Beringer Tame Blog


Ecommerce & the UK Economy

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Insight

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The UK Economy - Overview

  1. The Russian invasion of Ukraine is foremost a human tragedy. The conflict will have major repercussions on the global economy, which had not recovered from the pandemic, supply chain issues and rising inflation. 

  2. Higher global energy prices will weigh heavily on the UK economy affecting shopper confidence. Petrol prices and household energy bills have increased and will push inflation to a 40-year high.

  3. Living standards are set to fall during 2022-23 as higher inflation erodes real incomes and consumption.

  4. Public finances are currently recovering more quickly than anticipated following the pandemic. 

  5. Business investment is expected to grow rapidly outpacing GDP growth.

  6. Wage growth is unlikely to fully compensate for higher inflation.

  7. Borrowing in 2021-22 is down thanks to strong growth in income tax.

  8. Inflation in the UK is already running at a 30-year high of 6.2% and t he Bank of England (BoE) now expects CPI to reach 10% in Q4 2022 (+2% vs previous forecast).

  9. It is likely that the Bank of England will increase interest rates at the fastest rate since 1988 as it trid to reduce "rampant inflation".

  10. The UK economy could reach its pre-COVID level by the end of the year. 


"In the first quarter of this century, the UK economy has been subjected to an extraordinary array of shocks.

(OBR)


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Consumer Price Inflation (CPI) 

CPI has risen in the UK (and beyond) due to sharp increases in global energy and goods prices. Domestic inflation pressures are putting pressure on consumers and businesses alike.

CPI inflation is expected to dissipate over time as global supply bottlenecks ease, employment rises, wage growth picks up and energy prices (hopefully) begin to balance. 

Additionally, the demand for more space, driven by the ability of more people to work from home (and changes to stamp duty), has created "continued upwards price pressures" on the housing market. 


Living standards will erode at the steepest pace since 1956, caused by wages failing to keep pace with an average annual inflation rate of 7.4 % over the course of the entire year.

(CityAM)


During the pandemic there was a shift in where and how consumers spent their money

According to Acquia, 47% of consumers said they bought something online from a different supplier than previously. 

The biggest drivers were "where can I get it" then "who has the best delivery" and 'who do I trust”.


The Effect of Brexit, Covid & the war on digital & ecommerce 

Both Brexit and Covid-19 have had a significant impact on the world economy, however, more recently Russia's invasion of Ukraine has led to further economic effects.

Increases in energy and other commodities, including food and fuel, have exacerbated disruption and delays within the global supply chain, heightening inflation and pressures on people's purses.  This will of course have an impact on ecommerce sales as discretionary income decreases and the ability to get products from suppliers and to customers slows. However, if you can stand out from the crowd (social media roles are in high demand), maintain demand, and keep on top of your business model, things should remain manageable.


The Bank of England can do little to combat high global energy and commodity prices, while their impact on inflation at the relevant policy horizon of 2-3 years’ time is also likely to be limited.

(KPMG)


Business Challenges & Opportunities

Be agile

  • Rapid market and economic changes are challenging but businesses within the supply chain must find ways to continue providing essential items at affordable prices. Passing on cost rises to shoppers will become more difficult.

Job churn

  • This is a tricky one. People may want to change jobs for a higher salary and keep up with rising prices, however, there is another side to the coin where individuals may be more nervous than ever to move and risk job safety.  It is likely that the differences will be sector related.

Higher wages

  • High inflation will ultimately lead to higher pay.  This will provide challenges to employers yet is essential for employee welfare.  It will be a balancing act. Make sure you have strategies in place.

Changes to shopping practices

  • Budgeting will have increased focus and driving quality & sustainability models could become harder and more shoppers are likely to trade-off/down to discounters of private label

Major events 2022

  • The UK will see several major events in 2022 namely the Queen’s Platinum Jubilee and the World Cup. These events will serve up a plethora of opportunities for growth as the country comes together in celebration.  Be ready.

UK Ecommerce & Digital Market Update

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The UK leads ecommerce in Europe

When it comes to ecommerce in Europe, the UK was the "first out of the gate" and continues to be the most developed AND active online market in the region with over 24,000 ecommerce businesses starting up in the UK during 2021 (+21% vs YAG). London was top of the board with the most start-ups coming from the capital, followed closely by Birmingham, Manchester, and Liverpool.

The UK is also the fourth largest ecommerce market in the world - the evolution of tech in retail, and utilisation of the English language meant we picked up the American approach quickly & easily - just think about how quickly we adopted Amazon! 

However, multi-language and cross border shopping is more important than ever as consumers take a multi-region approach to purchasing goods they desire.


The top 3 players in the UK ecommerce market account for 25% of UK online sales

  1. amazon.co.uk
  2. tesco.com
  3. argos.co.uk 

Breakdown of UK ecommerce revenue by segment

  • fashion (31%)
  • toys, hobbies, and DIY (19%)
  • electronics and media (18%)
  • food and personal care (17%)
  • furniture and appliances (15%)

(Retail Times)


Top reasons UK consumers are buying online

  1. Convenience - time-saving/direct and fast delivery 
  2. Price - product is cheaper
  3. Place - product only found online
  4. Choice - more choice when it comes to ethical brands and sustainable businesses

One thing remains abundantly clear - delivery is now a key part of CX and must be made as frictionless as possible. Where delivery capability is strongest, online is strongest.


Both age and lifestyle have an impact on online spend

It's clear that the whole of society is engaged in spending money with online channels at some level.

According to Retail-X, millennials are the highest spenders (age 35-44) - this is likely because they are now overseeing the family 'purse-strings' and weekly online grocery shop. 


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The ecommerce & digital labour market

During 2020 and 2021 the general labour market was supported by the Coronavirus Job Retention Scheme (or as we know it, furlough) which helped to prevent a large spike in unemployment across the UK. At the same time, there was a lot of movement and growth within the digital and ecommerce industry as businesses transformed and went online.  

  • Shops, hairdressers, and gyms reopened in the second week of April 2021 marking a (tentative) return to normality - retail footfall increased 151%.
  • In late November, Omicron came on the scene with over 60,000 cases the week leading up to Christmas, and nearly doubling by Christmas Eve.
  • The phenomenon dubbed the "Great Resignation" reached its peak in Q4 2021 (in the general job market).

Average National Salaries & Vacancies

The average national salary has decreased by just over 1.5% vs last year to just over £35k (similar to a junior Digital Marketing role).  

From May '21 to October '21 average national salaries continued to drop before rising again pre-Christmas and levelling out at the start of 2022.

* When looking at salaries, the impact of the end of furlough must be taken into account. The ONS has made it very clear that interpreting average earnings data is very difficult at present.

Salary Survey 2022 Average National Salary 2022

Source: Adzuna (data correct as of 26 April 2022 1049am)

Digital Marketing & Ecommerce Salaries P12M

Things have changed recently and there is now a sluggishness to the movement of talent.

It's less to do with a lack of talent, or even the 'great resignation', and much more down to the fact that talent isn't moving easily.  

In order to attract talent, you now need to 'steal' it from elsewhere AND you need to give any candidate a good reason to choose you.

So if you're looking to hire an ecommerce or digital marketing professional, it's wise to ask the question "what are we really offering the candidate and why should they choose us?"

  • greater meaning to their work
  • a strong career path
  • competitive salary & benefits
  • a great culture
  • truly flexible working arrangements

...We'll say more about this in our full salary survey coming soon!


"Pay growth often tends to move in tandem with the intensity with which employees switch jobs, as job switchers tend to experience higher rates of pay growth than those that stay." 

(KPMG)


"Wages in the UK continue to increase, but more slowly than prices in most cases, leaving workers worse off in real terms."

(IGD)


...more to come


As an ecommerce recruitment agency, Beringer Tame can help you build an ecommerce team or help you find your next ecommerce job role - contact us today!


Related Articles

UK Economic Outlook - NIESR

BCC Forecast March 2022 - British Chambers of Commerce

UK Economic Outlook Dec 2021 - PwC

Monetary Policy Report - Bank of England

Deloitte Economics Monitor Mar 2022 - Deloitte

Economic Forecast Summary Dec 2021 - OECD

GDP monthly estimate UK Jan 2022 - ONS

UK Regional Economic Outlook Jan 2022 - KPMG

Labour market inequality Mar 2022 - IFS

Ecommerce Trends and Predictions for 2022 - Beringer Tame

Over 24,000 ecommerce businesses were started in the UK in 2021 - Instant Offices/Charged Retail

UK e-commerce market: statistics, challenges and outlook for e-retail in 2022 - Retail Times

Mollie survey reveals eCommerce SMEs plan huge growth - Fintech Finance News

Economics Bulletin - IGD


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