Global ecommerce markets: The United Kingdom

insights  September 3, 2019

Worldwide ecommerce continues to grow rapidly every year. Buying products online is seen as the favourite method of purchase in most countries. It is even predicted that by 2040, 95% of purchases will be facilitated by ecommerce[1]. For online stores, it is therefore wise to not only focus on domestic sales, but also on cross-border sales. Cross-border ecommerce is a smart way for etailers to create a wider market, which can lead to increased sales. It is important to consider that selling products to foreign customers is not the same as selling products to domestic consumers. After all, consumers in every country have different habits and preferences with regards to online shopping. In this blog series we analyse various ecommerce markets. In previous editions we discussed selling online in the United States and the Netherlands, today part 3: The United Kingdom

The UK is the third biggest ecommerce market in the world, with China and the US in first and second place

Ecommerce market share
The UK is the third biggest ecommerce market in the world, with China and the US in first and second place[2]. The business-to-consumer ecommerce turnover in the United Kingdom was worth €175 billion in 2018. It is predicted that the ecommerce turnover will reach over €200 billion at the end of 2019[3]. If this turns out to be the case, this would mean an increase of 14.6% compared to last year. This would also mean that 7.94% of the UK’s gross domestic product would be made up by ecommerce sales.

It is also predicted that 96% of the British population will use the internet this year. This is a small increase compared to previous years, when the share of the British population using the internet was 95%. Just like other years, 87% of UK internet users are expected to shop online in 2019. These online shoppers spent € 3254 per person last year and it is predicted that this amount will increase to € 3620.

By 2028, ecommerce in the UK will account for 53% of the country’s total retail sales[4]. For comparison: currently, this accounts for 19,2%. By 2028, about half of the adult population in the UK will consist of Generation Z and Millennials, which will greatly boost the growth of online shopping. In addition, it is predicted that there will be significantly fewer physical stores in 2028, stimulating online growth and merging physical and online retail channels.

Biggest online retailers and markets
The UK is dominated by great American online retailers, together with some strong local etailers. That the UK ecommerce market is dominated by American platforms can mainly be explained by the large home market size of American online retailers and the early development of these companies in the UK. With the exception of Tesco, a British retailer, the largest online stores in the UK are American, namely Amazon and eBay. Other big online retailers are Asos, Argos, Play.com, Next and John Lewis4.

UK consumers do not only buy their products from UK online retailers. On the contrary: consumers in the UK shop a lot at foreign online stores and do this more often than consumers in most Western countries. 73% of the products purchased online come from domestic online stores. Of the remaining 27%, 16% of the goods purchased online are purchased outside the EU and 11% are ordered from an EU country[5]. The foreign markets from which UK consumers order most products online from are the United States, Germany and France. The United States accounts for over 13% of total UK exports. From the United States, UK online shoppers mainly order fashion-related items, from Germany electronics, from France, UK online shoppers often order perfumes and cosmetics.

Consumer behaviour and preferences
When selling products to Brits, it is important that their standards, expectations and preferences are taken into account. It is in the first place important to know what products are popular with British online consumers. When the Brit shops online, he mainly buys fashion and sporting items. This is followed by travel items, household items, movies & music and books & magazines[6].

In addition to offering the right products, it is also important that British online shoppers can pay with the method they prefer to use. The most popular payment methods among British online shoppers is PayPal (40%), followed by credit card (24%)  and prepaid cards (17%).

If British consumers have ordered their desired products, they would prefer to have them delivered to their home, followed by delivery to a mailbox or multi-occupancy mailbox by the mail carrier and delivery to their workplace. When looking at innovative delivery methods such as in-car delivery, in-home delivery and delivery to an unmanned safe. British online-shoppers have the most confidence in delivery to an unmanned safe, followed by in-car and in-home delivery[7].

UK online shoppers are seen as “serial returners” who send back a lot of items. The total worth of these items was last year around €8.7 billion. This is a problem for etailers who want to sell their products in the UK, as this causes additional costs. Fashion retailers are among the worst hit, with 37% reporting increased levels of returns. Regarding the return of products, it is important that British online shoppers have a choice between different methods that they can use for this. UK customer’s preferences for the method of returns is varied, but if the Brit has to choose, then he prefers to return the package at the post office (73%). This is followed by courier collection (62%), the retail store (61%), a collection point (47% and a locker (28%)[8]. For etailers who want to sell in the UK, it is important that the return process is optimized, because it appears that a large proportion of UK online shoppers choose to never shop with a brand again when they have had a negative returns experience. This mainly applies to young customers between the ages of 18 and 25 (60%) and 26 to 35 (57%)[9].

Brexit
Since UK voted to leave the EU, there is a lot of uncertainty and expected change to the UK ecommerce landscape. However, nothing is certain yet, it is expected that the Brexit will have consequences in various areas within ecommerce in the UK[10]. For example, it will affect the rates and fees, because free trade between the UK and the EU and other EU-enabled countries will change with the arrival of the Brexit. It is likely to be more expensive for EU countries to ship to consumers in the UK than to customers in other EU countries. Import rules other than those between EU countries and new border controls will also delay delivery of online orders to British consumers. In addition, it may be that some UK shoppers start to feel uncertainty with looking abroad for products, because of the negative reporting surrounding Brexit.

Ecommerce trends in the UK
Digitalisation has completely changed the way UK consumers shop. Currently, the UK is the third largest mobile commerce market in the world. Only China and the US have larger mobile commerce markets dan the UK. Mcommerce in the UK is worth €55,9 billion and is the fastest growing channel[11]. This is driven by the fact that more and more consumers in the UK own a smartphone and because they have more confidence in the safety and ease of mobile purchases and payments. It is therefore also predicted that e-wallets will play an increasingly important role within ecommerce in the UK.

If retailers want to sell their products to British consumers, it is important that they, in addition to the developments in the field of digitization, also respond to the sustainability trend. Research from inRiver shows that sustainability is a key element in today’s purchase decision process or UK online shoppers[12]. UK consumers are always looking for information about sustainability and the ways in which their products are made and shipped. They expect greater transparency and product information around sustainable purchases. 62% of UK online shoppers even indicate that they would reconsider buying if retailers better communicated about the environmental impact. 62% would stop using a brand due to its detrimental impact on the environment.

[1] Pure360 (2018), 40 ecommerce statistics that will shape your strategy.
[2] Nation Master (2019), Online shopping trends 2019 & key figures – what you need to know.
[3] Ecommerce Foundation (2019), Ecommerce Report: UK 2019.
[4] Ecommerce News (2019), Ecommerce UK accounts for 53% of retail sales by 2028.
[5] Fintech Futures (2019), E-commerce: the biggest overseas markets for UK consumers.
[6] Ecommerce News (2019), Ecommerce in The United Kingdom.
[7] Cross-Border Magazine (2018), B2C Europe: innovations in delivery, p. 33-34.
[8] SaleCycle (2019), 11 of the best ecommerce stats from 2019.
[9] Internet Retailing (2018), ‘Serial returners’ send back clothes worth €7bn a year to UK online retailers: Barclaycard.
[10] Payments Cards & Mobile (2019), How will Brexit affect e-commerce?
[11] Ecommerce news (2018), UK is the third largest mcommerce market in the world.
[12] inRiver (2019), Does sustainability matter to buyers?
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