Traditionally, the UK food market was dominated by the ‘big four’: Tesco, Sainsbury’s, Asda and Morrisons. There were other players, such as Co-op, Waitrose and smaller, regional supermarket chains, but the main four’s position in the market remained unchallenged.
Then the discounters, Aldi and Lidl, arrived, inexorably eating into the market share of these companies, and quickly topped the rankings for most popular British brands, ahead of the likes of Marks and Spencer and John Lewis.
However, online retailer Amazon now looks set to provide a new threat to their position, as it has unveiled detailed plans to enter the UK supermarket sector. Two hundred and sixty Amazon owned and run supermarkets are to be opened before the end of 2024, as it meets retailers like Tesco and Sainsbury’s head-on. Amazon has already poached one of Tesco’s former top executives to run its physical stores all of which will apparently be cashierless.
Amazon already has six Fresh grocery stores in the UK, offering customers a different way of shopping. Customers scan a code as they enter the shop and then simply put items in their bag. Cameras and sensors detect what they have picked up off the shelves and the customers then just walk out with their goods. The bill follows, sent directly to their Amazon account.
Retail analysts have described Amazon’s move as ‘typically bold and aggressive’. Research recently quoted in City AM suggested that Amazon is on course to overtake Tesco as the UK’s largest retailer within the next four years, with sales expected to reach more than £77 billion by 2025. Last year, Amazon’s sales were £36.3 billion, well below Tesco at £64 billion.
Analysts are expecting 3.5% annual sales growth from Tesco, taking their sales to £76.1 billion, not enough to stay ahead of Amazon. Sainsbury’s is expected to hang on to third place, with sales projected to grow by 4.5% and reach £42.2 billion, by 2025.
The move is sure to divide opinion and shake up consumer habits. Is this a good thing or a bad thing? Is Amazon responsible for the decline of our high streets? Is it the fault of business rates? Or does the blame lie more directly with the retailers?
As usual, the real answer is a combination of factors. What is undeniable is that Amazon’s entry into the supermarket sector, combined with Lidl’s plans to ramp up UK store openings, will lead to big changes in the way we shop and the retail landscape.
