The UK: an e-commerce & payments primer
The UK is a rich country with a well-connected population that is used to shopping online and is even more open to e-commerce since the pandemic.
More than many European countries, Britain is clearly a card market. British consumers pay for 51% of all online transactions by credit or debit card. 32% are paid for with an e-wallet, 7% by bank transfer and 1% in cash. 9% are paid for with other, niche, payment methods [1]. Looking at the card market, Visa has an 78% market share, Mastercard 21%, and American Express 1%. There are no notable local payment-card products [1].
Research released at the end of 2021 showed that 86% of UK consumers had adopted some kind of fintech product [2]. And 79% said they used alternative payment methods to pay and transfer money at least some of the time [2]. This makes it highly likely that the UK alternative payments sector will grow in the coming years. This is particularly true given the explosion in things such as “buy now pay later” (BNPL) apps, which are growing at a rate of 25% a year in Britain [3].
The UK’s e-commerce market
The United Kingdom e-commerce market is worth US$281 billion and is growing at a rate of 9% a year [1]. The average British e-commerce user spends 4,199 $US a year with online merchants [1]. Consumers complete 55% of all online purchases on a mobile device [1]. 42% of consumers shop cross-border, with their purchases accounting for 11% of the total value of British e-commerce [1].
UK e-commerce boomed during the pandemic and the subsequent lockdown. E-commerce accounts for 31% of all retail purchases [4] (up from somewhere between 19% and 20% before the pandemic [4]). In one month alone, April 2020, the volume of UK e-commerce in the food sector grew by 55% [5]. Nor was this a blip. Seven of the next ten months also saw the category continue to grow [5].
In 2022, the largest player in the UK e-commerce market is Amazon. But its market share is just over 5%, giving it nothing like the overwhelming dominance it enjoys in its home market [4]. By 2022, there were almost 600,000 e-commerce merchants in the UK [5].
UK market insights for e-commerce merchants
According to the IMF, the British economy will grow by 3.7% in 2022 and then 1.2% in 2023 [6]. Unsurprisingly, with inflation above 6%, UK consumer spending looks set to fall in 2022, as a result of the cost-of-living crisis [7]. By the second quarter of 2022, British consumer confidence had fallen in comparison to the previous two quarters, with consumers worried by the impact of energy prices and the unstable international situation [8].
Unemployment remains low, just 3.8% [9]. Economists tend to define a jobless rate of 3-4% as “full employment”. The low underlying rate of unemployment should give workers cause for renewed confidence, if only other external factors will improve.
In a recent report, the Centre for Retail research predicted that, even factoring in high inflation, retail spending will grow in 2022 by around 1% [10]. Even in May 2022, when overall sales fell in response to the unstable international situation, non-food sales held up [11]. For merchants with the right approach, particularly those able to tell a story about value and affordable quality, the UK e-commerce offers a large, well-connected and enticing market.
Essential UK facts for e-commerce and payment professionals
Internet penetration in the UK is 95% [1]. A 2020 study found that the UK had a mean broadband speed of 37Mbps [12]. This puts it behind forty-seven countries worldwide and in Europe behind both Germany and France [12].
Britain is ranked 9th on the World Bank’s Global Logistical Performance Index [13]. According to UK regulator the Office of Communications (commonly known as Ofcom), parcel volumes in the UK grew by 30% in 2020-21 [14]. There are other signs that the logistics industry in the UK is gearing up to support the e-commerce boom. In 2021 for instance, warehousing space grew by 32% [15].
Financial inclusion is not a barrier to the conduction of business in the UK. 97% of adults have a bank account and 64% have a credit card [1].
Footnotes:
- Original PPRO research
- https://ffnews.com/newsarticle/uk-hits-an-86-rate-of-fintech-adoption-digital-payments-drives-future-growth
- https://www.globenewswire.com/news-release/2022/02/18/2387807/28124/en/United-Kingdom-Buy-Now-Pay-Later-Market-Report-2022-2028-BNPL-Trends-by-End-Use-Sectors-Operational-KPIs-Market-Share-Retail-Product-Dynamics-and-Consumer-Demographics.html
- https://www.retailtimes.co.uk/uk-e-commerce-market-statistics-challenges-and-outlook-for-e-retail-in-2022
- https://www.caspiaconsultancy.co.uk/uk-ecommerce-market-report-2022
- https://www.imf.org/en/Publications/WEO/Issues/2022/04/19/world-economic-outlook-april-2022
- https://think.ing.com/articles/uk-consumer-spending-set-to-fall-amid-cost-of-living-crunch
- https://www.ft.com/content/113d93fb-add5-46e2-a482-114cab7b00e
- https://www.ons.gov.uk/employmentandlabourmarket/peoplenotinwork/unemployment
- https://www.retailresearch.org/retail-forecast.html
- https://www.ons.gov.uk/businessindustryandtrade/retailindustry/bulletins/retailsales/may2022
- https://www.cable.co.uk/broadband/speed/worldwide-speed-league/#regions
- https://lpi.worldbank.org/international
- https://www.ofcom.org.uk/postal-services/information-for-the-postal-industry/monitoring_reports
- https://www.export.org.uk/news/602065/UK-warehousing-sector-booming-due-to-Brexit-the-pandemic-and-the-rise-of-ecommerce.htm
