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Can the UK compete globally on online retail?

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(Image credit: Image Credit: Zapp2Photo / Shutterstock)

Around the world, eCommerce is experiencing skyrocketing growth. For the year 2021, the sector is expected to reach a sales value of $4.89 trillion.

Indeed, online retail as a proportion of total retail sales in the UK nearly doubled, up from 19.5 percent in January 2020 to 35.2 percent in January 2021. Questions over the sustainability of this boom once traditional brick and mortar retail was free from lockdowns and social restrictions were natural. That said, the sector has shown encouraging resilience into 2021. 

By June, online retail’s market share had dropped to only 26.7 percent, still far ahead of the levels measured before the pandemic took hold. That online retail has secured an increased share through its unexpected access to a broader consumer base demanding a wider selection of goods and services is encouraging for the ongoing growth of this sector – and therefore how lucrative it could prove to businesses who respond aptly.

It is encouraging to note, then, that the UK is already recognized as one of the major players in global eCommerce – generally regarded as holding the third-largest share of total online retail sales, behind only the US and China. 

This leading role does not, however, tell the whole story. While the UK is well-positioned ahead of fourth-placed Japan, the takings of Britain’s eCommerce operations are modest in comparison to the two giants – the UK’s estimated £169 billion annual return being dwarfed by the US’ $843 billion and China’s $2.78 trillion. With emerging economies like India increasingly able to out-maneuver UK products on price, costs, and convenience, there is a danger of Britain being overtaken. 

Naturally, it is crucial that this budding sector is nurtured appropriately – not least because the UK’s deficit on the balance of trade still stands at £3.5 billion. As such, in a post-pandemic recovery economy, online retail should be afforded support and security to help generate a rare surplus.

Which raises the question: are UK eCommerce businesses adequately positioned to continue to compete on the international stage? To assess this, we must first acknowledge that the UK has some innate financial and reputational qualities which afford an enduring competitive edge over emerging challenger economies – and then consider how businesses can take advantage of the UK’s excellent infrastructural capacity to make the most of the potential of the growing eCommerce market.

Making the most of Brand UK 

As mentioned before, the UK has a longstanding trade deficit. Positively, however, the UK appears to be turning a corner; in the three months to May 2020 the deficit fell by £2.2 billion, with the total export of goods increasing by 4.9 percent, fuelled largely by an increase in volume and revenue from exports to the EU.

Similar figures demonstrate the key factor that could allow the UK to propel strongly into a renewed eCommerce boom once revitalized retail spending kicks in after the pandemic has abated. Namely, the healthy surplus in the balance of trade in services – which stands at £28.1 billion, sourced through areas of expertise like finance and management, highlighting the strength of reputation which could be capitalized on for UK goods.

Evidently, there is a growing demand for products from the UK – and eCommerce businesses would be wise to tap into this demand. With access to online markets growing globally as the world becomes more connected, and many developing economies emerging with the spending power and infrastructure necessary to take up large quantities of imports from the UK, there is a genuine potential for British retail to grow to compete on aggregate with the US and China. 

After all, recent research from Barclays suggests consumers from areas as economically and socially diverse as the US and China, South Africa and the UAE all expressed willingness to pay premium prices for the assurance and prestige of products manufactured in the UK. In India alone, consumers reported being happy to pay as much as 11.8 percent extra for UK products.

However, this alone will not secure UK firms an ascendancy in global online markets. The critical factor in facilitating this will be ensuring firms have the right infrastructure in place.

Getting the logistics right 

Planning and implementing a robust logistics strategy is the cornerstone of any successful eCommerce business. We need only look at the success of domestic online retail in meeting a surge in demand seamlessly through the pandemic to understand the significance of agile and dynamic infrastructure. However, those seeking to trade globally will naturally encounter challenges when scaling up.

Organizations will have to consider how customs clearances, currency variations, courier solutions and shipment tracking options will impact on their operational capacity, customer relations – and of course, their bottom line. For those looking to enter global markets, this will seem a tall order. Thankfully, there are numerous tools available that can both simplify and demystify this process, making them far more manageable even in the case of smaller enterprises. Because of advances in developing platforms to make international logistics accessible, UK businesses are well-placed to do so in a cost-effective and sustainable manner. 

Further, innovative technologies help to facilitate improved tracking capabilities for eCommerce. Indeed, with access to WiFi has improved dramatically throughout the previous two decades, logistics businesses have been able to connect all elements of their operations. For example, many logistics firms have now installed WiFi-connected sensors within most of their cabs, cargo ships and trains; these sensors are then connected to an alarm system or dispatcher, which monitors shipments. As such, the sensors can process and transmit the information to the crew who then gains insight into various risks and areas where efficiency could be improved.

Accordingly, British businesses looking to reap the rewards of the UK’s reputation and the inexorable growth of eCommerce should find they have all the tools at hand to develop a financially and environmentally sustainable logistics strategy, and muscle in on markets currently dominated by the US and China. 

While this will, of course, not be an overnight success story, UK businesses should find themselves well-placed to turn the eCommerce boom to their advantage. Indeed, the current demand for Brand UK, and the logistical tools available to businesses, such success over the coming decade may not be out of the question. I, for one, am excited to see how the country’s eCommerce market rises to the business’s international challenge over the coming decade.

Atul Bhakta, CEO, One World Express (opens in new tab)

Atul Bhakta is the CEO of One World Express, a position he has held for over 20 years. He also holds senior titles for other retail companies, underlining his vast experience and expertise in the world of eCommerce, trade and business management.