After about 25 years of online shopping, ecommerce and multichannel retail can be reckoned to have reached maturity. In the year 2000, UK shoppers were able to buy from early adopters of ecommerce, such as Amazon and Argos. Other retailers, meanwhile, were catching up throughout the noughties and teen years of the century.
As the ability of shoppers to buy online expanded quickly, the value of online sales shot up in response. Andy Mulcahy, strategy and insights director at IMRG, says ecommerce initially grew because it provided more shopping opportunities outside traditional times, while new devices – from smartphone to tablets – enabled them to buy from different places.
As this fast-growth industry completed its second full decade, the Covid-19 pandemic hit, pushing shoppers to buy ‘non-essential’ products online. While many thought that this move would mean that all shoppers would eventually do most of their shopping online, the truth has been more nuanced. Many returned to buying products instore once the pandemic was over yet many others continued to buy online.
The latest figures from the UK’s Office for National Statistics (ONS) suggest that 27% of UK retail sales took place online in December 2024. UK retail sales were then hit hard by cost-of-living issues sparked by Russia’s invasion of Ukraine in February 2022, as well as subsequent rises in the cost of energy and raw materials. Sales only returned to growth in 2024, according to ONS figures, while etail trade association IMRG suggests online sales will grow – by 1% – in 2025 for the first time in years.
“Ecommerce is not going away,” says Andy Mulcahy. “It’s just had a hard time. But if growth has returned to the market a bit more reliably, hopefully that’s good. A market that’s growing, rather than just in decline all the time, is a lot more investible. You know you can make decisions and are not just trying to plug holes all the time.” That, in turn, he says should lead to better technology that feeds into improved personalisation and, in turn, boosts conversion rates.
Taking stock of ecommerce development
Over the last quarter century, pioneers in this space, such as Amazon and Apple, have combined technology mastery with meeting customer demand to produce retail businesses that have been rewarded with high stockmarket valuations – a theme reflected in the Capital Value Chain of the RetailX UK500. As of January 2025, Apple is the world’s most valuable company, with a market capitalisation of US$3.46tn. It is ranked Elite in the UK500 for its performance in the UK market. Amazon (market capitalisation US$2.42tn) and Tesco (market capitalisation £26.3bn) are also among the most successful retailers listed in the UK500, with both standing out for the leading role they have taken in the development of ecommerce.
Traditional UK high street retailers such as Boots, Tesco, Sainsbury’s and Marks & Spencer have used ecommerce as a tool to build on their existing strong positions in the UK market. More recent market entrants, such as Next, have combined stores and ecommerce to win an outsize share of the market.
These are the retailers that have succeeded in a competitive UK market, where many long-standing retail names failed amid structural changes in the retail market. These include department stores House of Fraser and Debenhams and the Arcadia Group, former owners of Topshop and Topman.
Richard Lim, chief executive of Retail Economics, says that the market is now at an inflection point. “I think what we’ve seen over the last few years is that the ecommerce space has reached a level of maturity.” Channel growth, he suggests, has given way to a more competitive market in which multichannel retailers have invested online to compete more effectively against pureplays, while the influence of digital touchpoints throughout the customer journey is a more accurate indicator of how customers shop.
He notes: “I do think that the retailers that are winning at the moment are those that have a physical presence but appreciate that the role of the store has evolved, and it’s there to have a much more important role within the digital journey.”
Emerging marketplaces
RetailX analysis suggests that while marketplaces are a small minority of the UK500 – accounting for 7% of membership – they hugely outperform in terms of traffic and see 48% UK consumer visits to index members.
Early marketplaces eBay and Amazon have been joined by M&S, B&Q and Next, as they each added marketplaces to their retail websites. Depop and Vinted are attracting shoppers now happy to buy second-hand products, while social media is also becoming a retail centre.
Richard Lim also cites the fast growth of the TikTok shop, with Retail Economics estimating that social commerce is now worth £7.3bn of ecommerce spend in the UK, a figure set to double in the next five years. Retailers, he says, are using the marketplace model to offer wider choice to their customers, working with third-party sellers to expand into new categories. “There has been this explosion of marketplaces where retailers are using that as a way to grow, as another route to market,” says Lim. “But they are also using this as a way to build data and then look at how they can use the retail media model as well.”
Lim cites Tesco as an example. The company has built a large retail media network on top of its supermarket business. The network benefits from the data of 25mn Tesco Clubcard customers, built up over 30 years, and can give much larger margins than grocery retailing.
“That potentially puts a small group of retailers in a position where they form a strategic advantage over others and it becomes tactical, a strategic asset for them,” adds Lim.
AI in retail
Retailers are already making use of artificial intelligence (AI) on their websites in areas including personalisation, product descriptions and data collection. Andy Mulcahy of IMRG says its use currently being held back by factors including tech layoffs and a level of reticence around using AI. But as AI uptake inevitably grows, he sees a future boost to productivity.
Added to what retailers do, customers can also deploy AI through the latest smartphones. Those that do will be able to benefit from personalisation that combines browsing behaviour with locations, purchase history, calendars, emails and more.
“You can have your own AI agents that will optimise what the consumer wants,” says Lim, “which is usually the best price, the best quality or the most convenient. So it will optimise the objectives of the consumer, which I think is going to be interesting, because that won’t necessarily be what retailers are optimising for.”
That’s likely to lead, in turn, to higher consumer expectations, as will the experience of shopping on other, non-retail platforms, such as banking apps, music streaming services and takeaway delivery. “People just expect retailers to be offering the same level of customer service as they expect from other consumer-facing brands and products,” says Lim. “That is where I think AI is going to become much more influential.”
One of the biggest retail challenges, he says, are the skills that can bring the data into the right place, the right format and out of silos. “To leverage the power of gen-AI, there’s a lot of things that need to do before you can even start embarking on data transformation projects,” he says.
“But I think what we’re likely to see is not necessarily retailers developing their own AI platforms, or even upskilling their workers or trying to get new kinds of AI experts in. It’s going to be about partnerships with the right companies in the right way, in the right format – to be able to piggyback off their tech stacks and infrastructure.” He predicts that only the largest or most tech-focused etailers, such as Tesco, Amazon, Next and Ocado, will do that sort of development in-house – something that will, in turn, boost their individual stock market valuations.
This is an excerpt from the newly published RetailX UK500 2025 report. The 11th annual report evaluates the performance of retailers, brands and marketplaces selling in the UK. Going beyond simple turnover or traffic, the UK500 measures how these businesses deliver value across the entire retail ecosystem, taking into account evolving consumer behaviour, economic headwinds and disruptive technologies such as AI.
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