UK online retail sales are forecast to accelerate 4.5% in 2025 to £128.8bn, the strongest annual growth since 2021, driven by non-food online sales, which are projected to rise 4.1% next year, outpacing online food & grocery spending. Retailers must act now to diversify their online capabilities and capitalise on this improved outlook, warding off disruptors. We anticipate three key trends will emerge in the UK online channel in 2025: grocer online expansion, a renewed emphasis on sustainability and increased uptake of click & collect in the home sector.
Grocer online expansion in non-food
The poor non-food performance from traditional grocers in 2024 and the launch of Tesco’s marketplace, will drive investment in grocers’ online platforms in 2025. We expect to see grocers expanding online toys & games ranges, launching collaborations with homewares specialists and prioritising online channels to drive clothing & footwear sales. This forecasted investment will provide an opportunity for grocers to capture shoppers outside of their typical customer base and benefit from greater online penetration possessed by non-food sectors. Additionally, customers will have greater access to products available beyond the limitations of in-store selections and pricing. For grocers, utilising third-party lockers on supermarket and convenience store sites and offering speedy delivery will be essential to encourage customers to complete grocery and non-food purchases in one shopping journey.
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Renewed emphasis on sustainability
Sustainability is expected to regain prominence as a factor influencing UK consumers’ online purchasing decisions in 2025. The UK sustainability index has experienced a significant decline compared to September 2021* as consumers have prioritised value for money and price. As consumer purchasing power strengthens, we expect health & beauty and household product retailers to see a renewed demand for eco-friendly packaging and ingredient alternatives, as such subscription models for refillable products are expected to see greater demand. This anticipated resurgence in responsible consumption will compel retailers to innovate and embed sustainability within their core business strategies.
Conversely, a higher sustainability index is unlikely to result in a backlash against fast-fashion players. The popularity of Shein and Temu is increasing new product development and price competition among clothing & footwear specialists. A trend that is unlikely to slow in 2025, despite the transport emissions and limited usage of garments associated with these fast fashion players. Key to these disruptors’ success is the accelerating pace of fashion trends driving online sales in this sector. Whilst enhanced transparency of manufacturing processes, embracing circular economy principles and emphasising product longevity may suit higher price point clothing & footwear retailers, it is unlikely to be sufficient to draw consumers away from value-orientated shopping journeys.
Improved fulfilment in home sectors
The UK home sector has experienced a slowdown in the post-pandemic period. The cost-of-living crisis, coupled with rising mortgage and rent prices has curtailed major purchases, dampened the pace of home buying, and shifted the focus to essential spending. However, as inflationary pressures begin to ease, we anticipate a revival in online sales of homewares, furniture, and DIY products by 2025, as online spending is forecast to rise 4.0% within the home sector next year. Home retailers operating online, have an opportunity to leverage this recovery by broadening their product offerings, providing competitive pricing, and improving the online shopping experience. We expect click & collect spend for homewares and DIY & gardening sectors to increase by 6.4% and 11.3% respectively between 2024 and 2025. Due to specialists investing in express fulfilment options such as one-hour click & collect and rapid-delivery services, to cater to time-poor consumers.
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