Opportunities and challenges for UK SME retailers in today’s climate

Opportunities and challenges for UK SME retailers in today’s climate

Key points

  • As the number one facilitator of ecommerce in the UK, Royal Mail understands the opportunities and challenges facing SME retailers
  • Three quarters of UK SME online retailers express confidence that sales will increase this year
  • 70% of UK SME online retailers experienced an uplift in sales in 2017, compared to 2016
  • The biggest concerns for retailers this year are the ability to make a profit, increase sales and reduce costs
  • This year, almost two thirds of UK SME retailers intend to increase their international sales revenue

Royal Mail is the number one facilitator of ecommerce in the UK, supporting SMEs across the nation. We are proud to work with businesses of all shapes and sizes. But SMEs are our heartland.

The outlook for UK SME online retailers

Thanks to continued growth in ecommerce, the future is looking bright for UK SME online retailers. According to a study commissioned by Royal Mail in 2018, seven in ten (70%) say they experienced an uplift in sales in 2017, compared to the previous year. And 74% expressed confidence that sales will increase in 2018.

Increasing their social media presence (43%), running more promotional offers (39%) and introducing new products or services (29%) are the main ways UK SME online retailers are planning to achieve growth this year. 

The main concerns for UK SME online retailers in 2018 are the ability to make a profit (27%), increase sales (26%) and reduce costs (23%). 69% of retailers expect costs to be higher in 2018 and the biggest costs expected are purchasing (34%), logistics/delivery (32%) and advertising (27%). 

Opportunities in the UK and overseas

Exporting and importing offer opportunities for online SME retailers in the UK, especially in the current climate. In December 2017 alone, the value of UK exports and imports were £29.6 billion and £39.1 billion, respectively, according to HM Revenue & Customs. Targeting overseas customers presents a huge opportunity for UK SME online retailers.

According to our research, just above two thirds (68%) of UK SME online retailers currently sell overseas. 80% of these retailers sell to Europe, followed by the USA (35%), Canada (31%) and Asia (17%). Key ways of increasing international sales revenue will be by simplifying the sales, ordering, delivery and payment process (45%), selling more to the markets they already sell to (28%) and targeting new markets and countries (20%).

UK SME online retailers are planning to target Europe (50%), the USA (34%) and Canada (28%) in 2018 due to demand, good ecommerce structure and the ease of shipping and delivery. Europe holds the greatest opportunity, according to UK SME online retailers. 

Bricks vs clicks

When it comes to the way they sell, our study of UK SME online retailers also found that nearly four in ten (38%) have a physical store as well as a presence online. However, there are additional popular ways to sell goods, including via a catalogue (14%), over the telephone (21%) and via exhibitions (12%). Over half (54%) also currently sell on a marketplace. Looking to the year ahead, over half (52%) are planning to sell through new channels. This year, 15% intend to list products on a marketplace while 18% will use additional marketplace sites.

In conclusion

It is very promising to see the level of business confidence from UK SME online retailers. Although obvious challenges exist, retailers are grasping the available opportunities for growth and have a clear view of the actions they need to take to win new customers.

In particular, the ecommerce sector is increasingly global. There are currently more than two billion internet users in 200 countries, with nearly 100 million of them in English speaking countries. SME online retailers should look especially at opportunities to expand the international side of their business.

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