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Amazon: A Shopper's Perspective - UK - January 2019

“Amazon is the arch disruptor in a period of evolution for UK retail. The size of the business and its relentless focus on customer-facing innovation has meant it has invested in and led on many trends that have come to define 21st century retail. However, at present, it is not all conquering, leaving both room for its growth and for rivals to fight back.”
– Nick Carroll, Senior Retail Analyst

This Report looks at the following areas:

  • Amazon: destroying the high street or providing the platform for the next generation?
  • Can you win against Amazon?
  • Amazon: what is the next frontier?

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Table of contents

  1. Overview

    • What you need to know
      • Products covered in this Report
      • Executive Summary

          • Amazon: structure, innovations and marketing
            • Amazon sales top $177.9 billion (£138 billion) in 2017
              • Figure 1: Amazon net sales breakdown, 2017
            • Amazon is the largest online retailer in the UK…
              • Figure 2: Amazon reported and gross transactional value revenues, 2015-18
            • …disrupting most categories in the process
              • Figure 3: Amazon UK: estimated sales by product, 2017
            • Opening up the purse strings
              • Going physical
                • Figure 4: Amazon 4-star, New York City, September 2018
              • Amazon ramping up its advertising expenditure
                • Figure 5: Total recorded above-the-line, online display and direct mail total advertising expenditure by Amazon (UK) Ltd, 2013-18
              • The consumer
                • Nearly nine in 10 shopped with Amazon in the past year
                  • Figure 6: Changes in shopping levels via Amazon in the past year, October 2018
                • Most (70%) shop with Amazon at least once a month
                  • Figure 7: Frequency of shopping with Amazon, October 2018
                • 39% of consumers have access to Amazon Prime
                  • Figure 8: Ownership and access to Amazon Prime, October 2018
                • Amazon’s core categories still most popular but 30% purchased fashion
                  • Figure 9: What shoppers purchased via Amazon in the past year, October 2018
                • Desktop/laptop site remains most used overall, but younger consumers more engaged in mobile
                  • Figure 10: Devices used to shop with Amazon in the past 12 months, by age, October 2018
                • Satisfaction levels high among shoppers, although customer service is a concern
                  • Figure 11: Satisfaction with the Amazon shopping experience, October 2018
                • Convenience, familiarity, and habit driving customers to Amazon
                  • Figure 12: Behaviours of Amazon shoppers, October 2018
                • Awareness of Amazon’s impact on the high street, but few let the bad press affect use
                  • Figure 13: Attitudes towards Amazon’s impact on retailing, October 2018
                • What we think
                • Issues and Insights

                  • Amazon: destroying the high street or providing the platform for the next generation?
                    • The facts
                      • The implications
                        • Can you win against Amazon?
                          • The facts
                            • The implications
                              • Amazon: what is the next frontier?
                                • The facts
                                  • The implications
                                  • Amazon: Structure and Innovations – What You Need to Know

                                    • Amazon sales top $177.9 (£138.0) billion in 2017
                                      • Amazon is the largest online retailer in the UK, disrupting most categories in the process
                                        • Opening up the purse strings
                                          • Going physical
                                            • Amazon ramping up its advertising expenditure
                                            • Amazon: An Overview

                                              • Amazon is still predominately a retailer…
                                                • Figure 14: Amazon, total net sales, 2013-18
                                                • Figure 15: Amazon net sales breakdown, 2017
                                              • …but AWS is the quickest growing aspect of the business
                                                • Figure 16: Breakdown of Amazon net sales, as a percentage by business segment, 2015-17
                                              • Amazon around the world
                                                • Figure 17: Breakdown of Amazon net sales, by region, 2017
                                                • Figure 18: Breakdown of Amazon net sales, as a percentage by region, 2015-17
                                              • Amazon is becoming more profitable
                                                • Figure 19: Amazon, operating income, margins and net income, 2013-17
                                                • Figure 20: Amazon, net cash provided by (used in operating activities), 2013-17
                                            • Amazon in the UK Market

                                              • Amazon the biggest online player
                                                • Figure 21: Leading retailers share of all online sales, 2017
                                              • Amazon accounts for less than 5% of all retail sales
                                                  • Figure 22: Amazon reported and gross transactional value revenues, 2015-18
                                                  • Figure 23: Amazon reported sales and gross transactional revenues as a % of all online retail sales, 2015-18
                                                • Electricals the biggest category by value
                                                  • Figure 24: Amazon UK: estimated consolidated sales by product, 2017
                                              • Amazon: Launch Activity and Innovations

                                                  • A willingness to invest
                                                      • Figure 25: PillPack user interface, 2018
                                                    • Getting physical
                                                      • Figure 26: Amazon products in Whole Foods Kensington, 2017
                                                      • Figure 27: Amazon Go Seattle, 2016
                                                      • Figure 28: Amazon 4-star, New York City, September 2018
                                                    • Alexa finds her voice
                                                      • Figure 29: Amazon Echo Show, 2017
                                                    • Going the extra (last) mile
                                                        • Figure 30: Amazon Prime Air, December 2016
                                                    • Amazon: Advertising and Marketing Activity

                                                      • Amazon’s ad expenditure has jumped in the last three years
                                                        • Figure 31: Total recorded above-the-line, online display and direct mail total advertising expenditure by Amazon (UK) Ltd, 2013-18
                                                      • TV and Cinema spending showing particular growth
                                                        • Figure 32: Total recorded above-the-line, online display and direct mail total advertising expenditure by Amazon (UK) Ltd, by media type, 2014-18
                                                      • Retail, Prime, and CE the three core pillars of Amazon’s strategy
                                                          • Figure 33: Total recorded above-the-line, online display and direct mail total advertising expenditure by Amazon (UK) Ltd, by percentage spent by product category, 2014-18
                                                        • Amazon increases its physical interactions with customers
                                                          • Figure 34: Amazon Smile box, London July 2018
                                                          • Figure 35: Amazon Fashion pop-up, Baker Street London, October 2018
                                                        • Nielsen Ad Intel coverage
                                                        • Amazon: Brand Research

                                                            • Amazon: brand overview
                                                              • Brand map
                                                                • Figure 36: Attitudes towards and usage of selected brands, December 2018
                                                              • Key brand metrics
                                                                • Figure 37: Key metrics for selected brands, December 2018
                                                              • Brand attitudes: online players excelling with online service
                                                                • Figure 38: Attitudes, by brand, December 2018
                                                              • Brand personality: Amazon more likely to be seen as fun…
                                                                • Figure 39: Brand personality – Macro image, December 2018
                                                              • …and responsive
                                                                • Figure 40: Brand personality – Micro image, December 2018
                                                              • Brand analysis
                                                                • Amazon: a brand in rude health
                                                                  • Figure 41: User profile of Amazon, December 2018
                                                              • The Consumer – What You Need to Know

                                                                • Nearly nine in 10 shopped with Amazon in the past year
                                                                  • Over a third have, or have access to, Amazon Prime
                                                                    • Hardcopy media still the most popular category
                                                                      • More 16-34s shop with Amazon via a mobile device than a laptop/desktop
                                                                        • Satisfaction levels high overall among Amazon shoppers
                                                                          • Amazon’s reach extends far past the online sector
                                                                            • Awareness of Amazon’s impact on the high street, but few let the bad press effect use
                                                                            • The Amazon Shopper

                                                                                • Amazon usage is near universal across the demographic groups
                                                                                  • Figure 42: Those who have shopped with Amazon in the past year, by age, October 2018
                                                                                • A majority of Amazon shoppers use the site once a month
                                                                                  • Figure 43: Frequency of shopping with Amazon, October 2018
                                                                                  • Figure 44: Frequency of shopping with Amazon, by age, October 2018
                                                                                • More have increased their shopping with Amazon than have reduced it
                                                                                  • Figure 45: Changes in shopping levels via Amazon in the past year, October 2018
                                                                                  • Figure 46: Frequency of shopping with Amazon, by changes in shopping levels with Amazon, October 2018
                                                                              • Amazon Prime Membership

                                                                                  • Over a third have access to Amazon Prime…
                                                                                    • Figure 47: Ownership and access to Amazon Prime, October 2018
                                                                                  • …rising to two thirds of 16-24s
                                                                                      • Figure 48: Ownership and access to Amazon Prime, by age, October 2018
                                                                                    • Delivery remains key to Prime appeal, but Prime Video is growing
                                                                                      • Figure 49: Amazon Prime services regularly used, October 2018
                                                                                    • A quarter of those who are not members have previously been so
                                                                                      • Figure 50: Past membership of Amazon Prime, October 2018
                                                                                    • For non-members the main barrier is cost
                                                                                        • Figure 51: Why consumers are not/no longer Amazon Prime members, October 2018
                                                                                    • What They Buy Via Amazon

                                                                                      • Hardcopy media still the most popular purchase
                                                                                        • Figure 52: What shoppers purchased via Amazon in the past year, October 2018
                                                                                        • Figure 53: What shoppers purchased via Amazon in the past year, by age, October 2018
                                                                                      • Effects of Prime on purchasing
                                                                                        • Figure 54: What shoppers purchased via Amazon in the past year, by Prime membership status, October 2018
                                                                                        • Figure 55: Repertoire of categories purchased via Amazon in the past 12 months, by Amazon Prime membership status, October 2018
                                                                                      • Prime membership also increases frequency of shopping
                                                                                        • Figure 56: Amazon prime membership, by frequency of shopping via Amazon, October 2018
                                                                                    • Devices Used to Shop with Amazon

                                                                                      • Just under half shop with Amazon via a mobile device
                                                                                        • Figure 57: Devices used to shop with Amazon in the past 12 months, October 2018
                                                                                      • Younger shoppers most likely to shop via mobile device
                                                                                          • Figure 58: Devices used to shop with Amazon in the past 12 months, by age, October 2018
                                                                                        • Prime members more likely to shop via Echo
                                                                                            • Figure 59: Devices used to shop with Amazon in the past 12 months, by Prime membership, October 2018
                                                                                          • Repertoire of ways of shopping with Amazon
                                                                                            • Figure 60: Repertoire of methods of shopping with Amazon in the past 12 months, by age, October 2018
                                                                                        • Satisfaction with the Amazon Shopping Experience

                                                                                          • 90% of Amazon shoppers are satisfied with the shopping experience
                                                                                              • Figure 61: Satisfaction with the Amazon shopping experience, October 2018
                                                                                            • Customer service an area of priority for Amazon
                                                                                                • Figure 62: Key drivers of overall satisfaction with Amazon, November 2018
                                                                                                • Figure 63: Overall satisfaction with Amazon – Key driver output, November 2018
                                                                                              • Heavy users far more satisfied
                                                                                                  • Figure 64: Satisfaction levels with the Amazon shopping experience, by level of usage of Amazon, October 2018
                                                                                                • Methodology
                                                                                                • Behaviours of Amazon Shoppers

                                                                                                  • Convenience, familiarity, and habit driving customers to Amazon
                                                                                                    • Figure 65: Behaviours of Amazon shoppers, October 2018
                                                                                                  • The Amazon shopper in the physical world
                                                                                                      • Figure 66: Behaviours of Amazon shoppers, October 2018
                                                                                                    • Price assumptions greater for heavy users
                                                                                                        • Figure 67: Those answering ‘yes’ to behaviours around Amazon shopping, by frequency of Amazon shopping, October 2018
                                                                                                    • Attitudes toward Amazon’s Effect on Retail

                                                                                                      • Bad press doesn’t affect a majority’s desire to shop with Amazon
                                                                                                          • Figure 68: Amazon.co.uk, screen capture, November 2018
                                                                                                          • Figure 69: Attitudes towards Amazon’s impact on retailing, October 2018
                                                                                                        • Frequent users more aware of Amazon’s impact
                                                                                                          • Figure 70: Agreement towards attitudes towards Amazon’s impact, by frequency of shopping via Amazon, October 2018
                                                                                                        • Negative headlines regarding Amazon aren’t its problem, it’s the legislation
                                                                                                        • Amazon and Black Friday

                                                                                                            • Black Friday is an online-first event and this plays into Amazon’s hands
                                                                                                              • Figure 71: Black Friday shopping 2018, by retail channel, December 2018
                                                                                                            • Nearly half of online Black Friday shoppers used Amazon
                                                                                                              • Figure 72: Retailers shopped with in-store/online during Black Friday 2018, December 2018
                                                                                                            • Electricals top the Black Friday wish list
                                                                                                                • Figure 73: Products purchased during Black Friday 2018, by all Black Friday shoppers and by those who shopped with Amazon, December 2018
                                                                                                              • Christmas purchasing key during Black Friday
                                                                                                                • Figure 74: Behaviours of Black Friday shoppers, December 2018
                                                                                                            • Why They Don’t Shop with Amazon

                                                                                                              • 14% didn’t shop with Amazon in the past year, but why?
                                                                                                                  • Figure 75: Reasons for not shopping with Amazon in the past year, October 2018
                                                                                                              • Appendix – Data Sources, Abbreviations, and Supporting Information

                                                                                                                • Data sources
                                                                                                                  • VAT
                                                                                                                    • Financial definitions
                                                                                                                      • Abbreviations
                                                                                                                        • Consumer research methodology
                                                                                                                        • Appendix – Key Driver Analysis

                                                                                                                            • Interpretation of results
                                                                                                                              • Figure 76: Overall satisfaction with Amazon – Key driver output, November 2018
                                                                                                                              • Figure 77: Satisfaction with Amazon, November 2018

                                                                                                                          Amazon: A Shopper's Perspective - UK - January 2019

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