This article provides an overview of the UK eCommerce market, to help you start to develop your strategy for market entry.
The UK has a relatively mature and sophisticated market of around 41 million high-spending online shoppers, who spent £133bn online in 2016 alone.
This potential for high financial return together with the relative ease of setting up a business in this location clearly make the UK an attractive destination in which to set up an online shop.
To sell within this territory, however, an aspiring entrepreneur should exercise caution; successfully setting up and selling within a new territory involves much more than just acquiring a new URL.
The UK is one of the most advanced eCommerce countries in the world, so it isn’t unexpected that many brands are looking to expand into the market.
With an adult population of around 50 million and 90% access to broadband, there is plenty of market opportunity. 77% of those with access to the internet already shop online and online retail growth increased by 15.9% in 2016. There is also a high incidence of cross-border shopping, with more than 50% of online shoppers having already shopped on a non-UK website.
The obvious question mark at present is what impact the UK’s decision to leave the European Union (EU) will have not just on trade, but also on shoppers’ attitudes, legislation, and the overall economy. The process to leave, or ‘Brexit’, was triggered in March 2017 and will run for 2 years.
During this period, there will be swings in sentiment and confidence but, ultimately, business will find a way to trade and shoppers will still want to consume. In the meantime, the UK is still part of the EU and subject to the common legislation and benefits of access to the open market and customs union.
eCommerce has been so successful in the UK due to geography, investment in infrastructure, and willingness of the population to adopt digital technologies. The main metropolitan areas are obvious targets for any international merchant, but consideration should be given to how the populations of rural areas will be served; there is certainly a drive from their perspective to be part of a digital community.
This is reflected in a high level of smartphone ownership, with these mobile devices also being responsible for over 50% of website traffic and 55% of purchases made via mobile devices. In terms of finding products, Google dominates the search landscape, and have widely publicised the increasing volumes of search originating from mobile devices, which provides international merchants with an opportunity to compete in the local market, often when the user is in a competitor’s store.
Based on latest data from: Source OECD Factbook statistics. For explanatory notes, see OECD Factbook 2014 (DOI:10.1787/factbook-2014-en)
UK internet users are also a social group. Over 80% of them use social media regularly, with Facebook leading the charge. Snapchat and Pinterest also have strong followings, particularly amongst younger users. The latter shows promise as a tool for inspiration and product discovery.
Key categories for online shoppers in the UK include fashion, electricals, and health & beauty. Drivers for shopping international include variety, choice, and value.
Media on the move is also in strong demand, with 27% of UK adults having listened to radio via their smartphone and one of the biggest increases in digital advertising being seen in the field of Video on Demand (VoD). Increasingly, retailers are using this tool to drive engagement through product awareness, inspiration from experts, and how-to guides, all of which are avidly consumed by the online audience and resulting in new commercial opportunities.
Online payments are dominated by credit and debit cards. However, eWallets are increasingly important and there are innovations emerging that allow for direct bank payments, payment by invoice and mobile-enabled apps. The pace of change is going to increase as new payment regulations come in to force in January 2018, allowing for Fintech businesses to expand whilst increasing security for users.
The UK operates under stable taxation and legal systems which, while this may change post-Brexit, currently operate under EU ‘norms’. There are a couple of major changes in the legislative environment happening in 2018. The first is around data protection, with the introduction of the General Data Protection Regulation, which changes areas such as gaining consent, procedures, liabilities, reporting and fines.
The other area is around online privacy — cookies, definitions of personal data, tracking and marketing. These rules changes take effect in May 2018, irrespective of the Brexit schedule.
With excellent road and rail communications, the UK consumer benefits from a wide range of delivery options when shopping online. Next day, locker boxes, click and collect, premium and standard options (3-5 day) and increasingly timed and weekend delivery choices make it very easy for the customer to get what they want, when they want it.
Whether this is around marketing choices, payment options, delivery, returns or customer support, giving them the information required for an informed purchasing decision will open them up to international merchants who can offer something different, at the right price and on competitive terms to the local market.
In recent years, UK shoppers have grown accustomed to fast-loading web pages, comprehensive information in English, debit / credit card payments, and, at least above a certain threshold, free standard delivery with easy returns.
With its multichannel shopping culture, the UK also leads Europe in terms of mobile revenues, and a prospective merchant will benefit from being able to identify and exploit such developing opportunities.
Finally, shoppers in the UK are the beneficiaries of a vast array of consumer protections, imposed by both UK and European law. A comprehensive understanding of all of these areas is a necessary element of an aspiring online retailer’s journey.
Ultimately, whilst many factors make the UK an excellent and rewarding location in which to set up an online shop, as with any new trading location, care should be taken to thoroughly research and analyse your new market and its rules and procedures.