Could Amazon really be bigger than Tesco in four years? | Commentary and opinion
Amazon will become the UK’s largest retailer in terms of gross merchandise value over the next four years. That’s according to Edge by Ascential, which estimates that the e-commerce giant will surpass Tesco – the current number one – and achieve £ 77.1bn in UK sales in 2025, up from £ 76.1bn. provided by the supermarket.
This would be an impressive feat given last year Amazon UK’s total sales were ‘only’ £ 36.3 billion. Tesco’s sales nearly doubled to £ 64 billion.
The power of Amazon is looming across the western world. This week, the company was named the largest investor in the United States. It is also becoming an even more formidable force in the UK, announcing last month that it will create more than 10,000 new permanent jobs this year as it opens four new CFCs across the country.
But despite its almighty size, there’s one nut Amazon still can’t crack: the grocery store.
Even after online grocery share hit a record 15.4% in February [Kantar] and has only retreated slightly since, Amazon “is still a relatively small player” in food, according to Edge by Ascential. Without the ability, coverage or brand association to power grocery sales, neither Amazon is offering free delivery on fresh groceries to the estimated 15 million UK Prime members. [Mintel] Last summer, nor the arrival in March of the first of several convenience stores in London did not lead to any sales growth among incumbents.
Indeed, data from GlobalData shows that only around 5% of Britons have ever purchased food from Amazon, and this is usually ambient products from the main Amazon.com channel.
Ranking retailers based on total food sales, Edge by Ascential predicts virtually no change by 2025, with the exception of Aldi overtaking Morrisons in fourth place. Amazon will of course grow – more than doubling its sales of food products – but remains a relative minnow in 15th place (against 19th).
This assumes that Amazon isn’t playing either of the two aces up its sleeve. The first being its support for Deliveroo, now the rapid distribution partner of choice for Co-op, Sainsbury’s, Waitrose, Aldi, Morrisons and McColl’s. Not only could it use data from Deliveroo to find out exactly what people want to shop for, where and when, a few wisely placed dark stores and competitive pricing could make it become the number one convenience retailer on the platform. (he already has two lines of own-brand food products).
The other card is his deep pockets and willingness to spend big without needing quick returns. Industry experts have long predicted that Amazon could acquire a large supermarket. Morrisons would be an obvious choice, given his existing close relationship. But others believe Tesco could be in his sights. David Sables, CEO of Sentinel Management Consultants, predicted earlier this year that “if Amazon wants to do something right, you have a freebie of 30% of the market. Why would Amazon leave Tesco in the market as a competitor when it has a choice? “
If that happened, there would only be one answer to the question “who is the greatest?” Question, and maybe for good.