Sector Trend Analysis – E-commerce trends in the United Kingdom

Ecommerce market overview

Store based grocery retailers in the UK represent 92.9% of packaged food sales, which increased 2.0% annually over 2019-23. During the same period, ecommerce groceries sales rose 25.9% annually.

According to Euromonitor, after a pandemic driven surge in ecommerce groceries sales, sales are expected to slow to 3.2% annual growth over 2024-28 due to high inflation, the cost-of-living crisis, and a surge in utility prices, all of which also affects disposable incomes of UK consumers. Overall ecommerce sales in the UK are expected to be largely driven by food, beverage, apparel, and footwear products over 2024-28.

Ecommerce by food sector

From 2019-23, all packaged food categories experienced ecommerce sales growth that averaged 2.7% annually. Meals and soups is the largest agrifood category sold through ecommerce, followed by processed meat and seafood, and baked goods. Over 2019-23, all packaged food categories experienced faster sales growth through ecommerce than in store, driven by convenience and innovation through technological advancements such as AI to enhance the shopping experience. Ecommerce sales of meals and soup, plant based dairy, dairy, and sweet spreads grew fastest from 29.7%% to 23.5% annually.

Key players

Asda is the leading grocery retailer in the UK, followed by Sainsbury and Tesco. Aldi and Tesco saw the fastest sales growth over 2019-23. According to Euromonitor, most grocery retailers recorded robust sales growth over 2019-23, driven by retailers' value offer, especially discounters and warehouse clubs.

Price sensitivity is a primary driver of spending behaviour in the UK due to inflationary pressure and the ongoing cost-of-living crisis. As a result, consumers opted for discounters over traditional grocers, leading to increased footfall in Aldi and Lidl. According to Euromonitor, an increase of private label penetration in the UK has been supported by both leading discount retailers as prices are significantly lower than brands for many products. Aldi and Lidl have pledged to expand their store network in the UK in the near term to surpass 1,000 stores each.

As discounters are expected to remain a more popular channel for price sensitive customers, supermarkets and hypermarkets, like Sainsbury and Tesco, are anticipated to place a strong emphasis on the customer experience. For example, after investing in collaborations with Starbucks and Greggs in 2023, Sainsbury's continues to build on its strategy to substitute numerous in-store cafés with more premium concessions operated by third party vendors by announcing a partnership with Costa Coffee in 2024. Furthermore, Tesco and Vauxhall have formed a retail media collaboration to target new Vauxhall electric vehicle drivers with the latter promising free charging for a year at the former's hubs. This collaboration will include 2,700 EV charging stations across 619 Tesco outlets throughout the UK. Asda announced the expansion of its partnership with Claire's, a jewellery and personal accessories retailer.

Device distribution

In 2020, there was a strong shift in ecommerce sales to mobile ecommerce in the UK, making it the dominant ecommerce segment by device, in line with changing consumer preferences due to the pandemic.

Since then, the penetration of mobile ecommerce has continued to grow each year, driven by comfort and convenience. This was also the case in 2023 as consumers spent increasing amounts of time on their mobile phones, both at and outside the home. The UK boasts a smartphone penetration of nearly 80%, complemented by ongoing enhancements to mobile applications and the convenience offered by handheld devices, favoured by younger, tech-savvy generations. Impulse purchases and quick indulgences, associated with categories such as fashion and foodservice, further fuelled the growth of mobile commerce during the year, while big-ticket items that required meticulous research and comparisons contributed to the sales increase of PC e-commerce.

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Sector Trend Analysis – E-commerce trends in the United Kingdom
Global Analysis Report

Prepared by: Kris Clipsham, Market Analyst

© His Majesty the King in Right of Canada, represented by the Minister of Agriculture and Agri-Food (2024).

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