Amazon has been named as the UK’s most successful ecommerce retailers, with UK sales of £26.4bn for 2023/24.
For the second year running the online marketplace claimed the lion’s share of the ecommerce market, with Sainsbury’s (including Argos) taking second place with sales of £10bn over the same period.
And Amazon seems set to retain its place in the rankings, with forecasts anticipating five-year compound annual growth of 9.2%
Strategy:
The online giant described their strategy in 2023 as placing a “maniacal focus” on customer experience, while also prioritising cost reductions to drive future growth, shuttering 3 warehouse sites last year while opening two new state-of-the-art facilities.
The retailer has also invested £125m into staff pay, but strike action went on nonetheless at the Birmingham Sutton Coldfield and Stockton-on-Tees sites.
Amazon have also announced plans to branch into an unusual market, beginning a ‘strategic partnership’ with Hyundai to sell their vehicles online in the USA, Over the last year, the retailer also debuted partnerships with Meta and Snap, giving shoppers the opportunity to buy products directly via those apps and with the facility to ‘consult a friend’ encouraging customers to share, comment and react to the products available.
Challenges:
Despite the rosy financial picture, Amazon did face challenges over the last 12 months, notable cutting 25,000 staff across the business to compensate for the uncertain state of the economy
The previously mentioned strikes at two of Amazon’s UK locations also represent a risk for the retail giant. With inflation high and wages struggling to keep pace with the rising cost of living, Amazon may struggle to maintain margins while also successfully attracting and retaining staff.
Since its 2017 acquisition of Whole Foods, Amazon has emphasised carving out a niche in the grocery market but continues to struggle to gain a significant market share. If this areas is to remain a priority, then Amazon will need to differentiate itself from competitors.
Competition in the grocery sector
While Amazon leads UK retailers in online sales, Sainsbury’s, Tesco and Asda took second, third and fourth place respectively, with just under £20bn in collective sales.
Sainsbury’s has invested heavily into their online and delivery services, bolstered by the acquisition of Argos in 2016, strengthening their existing delivery network. Currently, the grocer has the capacity to fulfil 850k orders per week, and these acquisitions have empowered Sainsbury’s to be one of the largest retailers of general goods in the UK.
If Sainsbury’s (and its sister companies) are a significant competitor for Amazon, the latter may struggle to win over customers from such an established brand, particularly one which prides itself on a commitment to ethics and sustainability, attracting socially conscious customers.