follows the firm’s recent backing of Deliveroo, which could help it further expand moving forward.
Gregory noted that growth in the grocery space will be “driven by leading players looking to improve delivery speed”.
This is expected to include partnerships with ‘last-mile’ delivery specialists such as Deliveroo or its competitors, which includes Uber Eats.