This blog by PipeCandy is focused on sizing the B2C eCommerce market in the UK. We analyzed the factors driving the growth of eCommerce in the UK, estimated the TAM and then visualized the TAM by important retail parameters such as Web Sales, Product Categories, and Traffic. The United Kingdom is the top eCommerce market in Europe, followed by Germany and France. Together, they contribute more than two-thirds of Europe’s eCommerce turnover.
Major retail & eCommerce companies like Amazon, Argos, Tesco, Next, Asda, Debenhams, Play.com, Marks and Spencer and ASOS account for nearly 50% of UK’s B2C eCommerce turnover, with Amazon taking the lead.
The development of eCommerce in Europe differs across regions. The most dynamic one is the Western region, comprising the UK, France, Belgium, Netherlands, and Luxembourg. With internet penetration & smartphone adoption levels above 80%, it is this region that significantly adds to Europe’s eCommerce turnover, and the UK emerges as the leader in both the region and the continent.
As per the data released by the Office of National Statistics, the internet purchases in the UK, as a percentage of all retail sales have climbed from about 3.4% in 2007 to 9.4% in 2017 showing steady growth over the last decade. However, the growth rate of eCommerce has slowed down to 14% YoY in 2018, compared to 16% YoY in 2017. Apart from the general slowdown, there’s the possibility of Brexit further affecting the current retail and eCommerce landscape in both the UK and Europe.
Market Size and TAM
The UK retail market was worth an estimated 4 trillion pounds in 2018 and e-commerce, accounted for 9.75% of all retail. Of this 9.75%, we found that B2C-eCommerce accounted for about 20% of all eCommerce sales for the year ending 2018.
Based on a combination of secondary research and analysis of PipeCandy’s own proprietary data, we found that the Total Addressable Market comprises of 319,000 retailers, and 40,000 – 50,000 eCommerce companies, of which 18,000 – 20,000 are B2C eCommerce companies.
TAM split by Web Sales
We profiled these 18,000 – 20,000 for their web sales and found that at least 90% of the companies make less than 1 million in GMV annually.
TAM split by Product Categories
Clothing was found to be the most commonly purchased product category. About 35% of eCommerce companies sell Apparel and associated Fashion accessories like Bags, Footwear, Eyewear, Beauty and Cosmetic products. This is followed by Food & Beverage (14%), Home furnishings (12%), Sporting (8%) and Consumer Electronics (7%).
All the product categories depicted in the distribution below account for an estimated 70% of all types of SKUs sold in the UK.
TAM split by Monthly Sessions (Traffic)
We recognized that The TAM distribution by traffic sessions mirrors the long-tail nature of the eCommerce market. We found that the distribution of traffic across retail websites in the UK was about 91% of all retail websites have 100,000 or fewer than 100,000 sessions. A few examples of companies with monthly sessions greater than 1 million are Tesco, ASOS, Amazon, and Debenhams.
We started by taking into account the UK’s demography and found that, it is almost evenly split between men and women. After analyzing the online shopping habits of the UK residents, we came to know that the biggest segment is the 15-54 age group, that accounts for about 52.45% of the population. At least 88% of this cohort was found to be shopping online. Men, on average, seem to shop and spend more online than women. The average spend per quarter on online retail by men is approximately 255 GBP as opposed to 205 GBP for women. The average order value or AOV, of UK transactions, range anywhere from 30 to 40 pounds.
55% of shoppers seem to opt for Credit/Debit cards, which emerge as the most popular mode of payment. E-Wallets like PayPal are nearly as popular, closing in at 42%.
With the prospect of the UK exiting from the European Union looming, we conclude this report by musing aloud consequences that such an event would have on cross-border commerce, merchants and shoppers.
For starters, we expect there to be an overall slowdown in cross-border trade, resulting in extended delivery times and return times on both sides of the border. Shoppers on both sides of the border will face a sudden increase in prices of goods being sold if cross-border custom duties are to come into effect.
There is a chance that some UK merchants will open fulfillment centers in Europe to continue their Europe operations or move their operations to Europe altogether. Top British retailers like Tesco, Marks, and Spencer to name a few, have already been stockpiling essentials while desperately trying to avoid the prospect of panic-buying.
Merchants that have majorly been domestically-focused will see little or no impact but those that have been relying on revenue from Europe and can’t afford to relocate or set up operations in Europe will find it difficult to sustain.
Various reports claim that for the UK, Brexit would mean walking away from nearly 60% of its trade, half of which is with the EU and another 12% is through preferential deals that the EU has with countries outside of the EU.
Within Europe, we may see German, French and Dutch merchants beginning to compete for the void left by the UK, and shoppers in Europe will purchase more from these countries. Thanks to the recent EU regulation that does away with geo-blocking, European shoppers now have access to merchandise from across the Union.
While these are possible scenarios that could play out, the exact impact will depend on whether the UK reaches some kind of a trade agreement with Europe before the March 29 deadline, that retains its access to the single market and does not disrupt cross-border commerce operations significantly. The chances of such a deal playing out, however, based on recent events seem extremely bleak.