According to Amazon’s annual report, the retailer enjoyed its fastest rate of growth for six years, analysts at GlobalData have noted.
The results should have competitors concerned, the company added, with further impact on the online retail sector predicted.
GlobalData UK retail research director Patrick O’Brien commented: “It may be no surprise to hear that Amazon continues to prosper in the UK, but the level of success it confirmed in its annual report last week will strike fear into the hearts of all its competitors – which is pretty much the entire retail industry now.
“While its large multichannel competitors have been hopelessly boasting about ‘record sales’ in a period of inflation which would render anything else disastrous, Amazon said nothing at all about its UK performance. Its UK revenue increase of 19% to $11.4bn didn’t warrant a mention in Amazon’s 23-page press release, nor in its earnings call discussion with investment analysts. Instead this sole UK data point was buried away on page 71 of its annual 10-K report filed the next day.”
He continued: “Its coyness about the UK is just a function of its relative size, as it accounts for less than 7% of its total sales, and its key home market grew even faster (though it was helped there by the acquisition of Whole Foods to a greater extent). But the UK numbers are particularly impressive considering the maturity of the online market here, and when its revenues are converted back to sterling using average daily exchange rates, it reveals that its rate of growth has been accelerating for the third year running, and in 2017 grew at 25% to £8.8bn, the fastest rate for six years.
“When you then factor in its increasing reliance on third party retailers – from which it only recognises the commission charged – then the growth is even more impressive as it means that the gross transaction value must be growing at an even faster clip.”
Patrick added: “We believe that Amazon UK, is not only taking online market share, but driving the online market itself, and stealing increasingly large chunks of sales from physical store-based retailers. Rather than the threat subsiding as it matures, its latest results indicate that its impact on the market will be greater and faster than suspected. It’s not all from domestic demand though, as we believe that there has a major increase in overseas orders going through its UK platform since the devaluation of the pound in mid-2016 made its pricing more attractive.
“Currently more non-food spend goes through Amazon’s UK platform than through any other retailer, and while the Big 4 grocers are still larger overall, if Amazon’s current trajectory continues, it will soon have Tesco in its sights.”