UK retailers will grow their overseas online sales by more than seven times to hit £28bn in 2020, up from £4bn in 2012.
That’s the prediction of a new study from OC&C Strategy Consultants, working in collaboration with Google, who predict that international online sales will grow three times faster than domestic sales and will make up 40% of all online sales by 2020. In 2012 that figure stood at 14%.
The report, Britain’s Retail e-mpire, sees opportunities for British retailers from across the globe. Western European sales are expected to rise to £9.8bn in 2020 from £1.5bn in 2012, while North America is expected to remain the biggest single market for goods. There online sales are expected to hit £2.7bn in 2020, up from £0.8bn in 2012. And new opportunities will come as the economies of Central and Eastern Europe (where online sales are expected to grow to £6.9bn by 2020 from £400m in 2012), and Asia (£4.5bn in 2020, from £400m in 2012) expand.
The study also analyses consumer search results, finding that the number searching from outside the UK for British brands and retailers has grown by an average of 46% a year since 2020. Brands attracting the attention include Asos, Burberry, Jimmy Choo, Net-A-Porter, and Wiggle .
Peter Fitzgerald, director at Google, said: “We have seen a significant increase in the volume of searches for British retailers and brands coming from overseas. The majority of non-UK searches are currently coming from Europe, followed by North America and Asia, driven by the increased popularity of British brands abroad. Retailers can use search data to identify pockets of demand and move quickly to meet the needs of customers.”
But smaller companies are also winning attention from international shoppers, with names such as Farfetch, Isabella Oliver, Surfdome and Corsets UK among the small and medium-sized companies who are, as a group, seeing 47% of their online searches originate overseas. Only 13% of online searches for retailers turning over more than £250m come from outside the UK.
Anita Balchandani, partner at OC&C, said: “Ecommerce has transformed what was once a game anchored in local markets – with retailers choosing to expand internationally when they reached saturation nationally – into one where they can pursue internationalisation at the same time as domestic expansion. It is perhaps no surprise that companies like Amazon and eBay now generate about half of their revenues from international markets in a fraction of the time that it has taken the likes of Walmart and Tesco.
“There are a number of reasons why growth in e-commerce is changing the rules of internationalisation. Firstly, geographical proximity no longer determines which market is best suited for expansion – the internet allows customers seek out the best offers from around the world. Secondly, the nature of risk has changed. International expansion is much less capital intensive and this is creating growth opportunities which have a more controlled exposure to risk. Thirdly, the speed with which companies expand has also accelerated – over 40 of Britain’s top-100 etailers serve customers in more than 40 countries.”
The report singles out a number of reasons why UK retailers perform well against domestic overseas competition. Among them are: better choice, competitive pricing boosted by the depreciation of the pound, compelling site and service experience.
Case study: Wiggle
Cycling and tri-sport retailer Wiggle offers free international delivery from its Portsmouth warehouse, and shipped more than 2m orders in 2012. Its 350-strong workforce offers multilingual customer services, answering more than 40,000 emails and live chats a month.
“From Wiggle’s experience,” said Humphrey Cobbold, chief executive of Wiggle, “what has become clear is that there is no silver bullet to international expansion.
Our success can be attributed to four key factors: firstly, exploiting the ‘one off’ depreciation of the pound in 2007-2009; secondly, moving swiftly to automate all the elements associated with processing international orders, such as customs forms, address labels, etc.; thirdly, aggressively pursuing localisation – translating websites, local domains, localised online/offline marketing, and localised payment solutions; and finally, remaining resolutely focused on speed of order processing, dispatch and delivery to exceeded the expectations of our consumers.
“Initially, we didn’t realise how some elements of the purchase journey – such as payment methods – could be so different in different geographies, and for this reason we were slower to develop in some markets. For example, in Holland people like to use ‘Ideal’, whereas in Germany, invoice with product is preferred and in Japan offering ‘cash on delivery’ is very important. In China, it is very hard to develop an online business without offering Alipay as a payment method. We have had to build these very different technologies into our product development and technical plans, which is still an ongoing process.”
