Britain's Retail E-mpire

April 30, 2013 | REPORT

Overseas online sales to generate £28 billion for British retailers by 2020


  • International growth in online sales will outpace domestic online growth 
  • Biggest growth to come from Europe and Asia 
  • OC&C and Google call on businesses to capitalise on the increasing international appeal of UK brands

Online sales generated by UK retailers from international markets are expected to soar sevenfold to £28 billion by 2020, according to new research published today by OC&C Strategy Consultants in collaboration with Google. 

Whilst in 2012 online sales from outside the UK were worth £4 billion and made up 14% of total online sales, the OC&C and Google research, ‘Britain’s Retail e-mpire’, predicts that international sales growth will outpace domestic growth to make up 40% of total online sales by 2020. 

This increase in the international sales of British goods by 2020 will come from across the globe, and represents a promising pool of opportunity from a range of geographies: 

  • Sales in Western Europe are expected to soar to £9.8 billion in 2020 from £1.5 billion in 2012. These markets offer favourable trading conditions as a result of low barriers to entry through the European Union, combined with ease of delivery across the continent.
  • As the emerging economies of Central and Eastern Europe and Asia continue to expand, sales are predicted to reach £6.9 billion by 2020 from £400 million in 2012 and £4.5 billion by 2020, up from £400 million in 2012 respectively.
  • North America will continue to be the single biggest regional market for British online goods, with sales expected to increase from £0.8 billion in 2012 to £2.7 billion in 2020. However, the growth rate will be slower than other countries due to the relative maturity of the market and tougher competition from established national brands.
The OC&C and Google study shows that the number of consumers searching online for British brands and retailers from outside of the UK is growing on average by 46% a year since 2010. Flying the flag for British online retail abroad are well-known brands, such as – Asos, Burberry, Jimmy Choo, Net-A-Porter, The Outnet, Topshop and Wiggle, who already receive over half of their traffic from overseas. 

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.”

The research reveals that many smaller UK-based retailers – such as Farfetch, Isabella Oliver, Surfdome and Corsets UK – are embracing international opportunities more rapidly than their larger counterparts. Small and mid-sized companies currently receive nearly half (47%) of their online searches from overseas, tend to ship to more countries and offer multi-lingual sites. Conversely, only 13% of online searches for retailers with turnovers of more than £250 million come from outside the UK. 

Anita Balchandani, Partner at OC&C, said: “E-commerce 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.” 

British brands performed strongly across all sectors, with luxury goods, fashion and footwear the star performers. UK retailers performed strongly against domestic competition overseas for a number of reasons:

  • Better choice: e.g. UK beauty specialists, on average offer twice as big a range as their Scandinavian competitors.
  • Advantaged pricing: The pricing regime in the UK is relatively competitive, and further supported by the pound’s depreciation compared to local currencies, especially in Australia and Scandinavia.
  • Compelling site and service experience: Free, fast and trustworthy delivery is the norm for British retailers shipping internationally, e.g. ASOS offers a fast and effective returns policy overseas and Wiggle can ship its unrivalled range of cycling equipment to Australia in two to four days – as fast as or faster than many local competitors.
Anita Balchandani continued: “There is a huge opportunity for companies who want to capitalise on international expansion online – and this applies to a range of categories from luxury, fashion, retail and sports. There are, however, a number of strategic and operational considerations to avoid falling at the first hurdle.

“Firstly, retailers need to carefully assess which markets are more favourable for expansion based on their individual circumstances. Countries like Russia and China have a huge potential customer base but are also extremely challenging. In Russia, for example, difficulties in getting goods through customs can be burdensome, often adding to the time it takes to deliver goods. In China, local partnerships are required to navigate the market successfully and retailers are often required to tailor their shipping to offer ‘cash on delivery’.

“Retailers also need to bear in mind that international ecommerce requires new capabilities. Whether it’s the ability to respond quickly and tailor to local consumer demand or navigate international regulation and pricing, international e-commerce requires a healthy dose of all of these skills.

“Notwithstanding these challenges, there are a number of countries which present UK businesses with growth that is relatively easy to access – such as the English proficient world, like Australia and Scandinavia, and the rapidly emerging markets of Eastern Europe. And finally, even markets such as Germany, France and the US that tend to be classified as ‘mature’ are still emerging in ecommerce terms and offer plenty of growth potential.”


Supporting case studies

Wiggle

  • Wiggle is an award-winning online cycling and tri-sport retailer
  • It employs 350 staff managing 40,000 SKU’s and 500 brands 
  • Wiggle uses a combination of events and social media to build a strong brand connection and community globally
  • It offers free international delivery from its Portsmouth warehouse – shipping more than 2m orders in 2012
  • It has multi-language customer services responding to more than 40,000 email and live chats per month
Humphrey Cobbold, CEO of Wiggle, said: “From Wiggle’s experience, 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.”

Farfetch

  • Farfetch is an online marketplace for the world’s best independent fashion boutiques
  • It adopts a consistently global approach, with the aim of bringing customers extensive choice with seamless delivery across luxury clothes from a range of boutique brands
  • It has more than 150,000 customers
  • It offers shops from 18 countries and delivers to over 150 countries
  • Native language sites are offered in French and Portuguese
  • It has more than 80% of sales cross a country border
Andrew Robb, COO at Farfetch, said: “Farfetch has had an atypical story because we took a global approach from the very beginning, shipping initially from five countries to the rest of the world. We believed the proposition of combining items from the best fashion boutiques would have global appeal, so long as we could provide a seamless customer experience. We now ship from 18 countries and have customers in over 150. A core part of our success has been implementing processes that work on a global scale, including customer acquisition, shipping, customs clearance and returns. We currently have operations in Europe, US and Brazil with websites in English, French and Portuguese. We strongly believe that providing a global product proposition with a localised, multichannel experience is the future.”

Isabella Oliver

  • Isabella Oliver is a leading online maternity brand with emphasis on London fashion Deliver from UK but offer regional sites and localised offering, with focus on customer service
  •  It delivers to 150+ countries 
Geoff van Sonsbeeck, Founder and CEO at Isabella Oliver, said: “We launched Isabella Oliver in 2003 as an online only maternity wear brand with a global vision. With our innovative business approach as a vertically integrated brand, we were early movers in ecommerce and in the international market, launching 2 years later in the US followed by other markets. Today, we are the largest premium maternity brand in the UK, ship to 137 countries and over 60% (and growing) of our sales is from international markets. We’ve been honoured with a Queen’s Award for International Trade, the highest accolade that can be bestowed on a UK company and our collection continues to go from strength to strength – with Isabella Oliver being the preferred choice for many of the most recognisable celebrities worldwide.  We strongly believe we will be one of the key global maternity brands in the near future.”

Feel Unique 

  • FeelUnique is Europe’s largest online beauty retailer, and part of the Sunday Times Fast Track Top 100 in 2011 and 2012
  • FeelUnique internationalised early, offering free delivery to 100+ countries
  • An estimated 40-50% of sales come from outside the UK
  • 55% of its sales come from outside the UK 
Surfdome
  • Surfdome is an online lifestyle retailer selling clothes, footwear, accessories and board sports equipment
  • It has a strong brand range with over 800 brands available online
  • Delivery is offered to 50+ countries
  • Over one fifth of sales currently come from outside the UK, with international sales increasing significantly

Corsets UK

  • Corsets UK is the online leader in specialising in corset
  • It offers localised returns and native language customer services in key markets – e.g. Germany and France
  • It delivers to about 40 countries
  • 70% of sales currently come from outside the UK
Methodology
Google search statistics for c.500 of UK’s most prominent and interesting UK e-tailers from 2010-12 were analysed to highlight country / region consumer demand trends and retailer / category success stories. 

Demand indicators were cross referenced with primary research recording UK e-tailer international supply including delivery destination, lead times & language options and market growth projections from analyst firms.

This was supported through retail executive interviews adding operational insight from many of the UK’s internationalising stars.