THE UK’S TOP 30 ECOMMERCE RETAILERS

The UK's top 30 ecommerce retailers are those shrugging off MacDonald’s concerns of a return to “Web -1.0” and using online to prop up other channels where relevant.

Here, we explore how six of the leaders are forecast to achieve strong online sales performance despite the difficult trading backdrop – and where these retailers are hedging their bets for 2023.

Strong UX and CX goes hand in hand with ecommerce sales performance, so how are the country’s top ecommerce retailers ensuring they deliver optimal online shopping experiences? In this chapter we look at the tech, partnerships and innovations these retailers are investing in.

Using marketplaces to maximise assets

Those retailers leading the way in ecommerce are open to innovation without losing focus on strategic goals. Take Superdrug, for instance – 30th in our ranking with FY2022 forecast online sales growth of 6% to £350m – which is innovating to improve its digital personalisation and scaling its online product range. To help achieve this and diversify, Superdrug has focused on establishing its own online marketplace. Launched in November 2022 with 300 brands signed up, the marketplace has already enabled the beauty retailer to double its product offer with a focus on “homegrown, female-founded, sustainable and inclusive” new brands.

This is a similar strategy to that being pursued by Boots, which is launching its own marketplace this spring with brands of any size able to sell via the platform. Boots enjoyed mammoth ecommerce growth during the pandemic: its FY2021 total online sales surged 54% to £1.2bn and, despite a small decline in growth (-4%) expected for FY2022, it is focused on retaining its stronghold. 

Replatforming and app investment

In 2021, Boots replatformed its website to IBM Cloud, a full-stack cloud platform with more than 170 products and services covering data, containers, AI, Internet of Things (IoT) and blockchain, which has greatly improved the beauty business’ performance and functionality.

In its most recent quarter to 30 November 2022, Boots said its digital sales growth continues to outperform the market and now accounts for 18% of total retail sales. The Boots app has been a big driver of this too, with the app experiencing impressive growth of 26% in 2021 and now representing more than a quarter of Boots.com sales.

The app plays into Boots’ loyalty-driven community, with its 15 million Advantage Card holders a huge feather in its cap, and it continues to work to maximise this community. For instance, while the Advantage Card was digitised in the app back in 2019, only in 2022 was the app updated to give members exclusive access to Boots Price Advantage deals, offering up to 50% off selected products.

Elevated online partnerships 

One clear trend from retailers leading the way in ecommerce is the growth of strategic partnerships. Marks & Spencer and rental platform Hirestreet are one such example. M&S (ranked 11th with forecast online sales up 8% for FY2022 from £1.3bn to £1.5bn) used Hirestreet to introduce a rental offer via its website back in October 2021. The launch came after M&S found that more than a third of its consumers consider the environment before buying clothes.

By April 2022, M&S had made 40 womenswear lines available on the platform in what it said was the biggest retailer collaboration so far for Hirestreet. It is continuing to learn what works on the platform and says that although rental is usually associated with formal dressing, 53% of Hirestreet customers are now renting M&S products for casual social events.  

AO.com (ranked 17th) and Homebase are also chasing a goal of cross-channel benefits. In August 2022 the retailers entered into an initial five-year agreement to supply, install and recycle appliances. Homebase has agreed to purchase major domestic appliances and audio-visual equipment exclusively from AO.com, and Homebase customers get access to the entire AO range at its “internet” pricing and access to its logistics, including its recycling scheme. Chief executive John Roberts has highlighted how more businesses should be partnering to create “one-stop-shop solutions”. 

Boots is also making a play to drive ecommerce partnership revenue. In September 2021, the business launched the Boots Media Group, a media and marketing agency that helps third-party brands – inside and outside of retail – provide personalised campaigns to customers based on its Advantage Card database. ITV is the latest business to quite literally take advantage, striking a deal in November 2022 to target potential customers for its ITVX platform. 

Enter relationship marketing

Another trend evident among the UK’s top 30 ecommerce retailers is the real connection these businesses are forming with their customers via their marketing strategies. It is a trend that Marigold, parent company of Cheetah Digital, Selligent and more, refers to as "relationship marketing" – i.e. putting the customer at the centre of everything.

Marigold VP of Global Content Tim Glomb explains: “The idea of relationship marketing simply means listening to consumers as individuals and meeting their needs via marketing efforts. This means personalising email, ads, loyalty offerings, etc. Consumers are tired of generic, one-size-fits-all offers from brands.”

Glomb adds: “Our 2023 Consumer Trends Index also found that 49% of people are frustrated with irrelevant content and offers, so the time is now and the technology exists to deliver on this at scale.”

M&S, for instance, is honing relationship marketing. While it has been working on personalising the customer experience through its website, app and CRM programme over the past couple of years, it has recently developed a bespoke in-house solution to deepen relationships with customers and drive future growth. The goal is to build personalisation at scale to move from a targeted promotions model to one where the range, interactions and product presentation are relevant to the individual customer, making M&S a more engaging and easier place to shop. 

The retailer’s personalisation efforts stepped up a gear in the closing weeks of 2022 after it acquired the intellectual property of online personal styling service Thread, which had collapsed into administration, for an undisclosed sum. M&S has bought property including the source code and algorithms developed by Thread and is hiring 30 of its former data scientists, software engineers and styling and creative colleagues.

M&S said over the past few years it has “generated substantial value through customer data, personalising offers and language and providing repeat purchase and product recommendations”. Between 20% and 25% of “all digital interactions” are anticipated to be personalised this year, but co-chief executive Katie Bickerstaffe wants to get to 50% in the next 12 to 18 months.

Learning from Sainsbury’s Argos

• FY2022 forecast UK online sales: £10.5bn (-3% on 2021)
• FY2021 total UK online sales: £10.8bn (-11% on 2020)

For Sainsbury’s Argos, ecommerce is on a turnaround. While online sales are expected to fall 3% across the two businesses in FY2022, a rebound is anticipated in 2023 with growth of 6% and 9% in 2024. Argos in particular is enjoying an online revival with a large part of Sainsbury’s Argos’ strong Christmas 2022 performance – general merchandise up 7.4% over the 16 weeks to January 7 – being down to its ability to fix its availability issues, something that has plagued general merchandise retailers across the market. This meant it was able to capitalise on the success of its Black Friday awareness campaign, which drove 120 million visits to the website over the period and saw 15,000 orders per hour being processed on Black Friday itself.

Argos is another online-led retailer that has used online to prop up its other channels. While its owner Sainsbury's has closed many Argos own-brand stores, customers still have 1,100 points of contact with the retailer via its remaining estate and its presence in Sainsbury’s stores. Its click-and-collect model, honed over many years, stood it in good stead for customers looking for the confidence they’d receive their items during a Christmas period of Royal Mail strikes.

Looking forward, the goal is to continue wrapping its store presence around Argos’ ecommerce and mobile offer. By 2024, every Sainsbury’s supermarket is set to have either an Argos shop-in-shop or a collection point. The Argos store estate will be reduced to 100 standalone stores, with all of these similarly tailored to fulfilling online orders.

Retailers returning to form

Outside of our analyst rankings, another significant trend to note is the volume of legacy retailers that have successfully revitalised their ecommerce strategies to get back in the black. Multichannel fashion retailer White Stuff, for instance, returned to profit during the year to April 2022 after a bumpy couple of years. The fashion retailer recorded EBITDA before exceptional items of £8.6m during the year to April 30, up from a loss of £3.4m the year before. Online sales inched up 0.4% to £61.3m.

Since 2018, the retailer has been on a three-year transformation plan that involves significant investment in IT systems to drive process efficiency. This includes upgrading its ecommerce platform, implementing a product information management tool and replacing its finance, order and inventory management systems. It has also developed its partnerships with Next’s Label platform, QVC and M&S – in 2019, 2020 and 2021 respectively – alongside an increased focus on wholesale, to broaden its appeal.

Quiz is another example of a retailer whose recent online drive has proven fruitful. It swung back into the black in the six months to September 2022, following a challenging pandemic. It posted a pre-tax profit of £1.8m for the six months to September 30, compared with a £1.3m loss during the same period a year previously. Online sales jumped 29% to £16.1m over the period as investments in digital marketing paid off and customer numbers rose.

This extends to personalised messaging via email marketing. It has been working with a supplier since July 2020 to adopt more targeted email messages, which Quiz says has lowered the level of purchase abandonments for journeys originating via email. It has also been using AI technology to provide post-purchase customer support via Facebook Messenger to be closer to customers. While third-party partnerships are important – Quiz has arrangements with New Look, Next and Very – the fashion retailer’s core focus remains its own website sales.

Outside of fashion, in homewares digital transformation has been under way at Oak Furnitureland. Following a tough 2020, which saw the company bought by hedge fund Davidson Kempner in a pre-pack administration deal, in the year to June 30 2022 the retailer reported a 10% rise in revenue and a return to profit. During the year, group revenue stood at £275m, while profit was recorded as £1.8m, up from an £19m deficit in 2021.

With most purchases starting via online research, the focus has been on the creation of a single customer view and seamless multichannel service. Mobile is key and Oak Furnitureland launched a new app in December 2021 to bolster its ecommerce offer. Users of the app can now scan QR codes in its stores to add items to a wishlist and purchase at a later date. They can also use VR technology to gauge what products would look like in their own homes.

It is not just the big names excelling at ecommerce. Retail Week’s analysts have compiled a secondary data ranking of the UK's top 30 ecommerce retailers by 2021 sales growth and it shows several smaller brands, niche retailers and, perhaps surprising due to their store-focused past, heritage brands that delivered significant online growth in 2021.

It is clear that the UK’s top 30 ecommerce retailers have commonalities – they have prioritised technology, staff, supply chain and, above all, the customer to bolster online sales performance.

What’s also clear from our review is that there is no one silver bullet to a winning ecommerce strategy, with many of the top online retailers still navigating shifts. Amazon is the key example here because, despite its ranking and reputation as an ecommerce behemoth, it has not been immune to the impact of declining online demand and has been forced to constantly rethink and adjust its strategy accordingly.

There is a new dawn for ecommerce too – not the “Web -1.0” that MacDonald describes – but one where emerging disruptors such as Beauty Pie are claiming online market share and established retailers that critics may once have written off, such as White Stuff and Quiz, are returning to online growth.

More than anything, it is evident that to stay ahead online retailers must refresh their ecommerce strategies – what worked before won’t work now. Here are our tips to REFRESH in 2023.  

Recommendations and personalisation are key: From Asos investing in a data science team to improve its online recommendations to Next doubling down on personalisation across its website and app, the report has shown that customers have to be at the heart of ecommerce strategy. In fact, retailers have to become customer obsessed in 2023.

Enhance the app experience: Retailers must innovate to improve online CX and, alongside personalisation, this means investing in mobile apps to be present where hybrid customers now are. The Nike+ app shows just how valuable a tool they can be to drive engagement. Likewise, Tesco’s work to evolve its Clubcard and Tesco Pay+ apps has greatly supported customer retention.

Focus on staff: It may seem obvious but, as evidenced in the Currys case study, a renewed focus on employee engagement such as digital upskilling initiatives can largely improve ecommerce productivity, and reduces overheads of new technical hiring and training. Leadership development, compensation and better support for warehouse teams cannot be overlooked either.

Replatforming reaps rewards: As the Boots example shows, retailers that take action to overhaul their websites – or launch new websites altogether à la Fenwick – can expect greater online sales performance. The results outweigh the investment.

Elevating partnerships: Tie-ups and test-and-learn initiatives not only allow ecommerce retailers to innovate at a lower cost, but – as we’ve seen with the examples of Superdrug and its marketplace partners, and Asos and Nordstrom – they help broaden reach to new online audiences.

Savvier supply chain thinking is needed: The Fulfilment and returns chapter highlights solutions being implemented by the top ecommerce retailers, but equally it showcases an opportunity for businesses to take decisive action on adding friction into the supply chain. For instance, JD Sports and Zara have shown that charging for shorter delivery times and returns respectively hasn’t impacted their online sales.

Hone in on what’s already working: You don’t necessarily need to go after the next big thing. You may notice that our report hasn’t discussed the metaverse opportunity, blockchain or other elements of Web 3.0. This is for a reason: enhancements and continued updates as opposed to investments in future-thinking tech can generate, and are generating, dividends. Screwfix and Tesco, for instance, have continued to iterate their propositions and retained their positions as online titans.