- Contents
- *Overview
- Key issues covered in this Report
- COVID-19: market context
- Economic and other assumptions
The COVID-19 pandemic has given a boost to the online retail channel and naturally, as the UK’s largest retailer, to Amazon. Over a third (37%) of Amazon shoppers say they have used the retailer more than usual due to COVID-19, with almost all major product categories Amazon trades in seeing a boost to purchasing due to the pandemic. Amazon Prime also saw a boost, with now 50% of consumers having access to the scheme.
Globally the pandemic gave a significant boost to Amazon’s operations with sales growing by 37.6% to $386.1 billion as online demand soared across all Amazon’s key territories. However, meeting this demand was not without its challenges. Globally Amazon more than doubled its logistics and warehousing square footage and had to invest significant sums into keeping staff.
Amazon is in a strong position in the UK market, particularly given the expected legacy boost to online that COVID-19 will bring. However, it is not just Amazon that has benefitted from this growth in online, and with this representing an ongoing opportunity, competition in the online market is only set to grow in the coming decade. In particular the rise of alternative marketplaces, such as Bookshop, represent a particular challenge to Amazon’s own operations.
Amazon is the largest non-food retailer within the UK, but significant opportunity exists for the business in the food and drink side of the market. Amazon already has a small foothold in the market, with 18% of consumers using Amazon to buy food and/or drink in the past year. However much of its sales come from its core site, serving speciality food and drink items. With full basket online grocery demand climbing significantly in 2020 there are opportunities for Amazon to expand its Amazon Fresh service, and raise awareness of the Morrisons at Amazon service, to give it a greater foothold in the market.
Key issues covered in this Report
This Report covers Amazon’s operations within the UK from the consumer perspective, with a particular focus on Amazon’s current influence and longer-term ambitions in the grocery sector.
Key issues covered include:
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The impact of COVID-19 on Amazon and additional use of the retailer by consumers
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The operations of Amazon in the UK and globally, including key innovations in the past year
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Key demographic groups for Amazon, including most frequent shoppers
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Amazon Prime membership and Amazon services use
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Non-food purchasing via Amazon
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Food and drink purchasing via Amazon
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Interest in shopping in a physical Amazon grocery store
This is the third edition of our dedicated reports series on Amazon. Previous UK titles include Amazon: A Shopper’s Perspective and Amazon: Creating an Ecosystem – UK, January 2020.
COVID-19: market context
The first COVID-19 cases were confirmed in the UK at the end of January, with a small number of cases in February. The government focused on the ‘contain’ stage of its strategy, with the country continuing to operate much as normal. As the case level rose, the government ordered the closure of non-essential stores on 20 March.
A wider lockdown requiring people to stay at home except for essential shopping, exercise and work ‘if absolutely necessary’ followed on 23 March. It wasn't until 15 June that non-essential stores were allowed to re-open, followed by pubs, restaurants, hotels and hairdressers on 4 July, and many beauty businesses on 13 July.
By September, it had become clear that the UK was at the start of a second wave, and social distancing measures were intensified. Continued increases in infection numbers led to Wales implementing a two-week national lockdown from 19 October, England announcing a full month-long lockdown from 5 November, and Scotland introducing a new five-level system of coronavirus restrictions.
The UK lockdown ended as planned on 2 December, but the revised Tiered lockdown meant that almost all of the UK faced heavy restrictions on social activities. Although all non-essential retailers were able to re-open, foodservice and hospitality businesses still face extremely challenging conditions.
Despite these restrictions, however, case numbers continued to increase, and after a brief relaxation for Christmas Day, a full national lockdown was announced on the evening of 4 January. There is no defined end date for the lockdown: the legislation presented to Parliament extends to 31 March.
The UK’s vaccination programme started on 8 December, and with both the Pfizer-BioNTech and the Oxford-AstraZeneca vaccines licenced for use in the UK, the government aims to offer a vaccine to 15 million people by mid-February.
Economic and other assumptions
Mintel’s economic assumptions are based on the Office for Budget Responsibility’s central scenario included in its November 2020 Fiscal Sustainability Report. The scenario suggests that UK GDP will have fallen by 11.3% in 2020, recovering by 5.5% in 2021, and 6.6% in 2022. GDP isn’t expected to return to pre-COVID levels until the fourth quarter of 2022. The central scenario has unemployment peaking at 7.5% in Q2 2021.
The current uncertainty means that there is wide variation on the range of forecasts, however, and this is reflected in the OBR’s own scenarios. In its upside scenario, economic activity returns to pre-COVID-19 levels by Q4 2021. Its more negative scenario, by contrast, would mean that GDP doesn’t recover until Q3 2024.
The second wave of infections and subsequent lockdown means that the short-term prospects for the country are consistent with the OBR’s negative scenario, but this needs to be balanced against the fact that the vaccine rollout is ahead of even the OBR’s central scenario. Medium- to long-term, then, we are still basing our forecasts and market analysis on the OBR’s central economic scenario.