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

The research conducted by OC&C Strategy Consultants in collaboration with Google, shows that the number of consumers searching online for British brands and retailers from outside of the UK is growing on average by 46 per cent 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 of their online searches from overseas, tend to ship to more countries and offer multi-lingual sites. Conversely, only 13 per cent 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 clothing and couches, to cycles. 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 offering plenty of growth potential.”