E-commerce is on the rise in the UK. Driving forces include a weak consumer spending power and the desire to purchase experiences rather than things.
A third of UK online shoppers have chosen to buy from abroad according to a survey by online shopping community Pepper.com.
Shoppers are thought to be looking overseas due to a rise in UK prices following the UK’s vote to leave the EU. Around 60% of UK shoppers said they used foreign online retailers as the price was much better than UK retailers, even with additional shipping costs. A third of shoppers in the UK said that they shopped abroad because that was the only place they could find the items they were looking for.
The figures come amid a significant number of bankruptcies, layoffs and premises closures on the UK high street, including BHS, Toys R Us, Maplin, Mothercare and Marks & Spencer.
Rental value growth of urban distribution centers and big-box warehouses is on the rise
In 2017, the UK’s e-commerce market with the third largest in the world with annual sales of more than US$81 billion. As with any market disruption, UK residents and business insiders can expect to see increases in the value of urban warehousing – particularly in London – and also growth in property sectors related to big-box logistics.
According to e-commerce analyst Rogier Quirijins, the sustained scarcity of housing in the Greater London area over the past 15 years means that little land is dedicated to commercial use – let alone the large footprints required by warehousing and last-stage local delivery hubs. Estimated rental value growth of such real estate was around 7.1% in 2017 alone.
The second area of UK e-commerce that’s come to the fore is big box logistics. These companies that were the leaders of the golden age of brick-and-mortar are now needing to juggle direct to consumer and store network sales. It’s estimated that distribution rents will rise 4.3% in 2018. Retailers make up 37% of the demand for such property, and the national vacancy rates are just 6%.
Is the death of High Street fact or fiction?
The rise in e-commerce comes as no surprise. Post-Brexit, consumers are facing high inflation and lower wages, the global rise of e-commerce, and are beginning to privilege experiences over things. Many companies are going through an insolvency process called a Company Voluntary Arrangement, including Poundworld, Carpetright, and New Look. UK Toys R Us and electronics chain Maplin have gone into administration, according to Forbes.
The central business district of UK cities is referred to as “High Street” – and analysts note that these retailers are feeling the e-commerce hit the hardest. Despite this, US research group Cambridge Associates believes that the growth of e-commerce may be limited and that the balance between brick-and-mortar retail and e-commerce may be on the horizon.
“The growth in e-commerce has been impressive, but somewhat lost in the hyperbole is its scale relative to other categories, as well shifts that have already taken place. Americans spend a similar amount at gas stations ($457 billion) as they do online, and despite companies like Tesla popping up at some malls, the $1.2 trillion spent on cars and auto parts seems unlikely to rapidly move to the internet. From a different angle, annual spending at department stores ($152 billion in 2017) has already suffered a precipitous decline (down 25% over the past decade), arguably limiting how much further it has to fall.”
Plenty of room for growth of e-commerce tech
The technologies that surround the growth of e-commerce still have room to flourish in the UK. Fintech companies like ClearPay are ensuring the frictionless payment experiences that millennials demand, providing fee-free payment up to 450 pounds. The next emerging trend is invisible payment, or the ‘just walk out’ model used by China’s Hema Supermarkets and Amazon’s pilot fresh markets in the US.
According to eMarketer, just over 22% of UK smartphone users will use a phone to pay for goods and services at the point of sale in 2018. Though double-digit growth will continue through 2020, it will slow throughout the forecast period, dipping to 8.5% by 2021. eMarketer estimates 9.2 million people in the UK will use a mobile phone to pay at the POS this year, and the sector will grow by almost 17%.
2018 promises to be a big year for the growth of e-commerce in the UK thanks to increasing consumer adoption as well as fierce competition due to post-Brexit woes. Those involved in the fintech and mobile app payment space will find the market lucrative and full of opportunities to get a foothold as e-commerce in the UK continues to evolve.