Amazon: Influence and Ambition in the Grocery Sector - UK - January 2021

OVERVIEW
Key issues covered in this Report
COVID-19: market context
Economic and other assumptions
EXECUTIVE SUMMARY
Impact of COVID-19 on online retailing and Amazon
Figure 1: Short-, medium- and long-term impact of COVID-19 on online retailing, January 2020
Amazon: the business 
COVID-19 drives the fastest growth in sales since 2011 for Amazon
Figure 2: Amazon, total net sales, 2014-20
…helping the business hit record profits 
Figure 3: Amazon profits, 2016-20
The UK is Amazon’s fastest growing core region in 2020…
Figure 4: Geographic breakdown of Amazon revenues, 2018-20
…taking Amazon to a record market share in the UK market  
Figure 5: Amazon: share of the UK online retail market, 2017-2020
Amazon opens its first supermarket 
Figure 6: Amazon Fresh grocery store Woodland Hills, August 2020
The consumer 
A third of Amazon shoppers have used the retailer more as a result of COVID-19
Figure 7: Change in Amazon use due to COVID-19, October 2020
Most categories see a boost to purchasing in 2020 
Figure 8: Non-food products purchased via Amazon in the past year, October 2020
Prime also sees a boost… 
Figure 9: Amazon Prime membership and access, October 2020
…helped by growth in use of Prime Video 
Figure 10: Amazon services regularly used, October 2019 and 2020
Ambient central to Amazon’s influence in the grocery sector
Figure 11: Types of food and drink purchased via Amazon in the past year, October 2020
Rapid-delivery key to Amazon’s success in the online grocery market
Figure 12: Attitudes towards Amazon, October 2020
Three quarters would shop at an Amazon grocery store 
Figure 13: What would drive use of an Amazon grocery store, October 2020
ISSUES AND INSIGHTS
COVID-19 and Amazon: significant opportunity and heightened competition 
Amazon’s current influence on the grocery sector…
…and future ambitions
AMAZON STRUCTURE AND INNOVATIONS – KEY TAKEAWAYS
COVID-19 drives significant growth for Amazon’s core retail operations 
The UK is Amazon’s fastest growing core region in 2020
Amazon makes notable moves in the grocery and pharmacy sector 
AMAZON: AN OVERVIEW 
COVID-19 drives the quickest growth for Amazon since 2011
Figure 14: Amazon, total net sales, 2014-20
Figure 15: Amazon quarterly net sales growth, by major business area, 2019-20
Retail grows its share of the Amazon business in 2020 
Figure 16: Amazon net sales breakdown, 2020
Figure 17: Breakdown of Amazon net sales by business segment, as a % of total sales, 2016-20
Despite significant costs, COVID-19 drives record profits for Amazon 
Figure 18: Amazon profits, 2016-20
AMAZON: IN THE UK MARKET 
Amazon revenues in the UK skyrocket in 2020 
Figure 19: Geographic breakdown of Amazon revenues, 2018-20
Online-only players have not had it all their own way in 2020
Figure 20: All UK online retail sales, share of sales by type of retail operation, 2016-2020
Amazon grows its share of the online market in 2020 
Figure 21: Amazon reported sales and gross transactional revenues as a % of all online sales, 2016-20
Figure 22: Amazon: share of the UK online retail market, 2017-2020
Electricals the single largest category for Amazon 
Figure 23: Estimated breakdown of Amazon UK GTV sales by product, 2020
AMAZON: LAUNCH ACTIVITY AND INNOVATION 
Amazon’s first supermarket 
Figure 24: Amazon Fresh grocery store Woodland Hills, August 2020
Figure 25: Amazon Fresh grocery store Woodland Hills, seafood counter, August 2020
Figure 26: Amazon Dash Cart, August 2020
In the UK Amazon expands its partnership with Morrisons 
Ramping up private label
Figure 27: Amazon.com North America new product development, total product launches, Jan 2017-Dec 2020
Figure 28: Amazon Fresh and Amazon Kitchen products, June and September 2020
Figure 29: Happy Belly products, August and October 2020
Figure 30: Solimo product launches, November, August, June 2020
Moving into new areas 
Figure 31: Amazon Pharmacy packaging, November 2020
Tackling the negatives of marketplace
Figure 32: Amazon Transparency, September 2020
Ethical Amazon 
Figure 33: Climate Pledge Friendly certifications, October 2020
ADVERTISING AND MARKETING ACTIVITY
Advertising spend up 14.4% year-on-year in 2020
Figure 34: Amazon (UK) Ltd: total above-the-line, online display and direct mail advertising expenditure, 2016-20
Big push behind Prime Video as the battle for streaming viewers intensified during COVID-19 lockdowns
Figure 35: Amazon (UK) Ltd: total above-the-line, online display and direct mail advertising expenditure by advertising category, 2016-20
Focused on digital marketing
Figure 36: Amazon (UK) Ltd: total above-the-line, online display and direct mail advertising expenditure by media type, 2016-20
Nielsen Ad Intel coverage
THE CONSUMER – KEY TAKEAWAYS
COVID-19 drives significant growth from Amazon 
Prime grows, and is more integral to Amazon than ever before 
Amazon’s influence in the grocery sector is small, but primed for significant growth 
IMPACT OF COVID-19 ON AMAZON
Pandemic drives rapid online growth
Figure 37: COVID-19 Tracker: impact on online shopping and behaviour in-store, April-December 2020
Over a third of Amazon shoppers have used the retailer more due to COVID-19 
Figure 38: Change in Amazon use due to COVID-19, October 2020
Amazon seen as essential during the pandemic 
Figure 39: Attitudes towards Amazon and COVID-19, October 2020
A greater focus on online will bring opportunities in categories of focus…
Figure 40: In-store clothing shopping during COVID-19, August 2020
…and greater competition 
Figure 41: Attitudes towards Amazon during the COVID-19 pandemic, October 2020
WHO SHOPS AND HOW FREQUENTLY WITH AMAZON
Nine in ten shopped with Amazon in the past year 
COVID-19 drives greater frequency of Amazon use
Figure 42: Frequency of Amazon shopping, October 2019-20
Younger shoppers most frequent Amazon users
Figure 43: Frequency of Amazon shopping, by age, October 2020
COVID-19 drives greater frequency of purchase among older groups 
Figure 44: Frequency of Amazon shopping, by age, October 2019 and 2020
AMAZON PRIME MEMBERSHIP
Half of consumers now have access to Amazon Prime 
Figure 45: Amazon Prime membership and access, October 2020
Almost a quarter have signed up to Prime in the past year 
Figure 46: Length of Amazon Prime membership, October 2020
Nearly two thirds of 16-34s have access to Prime 
Figure 47: Amazon Prime membership and access, by age, October 2020
AMAZON SERVICES USED 
Delivery still the main draw, but Video also key
Figure 48: Amazon services regularly used, by type of access to Amazon Prime, October 2020
Figure 49: Repertoire of Amazon Prime services used regularly, by age, October 2020
COVID-19 drives significant use of services, particularly among younger consumers
Figure 50: Amazon services regularly used, October 2019 and 2020
Figure 51: Key Amazon Prime services used, by age, October 2019 and 2020
DEVICES USED TO SHOP WITH AMAZON 
App usage grows in 2020 
Figure 52: Methods used to shop with Amazon in the past year, October 2019 and 2020
Younger shoppers just as likely to use the Amazon app as any other method 
Figure 53: Methods used to shop with Amazon in the past year, by age, October 2020
Younger shoppers also most likely to use multiple devices 
Figure 54: Repertoire of devices used to shop with Amazon in the past year, October 2020
NON-FOOD PURCHASES VIA AMAZON 
Most categories see a boost to purchasing in 2020 
Figure 55: Non-food products purchased via Amazon in the past year, October 2020
Prime boosts purchasing levels across all categories 
Figure 56: Non-food products purchased via Amazon in the past year, by Prime membership status, October 2020
Figure 57: Non-food products purchased via Amazon in the two years, by Prime membership status, October 2019 and 2020
Repertoire of Amazon purchases grows 
Figure 58: Repertoire of products purchased via Amazon in the last year, October 2019 and 2020
FOOD AND DRINK PURCHASES VIA AMAZON 
Amazon’s slow build of influence in the grocery sector 
One in ten buys food/drink from Amazon 
Figure 59: Food and alcoholic drink purchasing via Amazon in the past year, October 2020
Speed is crucial to Amazon’s appeal in the grocery sector 
Figure 60: Attitudes to buying food/drink from Amazon, October 2020
Alcoholic and food cupboard central to Amazon’s influence in the grocery sector
Figure 61: Types of food and drink purchased via Amazon in the past year, October 2020
Figure 62: Food and drink purchased via amazon in the past year, by age and socio-economic group, October 2020
Fresh lags behind in terms of interest among those who have yet to buy food and drink from Amazon
Figure 63: Interest in future food and drink purchases from Amazon, October 2020
Figure 64: Attitudes to hygiene and buying fresh food via Amazon, by age, October 2020
INTEREST IN A PHYSICAL AMAZON GROCERY STORE
Rumours of a physical entrance to the UK grocery sector persist 
Over three quarters of shoppers would be interested to shop at an Amazon grocery store 
Prime could be the differentiator 
Figure 65: What would drive use of an Amazon grocery store, October 2020
Figure 66: What would drive use of an Amazon grocery store, by age, October 2020
APPENDIX – DATA SOURCES, ABBREVIATIONS AND SUPPORTING INFORMATION
Data sources
VAT
Financial definitions
Abbreviations
Consumer research methodology