Table of Contents
Overview
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- What you need to know
- Products covered in this report
Executive Summary
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- The market
- Internet access at near universal levels and device ownership high
- Real incomes falling and confidence wavering
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- Figure 1: Real wage growth: average weekly earnings vs inflation, Jan 2012-May 2017
- Online sales growth accelerating
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- Figure 2: All online sales and forecast, 2012-22
- Pure players growing faster
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- Figure 3: Online pure players and store based retailers share of all online sales, 2009-17
- Clothing the largest sector online
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- Figure 4: Online sales, by product category, 2016
- Digital spending also growing
- Companies and brands
- Innovation is driving Amazon’s success
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- Figure 5: Online retailing, market shares, 2016
- Same-day delivery taking off?
- Amazon scores highly on trust
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- Figure 6: Attitudes towards and usage of selected brands, August 2016-May 2017
- The consumer
- 91% of consumers have bought online
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- Figure 7: Products purchased online in the past year, May 2017
- Desktop and laptops remain the devices of choice for online shoppers
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- Figure 8: Devices used to buy goods online in the past year, May 2017
- A majority of purchases still come from home
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- Figure 9: Where consumers made purchases in the past year, May 2017
- Amazon by far the most popular retailer
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- Figure 10: Retailers used to purchase non-food and drink products online in the past year, May 2017
- Almost a quarter have Amazon Prime
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- Figure 11: Membership of Amazon Prime, April 2017
- Retail credit shows low usage but potentially big promise
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- Figure 12: Payment options used to buy goods online, May 2017
- Cashback sites are a popular tool when purchasing online
- Social media can inspire purchasing, but entertainment must come first
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- Figure 13: Attitudes to buying online, May 2017
- What we think
Issues and Insights
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- Is Amazon right to focus on Prime?
- The facts
- The implications
- How can retailers best leverage social channels?
- The facts
- The implications
- Is there a need for greater curation and personalisation online?
- The facts
- The implications
The Market – What You Need to Know
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- Internet access at near universal levels and device ownership high
- Real incomes falling and confidence wavering
- Online sales growth accelerating
- Pure players growing faster
- Clothing the largest sector online
- Digital spending also growing
Market Drivers
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- Internet access nearing universal levels
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- Figure 14: UK household internet access, 2007-16
- More personally own a smartphone than a laptop
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- Figure 15: Personal ownership of core devices used for online shopping, December 2016
- Confidence is wavering
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- Figure 16: Consumers’ future financial confidence, Jan 16-Jun 17
- Real incomes are now falling
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- Figure 17: Real wage growth: average weekly earnings vs inflation, Jan 2012-May 2017
- Volume growth slowing in the retail industry
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- Figure 18: Annual % change in all UK retail sales (ex-fuel), by value and volume, Jan 2016-May 2017
- Online retailing throughout the year
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- Figure 19: Average weekly value of retail sales online, non-seasonally adjusted, Nov 2014-May 2017
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- Figure 20: Online retail sales as a % of all retail sales, non-seasonally adjusted, Nov 2014-May 2017
Market Size and Forecast
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- The source data
- Online share of all retailing
- Online sales growth is accelerating
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- Figure 21: Online sales as % all retail sales, (exc fuel), 2010-17
- Total online sales and forecast
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- Figure 22: All online sales and forecast, 2012-22
- Figure 23: All online sales, 2012-22
Market Segmentation
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- Stores’ online sales vs pure players
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- Figure 24: Online pure players and store based retailers share of all online sales, 2009-17
- Online by type of retailer
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- Figure 25: Online sales by type of retailer, 2016
- Figure 26: Online share of major retail sectors sales, 2016
- Home shopping
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- Figure 27: Online share of all non-store retailers sales, 2008-16
- Pure player and stores forecasts
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- Figure 28: Pure player sales, 2012-22
- Figure 29: Pure player sales, 2012-22
- Store based retailers
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- Figure 30: Online sales of store based retailers, 2012-22
- Figure 31: Online sales of store based retailers, 2012-22
- Market segmentation by product
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- Figure 32: Online sales, by product category, 2016
- Figure 33: Online sales by product category, 2014-17
- Digital spending
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- Figure 34: The Book market, 2012-17
- Figure 35: Spending on e-books as % all spending on books, 2009-17
- Video – Streaming set to overtake hard copy
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- Figure 36: Value of the UK video market, 2012-17
- Music – Still growing fast
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- Figure 37: Digital spending on Music, 2011-17
- Games – Downloading not always practical
- The total download market
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- Figure 38: The digital download market, 2016 and 2017 (est)
The Consumer – What You Need to Know
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- 91% of consumers have bought online
- Desktops and laptops remain the device of choice for online shoppers
- A majority of purchases still come from home
- Amazon is by far the most popular retailer
- Almost a quarter have Amazon Prime
- Retail credit shows low usage but potentially big promise
- Cashback sites a popular tool when purchasing online
- Social media can inspire purchasing, but entertainment must come first
- Undermining price integrity
What They Buy Online
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- 91% of consumers have bought online in the past year
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- Figure 39: Online purchasing levels in the past year, May 2017
- Clothing the most popular item to purchase online
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- Figure 40: Products purchased online in the past year, May 2017
- Repertoire of products purchased
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- Figure 41: Repertoire of product categories purchased from in the past 12 months, May 2017
Devices Used to Buy Online
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- Desktops and laptops remain the devices of choice
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- Figure 42: Devices used to buy goods online in the past year, May 2017
- Over half of 16-34s have purchased via smartphones
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- Figure 43: Devices used to buy goods online in the past year, May 2017
- Repertoire of devices used
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- Figure 44: Repertoire of devices used to purchase online in the last 12 months, May 2017
Where Consumers Buy and Browse Online
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- A majority of purchases still come from home
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- Figure 45: Where consumers made purchases in the past year, May 2017
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- Figure 46: Where consumers made purchases in the past year, by devices used to purchase online in the past year, May 2017
- Younger and more affluent consumers most likely to purchase when out of home
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- Figure 47: Where consumers made purchases in the past year, by age group, May 2017
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- Figure 48: Where consumers made purchases in the past year, by socio-economic group, May 2017
- More browsing than purchasing is done out of the home
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- Figure 49: Where consumers have browsed for goods online in the past 12 months, May 2017
- Younger consumers are again more likely to browse outside of the home
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- Figure 50: Where consumers have browsed for goods online in the past 12 months, May 2017
Retailers Used
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- Amazon still on top
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- Figure 51: Retailers used to purchase non-food and drink products online in the past year, May 2017
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- Figure 52: Trend data – Retailers used to buy online, May 2014-May 2017
- Online shopper profiles match those of in-store shoppers
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- Figure 53: Retailers used to purchase non-food and drink products online in the past year, by age and socio-economic group, May 2017
- Repertoire of online retailers used
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- Figure 54: Repertoire of retailers used to purchase non-food and drink products online in the past year, May 2017
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- Figure 55: Repertoire of retailers used to purchase non-food and drink products online in the past year, by retailers used in the past year, May 2017
Amazon Prime and Subscription Services
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- Almost a quarter have Amazon Prime…
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- Figure 56: Membership of Amazon Prime, April 2017
- … and just over half of 16-34 year olds have had some experience with Prime
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- Figure 57: Membership of Amazon Prime, April 2017
- Other similar services have lower membership but are growing
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- Figure 58: Ownership of other membership schemes, by total sample and by % of those who have shopped with the retailer in the past year, May 2017
- Why is Amazon Prime so much more popular?
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- Figure 59: Use of Amazon Prime services, April 2017
- Why offer a scheme at all?
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- Figure 60: Products purchased via Amazon in the past year, by membership of Amazon Prime, April 2017
Use of Payment Options, Credit and Cashback Sites
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- Retail credit still a niche option
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- Figure 61: Payment options used to buy goods online, May 2017
- PayPal usage skews older
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- Figure 62: Payment options used to buy goods online, by age, May 2017
- Despite low usage there is demand for credit terms
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- Figure 63: Interest in payment options not used in the past year, May 2017
- Cashback sites a popular option online
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- Figure 64: Cashback site usage, May 2017
- Half of 25-34s have used a cashback site
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- Figure 65: Cashback site usage, by age, May 2017
Attitudes to Social Media and Product Recommendations
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- Social media and online retailing
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- Figure 66: Attitudes to buying online and social media, May 2017
- Younger consumers happier to share information and communicate through instant messaging
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- Figure 67: Agreement to attitudes to buying online and social media, May 2017
- A need for curation and personalisation online?
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- Figure 68: Attitudes to discoverability in shopping online, May 2017
Attitudes to Discounts, Promotions and Joint Accounts
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- High levels of promotional activity may be undermining price integrity online
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- Figure 69: Attitudes to promotions and pricing online, May 2017
- Do retailers need to evolve customer accounts?
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- Figure 70: Attitudes to joint accounts online, May 2017
- Those in larger households far more interested in splitting costs
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- Figure 71: Agreement to attitudes to joint accounts online, by household size, May 2017
Key Players – What You Need to Know
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- Amazon innovation driving its success
- Online retailers trying to tie in customers
- Store based vs pure players: pure players growing faster
- Stores and online
- Same-day delivery taking off?
- Amazon scores highly on trust
Leading Online Retailers
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- Amazon outperforming eBay
- eBay marketplace
- Shop Direct gaining momentum
- Store based retailers
- Fashion – Key area for online
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- Figure 72: Leading online retailers, 2014/15-2016/17
Market Shares
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- Figure 73: Leading online retailers, market shares, 2014-16
- Figure 74: Online retailing, market shares, 2016
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Launch Activity and Innovation
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- Enhanced delivery options…
- …Tesco deliveries within-the-hour
- …John Lewis trialling direct-to-customer's car trunk shopping delivery service
- …drone deliveries
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- Figure 75: Amazon Prime Air, Test Launch 2016
- …Matches Fashion 90-minute delivery service across London
- …Amazon launches free one-hour restaurant delivery service in London
- M&S to trial online grocery shopping service
- Chat-style interface platforms for customer service
- ‘Buy British’
- Buying from sellers who live nearby
- ‘Buy now pay later’
- Is Amazon preparing to launch its checkout-free supermarket concept in the UK?
- App that makes choosing healthier options easier
- ASOS testing beauty app
- Real-time, in-app retail experience
Social Media
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- Facebook most popular social media site
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- Figure 76: Usage of social and media networks in the last three months, 2014-March 2017
- Family and friends most trusted news source
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- Figure 77: Sources of content shared on social and media network other than users’ own content, march 2017
- Why do people follow companies?
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- Figure 78: Attitudes towards social and media networks, March 2017
- Who is being talked about?
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- Figure 79: Number of mentions for selected retailers, 3 July 2016-30 June 2017
- Tesco topics
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- Figure 80: Topic cloud around online mentions of Tesco, July 2016-June 2017
- Amazon topics
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- Figure 81: Topic cloud around mentions of Amazon online, July 2016-June 2017
- eBay topics
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- Figure 82: Topic cloud around mentions of eBay online, July 2016-June 2017
- ASOS topics
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- Figure 83: Topic cloud around mentions of ASOS online, July 2016-June 2017
Advertising and Marketing Activity
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- Total online retail advertising spend up 16.1% year-on-year in 2016
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- Figure 84: UK online retail – Recorded above-the-line, online display and direct mail total advertising expenditure, 2013-16
- Online marketplace Amazon.co.uk is the biggest advertising spender
- ebay targets young shoppers
- Notonthehighstreet.com ‘Magic is Real’ campaign
- Very.co.uk £3m autumn fashion collection campaign
- Littlewoods.com rebranding campaign
- Iceland Frozen Foods drops celebrity-focused advertising
- Boohoo first dedicated menswear campaign
- Net-A-Porter and Mr Porter emphasise the luxury shopping experience
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- Figure 85: Leading UK online retailers – Recorded above-the-line, online display and direct mail total advertising expenditure, 2013-16
- A fifth of total advertising spend channelled through digital medium
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- Figure 86: UK online retail – Recorded above-the-line, online display and direct mail total advertising expenditure, by media type, 2013-16
- Nielsen Ad Intel coverage
Brand Research
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- What you need to know
- Brand map
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- Figure 87: Attitudes towards and usage of selected brands, August 2016-May 2017
- Key brand metrics
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- Figure 88: Key metrics for selected brands, August 2016-May 2017
- Brand attitudes – John Lewis is worth paying more for, but pure players are innovative and provide a great service
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- Figure 89: Attitudes, by brand, August 2016-May 2017
- Brand personality – Pure players are vibrant and fun, M&S is unappealing
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- Figure 90: Brand personality – Macro image, August 2016-May 2017
- Pure players are exciting, Very is aspirational, M&S is overrated
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- Figure 91: Brand personality – Micro image, August 2016-May 2017
- Brand analysis
- Amazon
- eBay
- Fashion retailers
- Department stores
- Supermarkets and Ocado
Amazon
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- What we think
- The focus on Prime
- The fostering of the next generation
- The white whale(s)?
- Amazon gets physical
- The threats?
- Company background
- Company performance
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- Figure 92: Amazon.com Inc: group financial performance, 2012-16
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- Figure 93: Amazon: estimated total retail sales, by European country (excl. VAT), 2014-16
- Retail offering
AO World Plc
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- What we think
- 4Cs strategy is working
- Still work to do with mobile
- Smoothing the customer journey
- New distribution centre provides platform for further European expansion
- Opening up new revenue streams
- What next?
- Company background
- Company performance
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- Figure 94: AO World Plc – Group financial performance, 2012/13-2016/17
- Figure 95: AO World Plc – Group turnover breakdown by segment, 2015/16 and 2016/17
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- Figure 96: AO World Plc – UK turnover breakdown by segment, 2015/16 and 2016/17
- Retail offering
Argos
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- What we think
- Digitally-led in-store Sainsbury’s concessions deliver positive results
- Own brand drive
- Market-leading order fulfilment proposition
- Company background
- Company performance
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- Figure 97: Argos – Group financial performance, 2012/13-2016/17
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- Figure 98: Argos – Outlet data, 2012/13-2016/17
- Retail offering
ASOS
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- What we think
- ASOS to launch its own sportswear range
- Tapping into the growing demand for plus-size menswear
- Mobile-first approach
- Relevant content and customer engagement
- Convenient delivery and return options
- Company background
- Company performance
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- Figure 99: ASOS – Group financial performance, 2011/12-2015/16
- Retail offering
Dixons Carphone
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- What we think
- Connectivity is the big idea
- Ruling price out of the online/offline equation
- Improving the online proposition
- Mobile becoming a greater priority
- Monthly membership scheme to ‘redefine retail’
- Where next?
- Company background
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- Figure 100: Dixons Carphone – Brands, by country, 2017
- Company performance
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- Figure 101: Dixons Carphone – Group financial performance, 2013/14-2016/17
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- Figure 102: Dixons Carphone – Outlet data, 2013/14-2016/17
- Retail offering
eBay
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- What we think
- What has gone wrong?
- Not a retailer
- Where next?
- Company background
- Company performance
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- Figure 103: eBay – Gross merchandise volume, 2013-16
- Retail offering
John Lewis
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- What we think
- Improving the customer experience
- Mobile use increases for online ordering
- Staying at the forefront of online innovation
- Stores play an important role in supporting online
- Gradual shift towards delivery
- Growing own brand and exclusives
- Modest international expansion focuses on e-commerce
- Company background
- Company performance
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- Figure 104: John Lewis (department store) – Group financial performance, 2012/13-2016/17
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- Figure 105: John Lewis (department store) – Outlet data, 2012/13-2016/17
- Retail offering
Next Directory
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- What we think
- Third-party parcel shop collection and return option
- More convenient home delivery options
- New m-commerce websites and upgraded apps driving UK conversion rate
- New distribution hubs and planned mobile sites to boost overseas sales
- Reducing buying friction with streamlined registration and check-out process
- Website personalisation for a more engaging online shopping experience
- Company background
- Company performance
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- Figure 106: Next Group – Group financial performance, 2012/13-2016/17
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- Figure 107: Next Retail – UK outlet data, 2012/13-2016/17
- Retail offering
Ocado Group
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- What we think
- Development dependent on depot coverage
- Managing capacity is key to profitability
- Average orders falling
- The future of the Waitrose agreement
- The Smart Platform
- Where next?
- Company background
- Company performance
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- Figure 108: Ocado Group plc – Group financial performance, 2011/12-2015/16
- Retail offering
Shop Direct Group
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- What we think
- The inheritance
- The future – Credit
- The future – Personalisation
- High sales per customer.
- The strategy is working
- Where next?
- Company background
- Company performance
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- Figure 109: Very, Littlewoods – Sales, 2014/15, 2015/16
- Figure 110: Shop Direct Group – Group financial performance, 2011/12-2015/16
- Retail offering
Tesco
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- What we think
- Making choosing healthier options easier online
- Smart home ordering capability
- Making it faster and simpler for customers to pay for their shopping
- Extended click-and-collect and home delivery options give customers more choice
- New monthly unlimited deliveries scheme
- Company background
- Company performance
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- Figure 111: Tesco Plc – Group financial performance, 2012/13-2016/17
- Figure 112: Tesco Plc – Outlet data, 2012/13-2016/17
- Retail offering
Appendix – Data Sources, Abbreviations and Supporting Information
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- Data sources
- VAT
- Financial definitions
- Abbreviations
- Consumer research methodology
Appendix – Market Size and Forecast
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- Forecast methodology
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