U.S. & U.K. Markets Look Abroad for Growth

Retail is revving up across the pond. More consumer packaged goods (CPG) brands are eyeing the U.K. market as a way to expand as the e-commerce boom smashes international barriers and fuels retail growth. E-commerce can help U.S. brands reach and dazzle U.K. retailers who seek spectacular products for their physical and digital shelves. Likewise, U.K. brands are interested in breaking into the massive U.S. market for lucrative new sales opportunities.   

Let’s look beyond the Union Jack and sultry Mr. Bean to compare the U.K. and U.S. marketplaces. We’ll see why CPG brands and retail buyers on both sides of the Atlantic are looking abroad for growth.

Differentiators

Market size

The U.S. retail market is significantly bigger. Total U.S. retail sales are on track to exceed $5.8 trillion this year. ¹ Droesch, Blake. How will the pandemic affect US ecommerce sales in 2021? Insider Intelligence eMarketer. May 17, 2021. Last year, U.K. retail sales totaled approximately $570 billion. ²UK Retail Stats and Facts. Retail Economics. 2021. As for consumer market size, the U.S. population of 328 million greatly surpasses the U.K. population of 67 million. ³ Country comparison United States vs United Kingdom. Countryeconomy.com. 2021. Even geographically, the U.S. is massive compared to the compact U.K., which can affect logistics and delivery speed.

Top players

The U.K.’s top retailers by turnover are LloydsPharmacy, Tesco, Sainsbury’s, Asda, Morrisons, and Amazon, most of whom sell groceries. ⁴ UK Retail Stats and Facts. Retail Economics. 2021. U.S. leaders are Walmart, Amazon, Kroger, Costco and Walgreens, reflecting a mix of mass, grocery, and pharmacy leaders. ⁵ Top 100 Retailers 2020 List. NRF. 2020.

Brexit

Since the U.K. left the EU, Brexit adds complexity, including a new value-added tax (VAT) on U.S. imports. While brands that only sell in the form of online marketplaces such as Etsy or Amazon are not affected. U.S. brands that sell on their own websites to the U.K. need to understand how recent changes affect imports. ⁶ Meldner, Richard. How a New VAT Rule From BREXIT Now Impacts Every US Seller Shipping to UK Customers. eSeller365. January 4, 2021.

Currency

Different currencies – the British pound vs. the U.S. dollar – can affect brands’ business plans and financial forecasts due to foreign exchange fluctuations.

Private label maturity

U.K. private labels account for a whopping 47.5% market share compared to 19.5% for U.S. private labels. ⁷ Private Label Maintains Strong Position Across Europe. PLMA International. 2021. ,⁸ Coppola, Daniela. U.S. private label market – statistics & facts. Statista. June 8, 2021 Yet, U.S. private label sales are on a roll, rising 12% in 2020, smashing records with $158 billion in sales. ⁹ Ochwat, Dan. PLMA: Private label sets sales records in 2020. Store Brands. April 13, 2021.

Similarities

Small is big

Between 2016 and 2020, 51% of health and beauty sales growth came from small brands (vs. 18% for leading brands) and small brands accounted for 48% of beverage sales growth (vs. 35% for leading brands). ¹⁰ Kopka, Udo, Eldon Little, Jessica Moulton, René Schmutzler and Patrick Simon. What got us here won’t get us there: A new model for the consumer goods industry. McKinsey & Company. July 30, 2020. In the U.K., retailers like Tesco, Sainsbury’s, Asda, and Morrisons welcome smaller suppliers with special programs to encourage mutual success. ¹¹ Bridge, Rachel. How to sell your products to supermarkets and retailers. Entrepreneur Handbook. March 27, 2021.

Global e-commerce leadership

The U.S. and the U.K., were respectively the second and third most-shopped markets for international online purchases in 2020, behind China. ¹² Briggs, Fiona. UK third most popular market globally for online cross-border shopping, research shows. Retail Times. January 3, 2021. Last year, U.K. e-commerce sales grew 35% and U.S. e-commerce grew 44%. ¹³  Fisher, Bill. In the UK, search’s saving grace was strong growth in ecommerce. Insider Intelligence eMarketer. May 2, 2021. ,¹⁴ Ali, Fareeha. US ecommerce grows 44.0% in 2020. Digital Commerce 360. January 29, 2021.

CPG e-commerce growth

In 2020, the online value share of fast-moving consumer goods rose 11.4% in the U.K. and 4.1% in the U.S.. ¹⁵ Winning Omnichannel: The future of FMCG and Retail post-COVID. Kantar. 2021. Also, U.K. total online sales growth rose by 37% year-over-year in 2020 and mobile commerce sales rose by an impressive 73%, as more consumers shop from anywhere. ¹⁶ Mulcahey, Andy. Strong December Caps Standout 2020 as Online Sales Growth Hits 13-Year High. IMRG Capgemini. January 12, 2021.

Amazon’s momentum

The e-commerce giant is on track to become the U.K.’s largest gross merchandise volume (GMV) retailer as measured by GMV by 2025. ¹⁷ Skeldon, Paul. Amazon set to become UK’s largest GMV retailer by 2025 as online grocery grows. Internet Retailing. June 2, 2021. By 2022, Amazon is poised to be the largest retailer in the U.S.. ¹⁸ Palmer, Annie. Amazon will overtake Walmart as the largest U.S. retailer in 2022, JPMorgan predicts. CNBC. June 11, 2021.

E-grocery soars

The U.K.’s mature e-grocery market has a penetration rate above 30% across all life stages, as the rate among retired households jumped from 19% to 37% last year. ¹⁹ Winning Omnichannel: The future of FMCG and Retail post-COVID. Kantar. 2021. In 2021, 16% of UK shoppers plan to buy groceries online, a higher rate than among any other European market. ²⁰ Gerckens, Claus, Franck Laizet, Daniel Laubli, Eugen Zgraggen and Jean-Albert Nyssens. The path forward for European grocery retailers. McKinsey & Company. March 25, 2021. This year, U.S. e-grocery sales are expected to rise by nearly 18% to $112.9 billion, up from $95.8 billion in 2020. ²¹ In 2021, online grocery sales will surpass $100 billion. Insider Intelligence eMarketer. Feb 24, 2021.

Beauty boom

As masks come off, lipsticks are being put back on. A growing number of U.K. shoppers demand natural and clean beauty products, especially natural cosmetics and skincare items made with organic ingredients.²² Callaghan, Shaun, Eric He, Sara Hudson and Stefan Rickert. Wellness worldwide: Consumer insights from four countries. McKinsey & Company. April 8, 2021. This year, 40% of U.S. consumers plan to buy beauty products as socializing face-to-face thankfully boomerangs back. ²³ Howland, Daphne. Wells Fargo sees permanent behavior shifts from the pandemic. Retail Dive. March 29, 2021.

Value shopping

In the U.K., 38% of consumers look for ways to save money when grocery shopping, 22% actively search for promotions and 24% plan to switch to less expensive products this year. ²⁴ Gerckens, Claus, Franck Laizet, Daniel Laubli, Eugen Zgraggen and Jean-Albert Nyssens. The path forward for European grocery retailers. McKinsey & Company. March 25, 2021. More than half (59%) of U.K. grocery shoppers say they are more price-sensitive than they were before the start of the pandemic, compared to half of U.S. adults. ²⁵ Hillier, Lizzy. Stats roundup: the impact of Covid-19 on ecommerce. eConsultancy. May 21, 2021. ,²⁶ Maake, Katishi. DoorDash, Instacart Eye Launching Credit Cards. The Harris Poll. April 9, 2021.

Health and wellness

In the U.K., 29% of consumers plan to focus on healthy eating and nutrition this year. ²⁷ Gerckens, Claus, Franck Laizet, Daniel Laubli, Eugen Zgraggen and Jean-Albert Nyssens. The path forward for European grocery retailers. McKinsey & Company. March 25, 2021. Similarly, 59% of Americans are more health-conscious when shopping,  which can benefit brands in the grocery, personal care, and pharmacy categories. ²⁸ Consumers expect their shopping habits to change permanently. Accenture. April 2021.

Sustainability

This year, 17% of U.K. shoppers say they will spend more on environmentally friendly products. ²⁹ Gerckens, Claus, Franck Laizet, Daniel Laubli, Eugen Zgraggen and Jean-Albert Nyssens. The path forward for European grocery retailers. McKinsey & Company. March 25, 2021. In April 2020, U.S. consumer spending on sustainable goods rose 16% year-over-year, outperforming conventional products, as conscious consumerism shapes shopping habits. ³⁰ Wilson, Julia. Sustainable Brands Can Pivot With Purpose to Help Address COVID-19. Nielsen. April 23, 2020.

It’s time for another British invasion

Despite certain differences, the U.S. and U.K. retail markets exhibit an abundance of similarities. Familiar market conditions could help CPG brands gain an edge with foreign expansion, as many product trends are already in demand on both sides of the Atlantic. Ultimately, both U.S. and U.K. retailers want unique products to build competitive assortments that consumers love. E-commerce can connect CPG brands with retailers to boost the speed-to-market, drive sales growth, and delight shoppers beyond domestic borders.

Do you plan to sell abroad this year?

Learn more about how RangeMe can help your brand work with retailers in the United Kingdom, here. 

Learn more about joining RangeMe as a retail buyer to source products from around the world, here.