OC&C: 45 billion eCommerce export opportunity for UK

26 November 2014 Consultancy.uk

UK based companies will in the coming years be granted a massive opportunity to boost their eCommerce exports to Europe and beyond, concludes a research from OC&C Strategy Consultants in collaboration with Google. In order to capitalise on this opportunity, firms will need to adopt a global strategy, prioritise their efforts, embrace digital tools and learn from best practices in the marketplace that excel with ‘future-proof’ business models.

Historically markets have been encompassed by geographic limitations, distance, oceans, hospitability, etc. In recent years however the internet has simplified a broad range of information exchange, for businesses that trade in knowledge, for instance, the other side of the world is merely a two second email away. But also other businesses – whether big or small, old or new, and in a wide range of industries – have a huge audience at their fingertips.

Online Retail - OC&C Strategy Consultants

According to research from OC&C Strategy Consultants, UK businesses in four sectors alone – travel, retail, leisure and content – can in the coming six years see their eCommerce export grow by £32 billion, from £13 billion in 2013 to an expected £45 billion in 2020. The potential is driven by a range of factors, including globalisation, growing internet penetration across the globe, and more international search traffic. “Internationalisation used to be very capital intensive but eCommerce has meant that it is now quicker, simpler, more economical and therefore lower risk for companies to test out new markets. We estimate that international search traffic will quadruple by 2020, so there is a huge opportunity for UK companies who want to capitalise on international expansion online,” explains Anita Balchandani, Partner and Head of Retail at the UK-origin consulting firm.

Priority is key
For firms contemplating capitalising on the potential, the consultants have an advice: prioritise your market entry strategies. Not every market is as easily accessed or as lucrative. OC&C identifies the most lucrative markets for expansion to be the US, Brazil, China, Russia and Mexico. There are however challenges associated with expansion into these markets. In the case of Russia for instance the language barrier and established local business make entry difficult.

Market readiness framework

Other recommendations include embracing digital tools and learning from best practice businesses in the marketplace, with Booking.com, eBay, Spotify and Airbnb a few examples of such players. Another area considered key to unlocking a business’s full expansion potential into new markets is knowledge of those markets. To make this easier, OC&C and Google have released so-called ‘Export Business Maps’ – one page overviews that in a nutshell presents key aspects of foreign markets and consumers. Data includes among others a seasonality calendar, a section with a breakdown of fundamental facts for each country, information about search and display, an overview of mobile behaviour as well as location specific information related to local taste. An example:

Netherlands Export Map

“We hope the Google Export Business Map will help UK businesses to capitalise on the £45 billion opportunity, inspiring them to think beyond their local markets and grow quickly and strategically,” says Peter Fitzgerald, UK Country Sales Director at Google.

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Debenhams administrator handed legal threat from Sports Direct

24 April 2019 Consultancy.uk

Earlier in April 2019, the long-suffering high street entity of Debenhams finally collapsed into a pre-pack administration, wiping out equity for shareholders including Sports Direct. Now, Mike Ashley, the controversial owner of Sports Direct, has threatened legal action to remove FTI Consulting from its role as Debenhams’ administrators, following the obliteration of his stock in the company.

As the retail sector in the UK continues to endure a torrid period, British retail stalwart Debenhams endured a spectacular fall from grace. The high street ever-present was founded in the early 19th century, with a single store in London, before expanding to 178 locations across the UK, Ireland and Denmark. However, following a string of profit warnings and several rounds of lay-offs, the company engaged advisors from Big Four firm KPMG to consider its options in the Autumn of 2018.

At the time, Debenhams Chairman Sir Ian Cheshire insisted that the chain was not heading for insolvency, or that it was actively embarking on a company voluntary agreement (CVA). Nevertheless, Debenhams fell into administration in Spring 2019. The news saw Chad Griffin, Simon Kirkhope and Andrew Johnson of FTI Consulting appointed as joint administrators, immediately selling the retailer to a newly incorporated company controlled by secured lenders.

Debenhams administrator handed legal threat from Sports Direct

The pre-pack administration deal meant Debenhams was able to access significant additional funding, preserving 165 of its stores, though plans to close around 50 under-performing stores in the next three to five years remain in place. At the same time, the deal maintained its commercial relationships with suppliers, employees and pension holders. However, it also effectively led all of Debenhams’ previous shareholders – including the retail magnate Mike Ashley – to lose their equity.

Ashley’s Sports Direct firm had increased its stake in the department store chain in 2018, but stopped just short of the 30% stake which would require it to put in a formal offer to fully acquire the business. The transaction fuelled speculation that Ashley was waiting for the opportune time to acquire Debenhams, particularly in the wake of his swoop for House of Fraser. Ashley’s deal there enabled Sports Direct to buy the firm out of administration in a pre-pack deal, allowing the new ownership to controversially wash its hands of the company’s pension scheme in the process.

While some believed this was Ashley’s intent for Debenhams, FTI’s decision to sell the store to its creditors has instead resulted in a sizeable loss for Ashley. The hit of around £150 million from his loss in Debenhams comes after an analysis by The Sunday Telegraph suggested the tycoon had accrued “a sprawling web of stakes” in rival companies, and that he may be nursing losses of more than £500 million.

Bad press

Ashley – who recently lost a complaint ruling by British press regulator Ipso allowing the Times to note that he shared many characteristics with North Korean dictator Kim Jong-un – has been outspoken in his contempt for FTI since the news broke of Debenhams’ sale. The Sports Direct CEO has called for the resignation of FTI from its role as administrator, after his stake in the department store chain was wiped out. The Guardian stated that a letter to FTI saw Sports Direct’s lawyers even threaten legal action to remove the advisory firm as administrators because of a conflict of interests.

According to the reports, the document claimed, “[Sports Direct] will do everything available to it to unwind the damage caused to the company and other stakeholders (including large and small shareholders) by the events of today including but not limited to challenging the appointment [of FTI as administrators] and all consequences of it.”

The letter allegedly claims that FTI had been involved with Debenhams since the second week of February, and had engaged with the group’s lenders. The legal team reportedly suggested that this would consistute a conflict of interest, because FTI sold the retailer’s operating companies to the same lenders via a pre-pack administration.

This comes weeks after Sports Direct was itself accused of becoming overly cosy with a professional services firm, which has seen its auditor Grant Thornton placed under scrutiny for its continued role with the firm. In 2018, it was reported that Grant Thornton was set to stand aside from the role due to competition rules. It had held the role since before Sports Direct floated on the London Stock Exchange in 2007, while Phil Westerman, the Partner at Grant Thornton responsible for signing off Sports Direct's accounts, had himself undertaken the work for five years. 

Neither situation is understood to have changed, leading to the questioning of the independence of Grant Thornton’s auditing work with Sports Direct. Such is the level of bad press surrounding the retailer, that the Big Four of the accounting and advisory world – wary of incurring a new scandal of their own – are said to have ruled out taking the contract over.