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In our new Ecommerce Platforms Buyer’s Guide, one of the highlighted trends was the continued growth of the ecommerce market in the United Kingdom.

This has been the driving factor for increased spend on the technology and services that facilitate online and multichannel commerce.

Figures from the IMRG CapGemini e-Retail Sales Index, summarised in a report published by Ofcom last week, show that the UK leads the world for online consumer spending per person.

Each person spent on average £1,083 per year online in the UK during 2011, an overall rise of 14%. This trend sits in line with an earlier report by the Boston Consulting Group that predicted that 24% of all UK consumer retail spend will be online by 2015.

Ecommerce Market Value Per Head (£):

So why does the UK lead the rest of the world?

The English language provides a competitive advantage

With much of the technology powering ecommerce coming from the US, the UK has a natural advantage in terms of the speed of adoption of the latest technology. When technology firms decide to ‘cross the pond’, the easiest location in which they can settle is the UK (or Ireland) simply due to the lack of language barriers.

Marketing collateral, processes and procedures do not need to be translated, and it is relatively easy for someone from North America to quickly understand the characteristics of the UK marketplace.

In addition to this, with English being the world’s most popular second language, shoppers looking to purchase from countries abroad are more likely to use websites that are in English if they cannot find one in their mother tongue.

This is likely to be the primary reason why the UK is the market of choice for Nordic online shoppers purchasing items from abroad, accompanied with the presence of strong, reliable and established ecommerce players such as Amazon choosing the UK for much of their operations. This makes the UK a net exporter of ecommerce goods and services.

The size of the UK provides logistical efficiencies not present in the USA

The USA has over 39 times as much land as the UK, and its population density is over seven times lower. Therefore the average distance that goods have to travel inside the country to reach consumers are far greater in the US than the UK.

Because of this, and the fact that the UK has a universal pricing system for postage (i.e. it costs the same to send an item within the country regardless of its final destination), the cost of shipping is lower and provides a greater incentive to buy and sell goods online.

It also makes it easier to provide a multichannel shopping experience. Small distances mean that it is easy to move stock to provide Click and Collect or Click and Reserve options, details of which are outlined in our How the Internet Can Save the High Street report.

Early and widespread use of debit cards has facilitated the growth of the online economy

Consumers in the UK are far more comfortable and likely to pay using plastic than many other countries, and the UK has had cards since 1966 beginning with the launch of the Barclaycard.

Today over 48% of UK retail sales are paid for using debit cards (i.e. charge cards). This is in stark contrast to other countries in Europe which have a greater preference for the use of cash by consumers.

Even though payment mechanisms to facilitate ecommerce have now emerged in cash-centric European markets (as detailed in a report by the European Payments Council), the existing prevalence of plastic has given the UK a strong first-mover advantage.

Distance selling regulations and quality customer service provide consumers with trust

One reason that customers in the UK have confidence in online shopping is the fact that the Distance Selling Regulations have made it a legal requirement for companies to accept any returns from customers providing they sent the items back within seven days of receiving them.

This means any company selling products online in the UK must offer returns, and in an attempt to ensure high levels of customer satisfaction, many offer free return shipping and provide consumers with a period longer than the statutory minimum within which they can return goods. This breeds trust in online companies which may not occur in countries without such strong statutory protection. 

High rates of technology adoption and low costs of internet services lower the barriers to ecommerce

The Ofcom report highlighted that as well as spending the most online, UK consumers pay the least for their communications services and use the most mobile data.

This, combined with the fact that the UK has one of the highest smartphone penetration rates in Europe, further contributes to the mix of factors that makes the UK such an ecommerce success story.

Source: Our Mobile Planet

What do you think makes UK ecommerce so successful?

Have you got any other reasons why the UK leads the world in ecommerce? Do you think there are any emerging markets worth serious consideration? Or do you see any serious risks to the growth of ecommerce in the future?

Share your thoughts below.

Andrew Warren-Payne

Published 17 December, 2012 by Andrew Warren-Payne

Andrew Warren-Payne is a Senior Research Analyst at Econsultancy. Follow him on Twitter or Google+

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Comments (14)

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Pete Williams

Pete Williams, Managing Director at Gibe Digital

what is really interesting is consumer confidence in online transactions no matter what industry or value. Consumers advice shows and websites have created an environment in which consumers feel protected by the credit card companies and some high profile examples have backed up this assumption. Perhaps central Europe should learn from this example with a strong combined marketing effort from the credit companies and multi-national retailers?

over 3 years ago

Andrew Warren-Payne

Andrew Warren-Payne, Senior Research Analyst at Econsultancy

Thanks for your comment Steve. I do think this approach would be useful in Europe, and I think companies like PayPal are leading the way in trying to establish trust (e.g. through its buyer protection programme), but they still could do more.

It will be interesting to see in the future whether the lead of the UK will continue due to cultural and economic factors, or the gap will narrow as the first-mover advantage shrinks in significance over time. But overall, I think this is great news for UK ecommerce players, especially those who want to use their strong foothold in the UK to help fund their investment in international markets.

over 3 years ago

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cele

Interesting and vary clear to understand.

over 3 years ago

Stuart McMillan

Stuart McMillan, Deputy Head of Ecommerce at Schuh

Another reason why we beat our US cousins is down to the complex inter-state sales tax legislation there, which US consumers really don't like paying. You may remember some of the recent press about Amazon potentially no longer dealing with affiliates in California as it made them liable to charge tax.

over 3 years ago

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Yatin Hattangadi

From a distance, I see a difference in shopping cultures that could be a factor. Suburban living, malls and Costco on one side of the pond. A quick trip down to the shops, on the other. This difference in attitude and behaviour (or behavior - there you go!) carries over genetically into the e-commerce scenario.

over 3 years ago

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Shayne Crawford

Your graph on Smartphone penetration is interesting. Perhaps a more thorough chart would include figures from Australia. You may have missed Australia, it's such a small Island just to the left of New Zealand. Possibly with a slightly larger population and perhaps a serious penetration of smartphones. Main thing is you got New Zealand ......Well done!

Shayne Crawford

over 3 years ago

Andrew Warren-Payne

Andrew Warren-Payne, Senior Research Analyst at Econsultancy

Thanks for your comments all.

@Shane - I definitely think this is an issue. Seeing how people abandon baskets regularly when confronted with costs they haven't seen previously (such as shipping), I suppose tax being added isn't any different. I think Massachusetts is pursuing a similar approach to sales tax for online sales.

@Yatin - I think this could also apply. It would be interesting to see some qualitative research that supports this opinion.

@Shayne - fair point on including NZ and not Australia! And yes indeed, it does have a serious smartphone penetration. I've updated the chart accordingly - enjoy!

over 3 years ago

Monika Pletty

Monika Pletty, E-commerce Manager at Cloud9

Also, the fact that England has been historically known as the nation of shopkeepers, many bricks and mortar business procedures have been successfully applied online

over 3 years ago

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Allon Bloch

excellent article Andrew. from my experience in the online grocery space (where the UK is by far the world leader in terms of penetration) two additional factors make a difference:
1. full price transparency: in the UK prices are identical across the country and don't chg by store.

2. significantly higher investment in emerging models like click & collect/drive through

over 3 years ago

Tony Barker

Tony Barker, Director & Founder at eEnablement - Online Interim Management & ConsultancySmall Business

Would also include the historical strength in the UK of mail order with consumers comfortable with ordering remotely well before the growth in ecommerce, together with universal postal coverage through the Royal Mail

over 3 years ago

Andrew Warren-Payne

Andrew Warren-Payne, Senior Research Analyst at Econsultancy

Thanks Monica, Allon and Tony. All great points.

over 3 years ago

Stuart McMillan

Stuart McMillan, Deputy Head of Ecommerce at Schuh

Tony, one thing worth pointing out is that Germany has a similar if not larger history of mail order but has not had the same ecommerce uptake. I'd suggest that this might be party due to German consumer legislation which forces companies to offer free reverse logistics as well as some of the more exotic payment methods German consumers like, which have a high fraud rate. Both of these things don't exactly encourage people to grow online businesses there.

over 3 years ago

Dominic Byrne

Dominic Byrne, Chief Digital Officer (CDO) at DigiToro

While there are factors (many mentioned above) that drive the UK's early adoption, when they have engaged in eCommerce and the associated technologies they have got it right.

Many of our (Aussie) big retailers have had false starts, poor roll outs, usability issues, website performance problems.

If you are going to engage with eCommerce then spend more time researching options, consider all the functions involved, the internal and external environment so as to best formulate what is possible and what is right for the business.

over 3 years ago

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Simon Norris, leading design psychologist and CEO of digital agency Nomensa

One of the reasons behind this increase in multi-channel commerce is due to the vast increase in shoppers purchasing online via mobile devices. This is why it is vital that organisations provide a meaningful cross-channel experience that allows potential online consumers to easily interchange between these multiple channels, including mobile, tablet and website.

Responsive design is now a ‘must-have’ and not a ‘could-have’. People expect a good online shopping experience whether they are using their mobile, tablet or desktop computer.

In my opinion, another reason why the UK has been labelled as the world’s largest internet-based economy is because English is the most common second language internationally. These UK sites have a clear advantage because those purchasing abroad will choose to use an English-based site if they are unable to find one in their own language.

over 3 years ago

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