E-commerce growth engine running out of steam

The continued growth of online only sales may be coming to a standstill in the UK, with both logistical issues and customer behaviour holding back further e-commerce expansion. Developing a multichannel strategy and securing the delivery supply chain, may open up potential for further growth, say advisors from Strategy&, PwC and LCP Consulting.

In an article by the Yorkshire Post, James Walker, partner at Strategy&, is asked for his view on the future of UK’s e-commerce market. According to Walker, the market could plateau over the coming two years, pointing at recent data from the office of National Statistics (ONS) which discloses a “dramatic slowdown” in the growth of e-commerce. “The e-commerce growth engine has run out of steam,” Walker remarks. The online commerce sector has now been flat in the UK for “about a year” with growth in the ‘click-and-collect’ multichannel now evolving. The biggest development is in multichannel consumer engagements with retailers, Walker seeing further room for improvements in multichannel sales if retailers "reinventing the role of the store." This would involve engaging customers to research products and look for deals online, but with the point of sale being in-store, or vice versa.

One of the key issues is that during the 2014 Christmas shopping period a range of retailers had problems keeping up with delivery from online sales, with a recent YouGov poll finding one in thee customers met with delays on receiving goods purchased on the Christmas period discount days, Black Friday and Cyber Monday. For some brands the delays were extensive, with the backlog at one high street store taking up to two weeks to resolve. With many shoppers responding to the delays by engaging in “multichannel” ‘click-and-collect’ services, by having online bought products delivered to stores for pickup. 

Supply chain
Solving supply chain issues too may be able to create a competitive advantage, adds PwC partner Jacqueline Windsor to the Yorkshire Post, with most stores having similar online pricing – the delivery becomes a way of distinguishing one store from another. “If you can compare prices, you can compare products online, what's the differentiator? Can you get it quicker? Can you rely on that delivery? Are returns easier? It's actually all part of the product," comments Windsor.

Care may need to be taken on demanding too much for too little from delivery services, exemplified by the margin squeeze which has been costing the parcel delivery sector dearly, with the recent administration of City Link a notable example. “Somebody has to pay for that ‘free shipping’ and at the moment that’s been the express parcels companies,” says John Manners-Bell, Chief Executive of Transport Intelligence, and with retailers “[putting] a lot of negotiating pressure on the carriers, the carriers respond to it, but of course when they fail the carriers get vilified. It’s all a bit of a vicious circle,” says Alan Braithwaite, chairman of LCP Consulting. 

E-commerce export
The slowing internal e-commerce market may incentivise UK companies to look (further) abroad for growth, and according to a recent study from OC&C Strategy Consultants such an approach may well turn out lucrative. In a joint study with Google the consultants calculated that in the coming seven years UK companies face an additional online export opportunity of more than £30 billion. The data however is based on four sectors alone – travel, retail, leisure and content – implying that the combined potential for all sectors will in practice be significantly higher.