This article provides an overview of the potential of the UK eCommerce market and outlines some of the key elements that prospective cross-border retailers need to be aware of before entering it.
The channels and methods e-traders choose to market their products in the UK have far-reaching implications for the overall success of their businesses. Researching successful territory marketing channels is a key first step for any developing organisation. This section examines the most popular and effective marketing mechanisms in the UK, and has the aim of assisting you in making the best overall choices for your business.
Natural search provides by far the biggest share of revenue, at 28.5%, for an e-retail website according to IMRG’s Quarterly Benchmark. Interestingly, this also remains true irrespective of device; desktop (31.8%), tablet (26.8%) or smartphone (25.9%). Direct traffic, at 22% is the next biggest source of revenue and obviously the most cost eff ective. Revenue from paid-for traffic accounts for 20.3% of the total and whilst having a direct cost, still provides a strong Return on Investment (ROI). For example, for every £1 spent on Pay-Per-Click (PPC), the average ROI is £7.69.
In comparison, revenue derived from social marketing in the UK is currently limited, accounting for just 0.3% of total e-retail revenue in 2015, down from 0.8% in 2010. There has been litt le change in the percentage of revenue derived from display marketing, which accounted for 0.7% of total revenue in 2015. Affi liate marketing however is growing and is strongest in the desktop environment.
Via mobile channels, affiliates still provide valuable traffic, averaging a 6.5% contribution to total revenue contribution. Affiliates are particularly strong in the fashion vertical, with nearly 10.7% of revenue coming from this marketing channel; pointing to the strong role that these sites have in building range awarenessand facilitating transactions.
It is important to note that certain marketing activities, such as social and banners, might not have an obvious link to revenue generation, they do have a strong role in building brand and in the case of social, an important communications channel with customers.
Figure 1: Visits split by marketing method since Q1 2012
Email marketing is renowned as one of the most effective and developed methods for driving sales in the UK. From IMRG / Capgemini data, one clear emerging trend is that email marketing continues to grow in popularity and become a more important tool for the online community. The development of mobile commerce has been identified as one of the key drivers of this growth and a strong correlation has been identifi ed between the growth in mobile commerce over recent years and the increase in visits and revenue generated from email marketing.
IMRG / Capgemini data indicates that during 2010, revenue generated from email marketing accounted for 7.7% of UK e-retail sales, and by 2016 this had reached 12.2%, representing almost 50% growth in terms of penetration in just five years.Visits to e-retail websites through email marketing have decreased, from 14.5% in 2014 to 14.4% in 2015.
Advertising investment in the UK print press has declined, as consumers use of media has changed. 2016 saw a sharp fall in print ad-spend of 10.7% on average to £2.63bn. Publishers aren’t necessarily losing out though as they ramp up their digital output, with most national newspapers now having a digital format.
Although online retail is very much a digital activity, given the influence of all channels mail has a place in winning and keeping online shoppers. In fact, as a means of bringing customers to web sites and to cross sell aft er an initial purchase, it proves to be an ideal partner with digital, making it a medium that is enjoying a renaissance.
Mail remains central to UK consumer’s lives, homes and behaviour. 90% of people open at least some of their mail immediately (Source: IPA TouchPoints 2016). Mail is displayed and persists in the home – presenting multiple opportunities to be seen and interacted with – mail drives action.
Specifically, mail can be used in the following ways in the UK e-retail market;
Importantly, there is evidence that mail drives customers online and that customers shop more and spend more when they receive mail from a retailer.
On average, 90% of the UK population tuned into the radio each week in the 12 months prior to March 2016.
Interestingly, in the OFCOM Communications Market Report of August 2016, it was reported Radio’s share of overall ad-spend is up marginally at 3.0% in 2015. National ad revenue for commercial radio stations has also increased, up by 1.4%, to £519m. This spend is by brands with a national footprint. Ad-spend by local brands is flat, a refl ection on the growing importance and cost effectiveness of targeted, localised, internet advertising.
Data from OFCOM has shown that one recent development in radio listening has been substantial growth in listening via a mobile device as a proportion of total listening - with 27% of UK adults claiming to have listened to the radio via Smartphone or Tablet in 2016.
Thinkbox reported in 2016 that TV adervtising in the previous year rose by 7.4% 2015, to £5.27; Overall ad-spend is also expected to increase by 3.8% to £21.79bn in 2017. (Advertising Association / Warc) Barb reports that since 2010 overall TV audiences, fell 12% between 2010 and 2016. However, the availability of Video-on-Demand and ‘catch-up-TV’ is replacing much of this as viewers now consume programming at a time to suit them, rather than by schedules set by broadcasters. Rather than being a challenge for advertisers, many of whom were worried about audiences skipping past the adverts, IAB UK estimates that VOD has driven much of the 51% increase in mobile ad-spend, now worth £3.9bn in this context.
Figure 2: Total TV Industry revenue, by source: 2008-2015. Source: Ofcom.org.uk
Affiliate marketing is also becoming an increasingly developed method of marketing within the UK. Affiliate marketing and lead generation channels generated an estimated £17.7bn worth of sales in 2015 according according to the latest publicly available IAB UK data. On an ROI basis, performance varied depending on digital channel used. For example, on the desktop / laptop, an ROI of circa £25.73 was achieved whilst on smartphone this was lower at £23.77, as reported by IMRG.
Social media marketing has had a mixed effect for many brands. Data from the IMRG Capgemini Quarterly Benchmark in 2016 reported that it was only responsible for driving 0.6% of total e-retail revenue. The challenge for this measure however is that it averages out over different verticals and business sizes. Perhaps the best measure for social is actually around brand awareness, customer interaction and as a promotional tool. There is evidence where businesses have driven commercially successful promotions through social media and as a tool for having conversations with your customers, it is unparalleled.
As with other territories, it is important to understand the demographics of the users of each of the social media platforms. Facebook is by-far the most popular social media platform in the UK but is it more widely used by older generations. Part of the challenge is that youth audiences don’t want to be on the same platform as their parents. The younger audience’s demands from these platforms are also different, with messaging being a key component, along with immediacy.
Figure 3: Popularity of Social media platforms as a percentage of the UK population. Source: weareflint.co.uk and * smartinsights
Figure 4: Demographic split by age of UK Facebook Users. Source: Clicky.co.uk
UGC is an important source of information for potential purchasers in the UK. In their 2014 Media Use and Attitudes Report, OFCOM said that of those surveyed, 39% wrote reviews whilst 78% said that they read reviews as part of their decision making process. It was also interesting to see that 39% of online users rated online recommendations as their most important source of information, closely followed by 36% who ranked UGC at a similar level. Closed Facebook groups were also used by 38% as a source of information.
There is an increasing use of apps in the UK, with 48% of smartphone users downloading in 2014, versus 37% in 2012. Of these users, the average number present on the smartphone is 23 whilst only 10 are regularly used (OFCOM 2016).
The usage case for apps is centred on gaming, streaming music and video. Consumers of news output also preferred browsers (43%) to apps (37%) on their smartphone. 55% of app users also preferred to use browsers for online shopping. The balance is made up of app usage and using other devices for their shopping experience, including using tablets.
Anecdotal evidence from UK retailers suggests that consumption of information, store finders and in-store product comparison are the main reasons for app usage. The key is to ensure relevance and engagement with the app in order to achieve value from it.
This article provides a marketing overview of the UK eCommerce market – we have produced a full country guide covering in-depth information on multiple aspects of trading into this territory including logistics, payments, legal framework and marketing.
By downloading this Country Guide, you agree to your email address being passed to this Country Guide sponsor.