e-Commerce in the UK

Strategies, Policies and Best Practices

Together with France and Germany, the United Kingdom has one of the largest potential domestic e-commerce marketplaces in Europe with high Internet usage rates. In addition, there is even greater latent potential for e-commerce transactions with the rest of Europe where Internet usage rates have traditionally lagged far behind in many countries, e.g. Cyprus, Latvia, etc. The European marketplace is potentially far larger than the US market.

As a ‘nation of small shop keepers’ and the first country to embark on the industrial revolution the potential of this new e-commerce revolution has not been lost on the UK government. The current administration declared as early as 1998 that it intended to do all in its power to make the UK the ‘best place for e-commerce in the world’ and this was substantiated in a subsequent report - e-commerce@its.best.uk (1999) by the government’s performance and innovation unit.

This comprehensive strategy majored on three core pillars – Access, Trust and Understanding. The approach was to be market led (competitive and innovative environment with internationally agreed tax and regulatory environment). The report also stressed the need for a pan-government effort (particularly in local government) to promote e-commerce trust and understanding and develop universal access to high speed broadband.

The report also stressed the need for government to lead the way in B2B e-procurement (a recommendation enthusiastically followed up by the UK’s e-government program, Gershon et al). Additionally, the government would monitor and evaluate the impact of e-commerce on key sectors particularly audiovisual and ‘weightless ’ financial services where the UK has a significant advantage.

Following the recommendations of the 1999 report; in 2001 the government initiated periodic e-commerce surveys of business and individuals and pioneered measures to understand better the impact of e-commerce on the ways business operate, the effect on individuals and the nature of cross-border e-commerce in digitizable products , e.g. music, maps, books, film, software, video games etc.

By 2002 the UK was benchmarked as second only to the US in its environment for e-commerce. At the time the study cited a whole range of key attributes in the UK’s e-commerce environment:

  • Strong market environment
  • Strong political environment with supporting legal regulation
  • The UK’s relatively high business readiness viz. high ICT spending and PC penetration
  • Government readiness, in particular the UK government’s e-government strategy
  • Government uptake
  • Citizen uptake, and
  • Infrastructure development (which only a year before was poorly rated) but had achieved an high speed internet access for 66% of the population

Internet sales by UK business had expanded from just £18.6bn in 2002 to £125.2bn in 2006 and by the following year had increased 30% to £163bn ; of which the wholesale, retail, catering and travel sector was the largest at £79.4bn.

he 2007 e-commerce survey also showed a significant increase in the value of internet trades.

Other findings were:

  • Internet sales represented 7.7% all sales (39.3% by value) by non-financial sector businesses.
  • Internet purchases by all non-financial sector businesses had risen to 30.4%
  • 70.3% of businesses had a website – 15% of businesses were selling on line

As e-commerce has proliferated in the UK; the government has strengthened the law surrounding on-line sales.

The UK’s traditional consumer protection regulations apply to on-line distance selling too and specific online regulations have been introduced that have largely been derived from EU regulations which share the common themes of ensuring the visibility, and transparency of the e-commerce trader’s identity, processes (payment and delivery), prices, terms and conditions of sale and rights to remedy in the event of dissatisfaction.

Despite the more relaxed consumer laws of the UK, compliance with EU e-commerce regulations and language can prove onerous for cross border e-commerce traders; causing the gap between domestic and cross-border e-commerce to widen.

Despite a slow down in UK business-to-consumer (B2C) e-commerce sales (including the travel sector) in 2008 (due to economic recession) it is estimated that 72.5% of Internet users in the UK over the age of 14 will purchase at least one item online in 2009 (up from 57% in 2008 ) and by 2013 the number of online Internet buyers will increase to 31.8m (over half of the UK population).

E-commerce remains largely immune to the economic downturn due to more competitive prices, easy product comparison , fuel savings and other convenience factors. In addition, whilst slower than in Asia, m-commerce will continue to increase exponentially in the UK which enjoys a highly competitive, high penetration mobile marketplace.

The UK continues to assist businesses to benefit from the use of the latest e/m-commerce technologies with much of its efforts directed towards partnerships with the private sector and academia (particularly via its business portal ), e.g. a sponsored B2B site that provides e-commerce and e-business advice and consultancy in conjunction with Warwick University’s Digital Labs.

The state owned British Broadcasting Corporation is active in this area, particularly through the development of creative license access to government information to promote innovative value added developments (data mashups). However, despite early success, the UK has failed to maintain the momentum and first mover advantage it aspired to in the 1999 strategy report. As a consequence the UK has failed to maximize the opportunities presented by e-commerce and e-business. This is primarily due to the lack of quality of its broadband connections.

In the past the UK has concentrated on achieving a universal broadband service with some success, however as a 2009 report points out the the emphasis has shifted from penetration to quality in recent years and the UK’s ‘universal service’ ideal has paid insufficient attention to quality.

The report shows that the UK fallen behind some of its European neighbors (particularly Scandinavian countries and the Netherlands) and many countries in Asia, e.g. Japan and Korea – who have invested in the high speed networks required for the next generation web applications.

To some extent this is recognized in the latest UK government strategy document ‘Digital Britain ’. However a promise of universal access to 2Mbps broadband for all by 2012 (though just adequate for today’s applications ) has been roundly criticized as woefully inadequate even for tomorrows next generation web applications, e.g. visual networking, high definition video streaming, consumer telepresence, large file sharing and high definition IPTV, which as a minimum, require at least 11.25Mbps (download), 5Mbps (Upload) and a minimum latency of 60ms.

The Department of Business Innovation and Skills is also moving ahead with OFCOM to put in place revolutionary new regulations to protect against P2P copyright infringement as a vital way to protect its valuable audiovisual industry.

Challenges

The greatest challenge to the UK’s e-strategies in general and e-commerce in particular is its lack of broadband capacity which will require significant further investment in fibre and cable upgrades to improve quality.

Both the Saïd and Digital Britain report recognize the size of this investment will require public private sector partnership. The UK government has moved quickly to get OFCOM renegotiate earlier mandates with British Telecom (BT) that were put in place with the privatized utility to ensure fair competition in a newly de-regulated telecoms market.

This renegotiation aims to better enable BT to recover costs from infrastructure investment and remove some of the favored conditions (for third parties) now that the deregulated telecoms market has matured.

This has already prompted massive commitments from BT and other private sector organizations are responding to the challenge for ultrahigh speed services, e.g. Virgin’s 40Mbps trials.

The Saïd report anticipated considerable improvements will have been made by 2010

Findings Analysis

Strengths

The UK has many natural strengths that propel it towards an e-commerce future, amongst them are:

  • One of the largest domestic markets in Europe.
  • Large sophisticated ‘high street’ retailers (Virgin, Boots, Marks & Spencers, Tescos, etc.)
  • Innovative SMEs and a positive entrepreneurial spirit – a ‘nation of shop keepers’.
  • Large and sophisticated (largely weightless) audio visual and financial service sectors
  • .A competitive environment (ranked 12th. WEF’s GCI index).
  • Broad Internet penetration (100% by 2012) and high e-commerce usage (over 50%)
  • High e-procurement within government with the mechanisms for suppliers to supply the government marketplace.
  • One of the strongest and most competitive international trading economies in the world.

There is long-standing recognition by the UK government of the importance of e-commerce as the next revolution and an opportunity to re-invent the UK within the digital age (remembering its role in the industrial revolution).

Weaknesses

Given the size of the UK’s population and its density the UK will always struggle to maintain the heavy investment in infrastructure needed to keep up with demand, as it has in other communications and utility infrastructures, e.g. transport (roads railways and air travel) and electricity and water.

Opportunities

The opportunity for the UK, recognized in the 1999 E-commerce@its.best.uk report remains – that of being the ‘best place for e-commerce in the world’.

As the above report highlights – the opportunity presented by e-commerce is two fold. First, it enables industry to reduce cost and increase competitiveness (lower prices) within existing business models and to raise efficiency by integrating supply chains through B2B.

Secondly it provides ‘double win’ in B2C by outsourcing work (thus costs) yet improving the buying experience and customer satisfaction – a fact long accepted in the financial service industry.

E-commerce also offers the UK the opportunity of meeting its commitment to becoming a ‘green economy’, reducing its carbon footprint and easing pressure on an overstretched physical infrastructure, e.g. road, rail and air travel through greater e-consumerism.

The 2012 Olympic Games to be held in London will provide a valuable opportunity to fund and ‘showcase’ its e-enabled economy (at least in London) and will provide a large additional fillip to businesses (large and small) to strengthen their e-commerce outlets, e.g. accommodation, event bookings and entertainment.

Threats

The main threat to the UK’s aspiration will be:

  • Insufficient or delayed government support (possibly due to a change in administration) for private sector investment in infrastructure to meet the broadband quality needs of the future.
  • An inability to recognize the potential of the Olympic Games to boost domestic and international e-commerce and its supporting functions in time for the 2012 Games.
  • Difficulties protecting the UK’s most valuable e-commerce assets, e.g. audio visual media, against copyright infringement whilst maintaining more open access to content and the much vaunted net neutrality.

In addition, the UK’s preeminence in creative arts, e.g. music and media, is forcing them to lead the way (in Europe) in developing more robust regulations that directly impact e-commerce.

These are largely uncharted waters and are often highly sensitive and controversial.

Although the UK government is making efforts to adopt a less prescriptive, more consultative approach to its policy making, e.g. putting draft policy online for open comment, e-petitions, etc; it lacks the more sophisticated engagement and formal petitioning mechanisms of its citizenry like, for example, the Korean ‘e-people’ solution.

This may mean that controversial proposals like forcing ISPs to monitor illicit P2P copyright infringement, the notification of rights holders, e.g. record label, web and other authors or musicians in order that they can take legal remedy, may prove difficult to implement and impact the potential of e-commerce in the UK.

Have Your Say!

If you are in anyway involved with e-service programs. Whether it is BIG e-government, e-health, e-cities, etc., or SMALL e-service strategies for SMEs and Ma & Pa Online Businesses or even a MIX of the two, e.g. National e-Commerce Programs for SMEs. ....

e-service-expert.com wants to hear from you.

So do the world a favor! Share your knowledge with others. You can really help...so have your say now!

Have Your Say!

If you are in anyway involved with e-service programs. Whether it is BIG e-government, e-health, e-cities, etc., or SMALL e-service strategies for SMEs and Ma & Pa Online Businesses or even a MIX of the two, e.g. National e-Commerce Programs for SMEs. ....

e-service-expert.com wants to hear from you.

So do the world a favor! Share your knowledge with others. You can really help...so have your say now!

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