Part
01
of one
Part
01
How has amazon affected shopping centres in the UK? What are the growth trends in market share and and turnover? Is there any correlations between the growth of online retailing and the growth of retail sales through physical stores?
Hello! Thanks for your question about how Amazon has affected shopping centers in the UK. The short version is that over the years, Amazon has made its way to becoming one of the UK's top online retailers and since its acquisition of Whole Foods, it is fast cementing its place as a major competitor in the physical retail space. Below you will find a deep dive of my findings.
METHODOLOGY
I reviewed a number of credible sources in order to best answer your question. These sources include industry reports and trusted media sites.
This response is broken down into three notable sections. The first section summarizes Amazon's multi-channel growth in the UK retail market. The summary includes Amazon's market share, projected growth, and how it compares to its competitors. The second section takes a look at Amazon Prime in the UK market and the third section briefly looks at the company's physical store strategy.
AMAZON'S GROWTH IN UK'S MULTI-CHANNEL RETAIL MARKET
Before Amazon's presence in the UK, retailers were not particularly customer centric. Amazon changed all this. Consumers have become increasingly demanding and retailers are constantly looking for ways to serve them. For example, in recent years, retailers such as Aldi, Lidl, and Amazon are increasingly taking market share from the 'Big 4' supermarkets (Tesco, Asda, Sainsbury’s, and Morrisons). Amazon's impact on the UK's e-commerce market, which is currently worth £133 billion, is undeniable. The company has created a truly global online department store, with a customer centric approach that is made evident by its user reviews of products. Amazon's presence in the UK has stretched across all areas of retail, for example, the eagerly anticipated Black Friday sales. In 2014, on Black Friday, UK online retail sites received 181 million visits, with an estimated online spend of £810m. Amazon took home 5.5 million orders, breaking its previous record. However, its growth in the UK is said to be slowing down at 8.6%. In 2015, the UK's high street retailers recorded a 1.9% fall in overall year-on-year sales. During the same year, online sales rose 18.5%. This trend continued well into 2017, with retail sales down 1.4% in the first quarter. Concurrently, online sales rose 19.5% in the 12 months. Below is just a number of ways in which Amazon is slowly making its mark in the UK retail market.
1. Amazon Disrupts the UK's Bookstore Market
Amazon's disruption in the UK's was first made evident in the UK's bookstore market. Amazon's Kindle was launched in 2007, by 2014, for the first time ever, the number of independent bookstores in the UK fell below 1,000.
2. Amazon Steps into The UK Supermarket Sector
The UK's online grocery sector is expected to grow by over 68% from 2016 to £17.6bn by 2021. During this period, supermarkets and hypermarkets are predicted to experience a decline in sales. Amazon, Aldi, and Lidl combined market share in this space is an estimated 10%, having more than doubled in the past three years. It is difficult to predict the growth of Amazon's 'Amazon Fresh' in this space, but if they hold an estimated 3% of the market share, they could be worth £1.9bn by 2021. Amazon's fast delivery has already raised the stakes in this market, with Ocado offering same day grocery home deliveries, while Sainsbury’s, Asda, and Tesco offer Click & Collect from store options.
In June 2017, Amazon made its announcement to acquire Whole Foods in a $13.7 billion deal. Although there is currently not much information on this deal, we do know that Amazon is taking on $13.7 billion in debt to fund this deal. However, investors applauded this move and, as a result, Amazon shares went up 3.4% to $996.46. Other US based grocery stocks took a dive with Kroger falling 13.4%, SuperValu fell by 16% and Costco by 7.5%. This sentiment rings true for many UK supermarkets. Tesco's stocks dropped 4.9%, Sainsbury’s 3.9% and Marks & Spencer closed down 1.9%. Morrisons rose 1%, this could be because of it already has a supply agreement with Amazon in the UK. While Whole Foods currently operates in nine locations in the UK, Morrisons could quite possibly become a takeover target if Amazon wants to buy a UK chain.
3. Amazon Dominating the UK Clothing Market
In 2016, UBS conducted a survey which included 17 clothing store in the UK. The survey revealed that 35% of respondents had purchased clothes from Amazon in a period of six-months, with only Marks & Spencer recording a higher figure. In third place was Primark, followed by Next, with Debenhams coming in fifth place. According to the Survey, 45% of millennials have shopped at Amazon for clothing, this presents a long term challenge for many retailers in this space.
4. Amazon Leading the UK's Physical Music, Games, and Videos Market
In 2014, Amazon took home one in every four pounds spent in this market. An estimated 39% of all the sector's purchases were made through Amazon and 25.6% of physical goods such as CDs and DVDs. Tesco closely followed taking home 14.7% of the market share.
AMAZON PRIME IN THE UK
On the 12th of July 2016, also known as 'Amazon Prime Day' in the UK, mobile and desktop visits to the UK's top 25 retail sites reached 35.4 million. Visits to Amazon.co.uk reached 14.3 million, 36% increase compared to the first Prime Day the previous year. Amazon was the individual retailer which saw the most traffic. Other online electronics saw an increase in their site visits that say, for example, Carphone Warehouse had 242,173 visits up 47.4%, Currys 607,060 up by 38%, and PC World had 176,214 up by 20%. This makes it no surprise that a third of UK shoppers are now Amazon Prime members.
AMAZON'S PHYSICAL STORE STRATEGY
The company has not revealed much about its physical store strategy. What we do know is that the company plans to have up to 100 pop-up stores in malls across the US. The company also plans to open over 400 physical bookshops in the US alone. Amazon also plans to open drive-thru grocery stores and expand its college campus outlets. If the trends are anything to go by, what happens in the US will most probably follow in the UK.
CONCLUSION
To wrap it up, Amazon has been quietly dominating the UK's online retail market, from book sales to clothing. While physical retail sales have dropped, online sales have increased dramatically.
Thanks for using Wonder! Please let us know if we can help with anything else!