By Sarah Clark, Country Head, UK at Clearco
There has never been a better time to start an ecommerce business in the UK. 2020 and 2021 saw a complete perception shift for businesses and consumers. E-commerce is no longer a nice to have but an essential, with checkout experience or website design now on equal footing with visual merchandising and product selection – clicks-and-mortar is here to stay. The UK consumer is amongst the most digitally savvy in the world, with over $3 billion spent weekly in the UK online retail market. Much of the friction that businesses experienced in the early stages of the pandemic has been addressed and consumers now enjoy a competitive online retail market in almost every sector, and the ability to shop with large multinational retailers or small local businesses online with ease.
For businesses looking to expand their offerings and customer base, we have also seen tremendous innovation in customer acquisition and digital marketing, with the emergence of easy to use ecommerce solutions and new platforms to reach millions of potential customers.
Unsurprisingly, we are already seeing a new wave of entrepreneurs building ecommerce businesses in the UK this year. For those just starting out, and those who have established businesses already, this year is going to be highly unpredictable, with a number of emerging technologies to get to grips with as well as a macroeconomic environment that most retailers will never have experienced before, from supply chain issues to inflation and capital availability.
Here are some of the key trends we think founders should keep an eye on this year:
Given how much the word has been overused in the last couple of months, it’s understandable if you’re tempted to switch off as soon as you hear it. However, if we see some significant technological advancements in areas like VR, it could be potentially transformative, with the potential to create huge value and some big winners amongst those that can deliver customers the right products.
We’re starting to see the normalisation of virtual shopping, with big name brands investing heavily in R&D and experimenting with new types of shopping experiences in the digital space. Half of consumers (61%) already say they prefer to make purchases from sites that incorporate AR technology and we’ve seen some moderately successful implementations of the technology, like Amazon’s Room Decorator tool, which allows you to use your phone to see what furniture will look like in your own home.
Other retailers are enabling shoppers to browse new collections or exclusive drops with a digital avatar, AR try-on using just a smartphone and we have even seen Nike and Gucci’s first forays into metaverse fashion with the release of virtual trainers as NFTs.
Inevitably, some of what we have seen has been purely driven by the hype, but even if a small number of these ideas take off, there is the potential that they open up whole new categories of ecommerce opportunities. This will largely be driven by consumers, if there are experiences they find more convenient, or more enjoyable than what exists right now, companies will do everything they can to serve that demand, so ecommerce founders would do well to keep an eye on what is working and what consumers are responding well to.
We can also expect to see even further innovation this year with AI and data analytics in ecommerce. It is already standard for brands to use AI tools to interpret data in real time, and the ability to react to customer choices by acknowledging previous purchases, implementing smart search and ensuring customers feel engaged and more interested in what they want to buy.
Artificial intelligence is already very good at predicting future preferences based on browsing and shopping history. Ecommerce brands like ASOS utilise AI to suggest next purchases by showcasing product recommendations, guidance on size fits and matching similar styles together. Makeup brand Charlotte Tilbury have taken this a step further with their Magic Mirror Makeup AI feature which allows shoppers to try on eyeshadows, eyeliners, lipsticks, and highlighters using their phone camera.
We are going to see a real acceleration of progress in this area and there has been a proliferation in off the shelf AI tools available for ecommerce c companies to use which could really help to level the playing field for smaller businesses.
New funding sources
Until very recently, ecommerce founders have faced difficulties when trying to secure funding to grow their business. Traditional financial institutions have been slow to adapt to the needs of digital businesses meaning that venture capital has been a common funding route for ecommerce entrepreneurs, forcing them to give up equity in their business in order to finance day to day spending like marketing and inventory. With capital now more easily accessible and more competition in the market, the power is shifting towards entrepreneurs.
Revenue based financing in particular has become a go-to source of funding for entrepreneurs looking to retain more control of their business and a speedy investment decision. Thanks to the use of AI platforms, company’s only need to connect their sales data to get a decision, with no personal guarantees or credit checks. This has also opened up funding to a more diverse pool of entrepreneurs compared to traditional banks or venture capital which is often dependent on being in the right place (usually London) and knowing the right people.
We can expect to see another strong year for ecommerce companies, with the emergence of exciting brands giving customers even more choice and a seamless experience. Digitally, the big retailers are playing catch up, and 2022 will be the year for more agile small and medium size brands to scale up at speed, helping to change the overall retail landscape for the better.
Global Banking & Finance Review
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