Nearly half of ecommerce entrepreneurs say intensifying competition across online marketplaces is costing them customers, according to new research from The Accountancy Partnership.
The survey of freelancers and self‑employed professionals found that 45.3% of ecommerce entrepreneurs identify market saturation as one of the most common reasons they are losing clients. Online marketplaces account for around one-third of all UK retail spending, with around 70% of small and medium-sized retailers using third-party platforms, according to government data.
While ecommerce has lowered the barriers to starting a business, entrepreneurs are competing in a crowded and highly competitive trading environment, where smaller businesses – with smaller budgets – are finding it increasingly hard to stand out.
Algorithm influence
One issue, highlighted by the research, is the growing influence of algorithm-led ranking systems, which can determine which sellers are visible to customers. For smaller businesses, these systems can limit exposure and intensify competition, particularly on large marketplaces. More than a third of respondents (34.4%) say platform fees or algorithm changes have negatively affected their business, while nearly one in four (23.4%) cite tax administration as having a detrimental impact.
At the same time, online sellers are facing greater regulatory oversight. In recent years, platforms including Vinted, eBay, Amazon and Etsy have been required to report seller earnings to HM Revenue & Customs under international reporting rules. Sellers may also need to declare income through Self Assessment if they exceed the £1,000 trading allowance, even when selling through small side businesses.
Lee Murphy, managing director of The Accountancy Partnership, said this shift reflects the scale and maturity of the online selling economy. “Online marketplaces have created huge opportunities for entrepreneurs, but they also bring new compliance responsibilities,” he said. “Many people start selling online as a side project and may not realise that once income reaches certain thresholds, it can fall within the scope of business taxation.”
Impact on wellbeing
These pressures are feeding through to wellbeing, with more than half of respondents (54.7%) reporting increased stress or anxiety linked to running their ecommerce operations – but despite the challenges, many entrepreneurs remain optimistic about the future. Three-quarters of respondents (75%) say they feel secure about their financial future, and nearly two-thirds (64%) expect to match or exceed last year’s profits.
AI is also largely viewed as a positive force by small ecommerce businesses. More than half of respondents (54.7%) think AI will have a positive impact on their industry, believing it offers tools that could help them compete more effectively online.
The research makes it clear that, as ecommerce continues to grow, small online businesses are navigating a complex landscape where competition, platform policies and tax compliance all play a critical role in determining success – and where AI could have a transformative impact, for better or worse.
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