By Atul Bhakta,
CEO
One World Express
It is hard to ignore the recent explosion in the popularity of eCommerce, as the sector carves out an increasingly impressive share of consumer sales. In fact, many business leaders consider ongoing consistent growth to be inevitable.
It is challenging to imagine anything slowing the growth of online retail under current conditions – though many will be familiar with the factors which should sound a note of caution for the sector.
The momentum of recent years was largely fuelled by the impact of the Covid-19 pandemic. In February 2020, the last month before social restrictions in the UK, eCommerce sales as a portion of total retail stood at more than twice its share in 2014. Only a year later, thanks to a convergence of consumer adaptation, ongoing restrictions, and the traditional holiday peak retail season, eCommerce’s share had nearly doubled again, peaking at 37.1%.
Other figures highlighted an outstanding 2020 for eCommerce, with 46.5% year-on-year growth, followed by a strong 20.5% in 2021.
Even as high street retail begins to reopen in full as restrictions in the UK come to an end, figures still suggest that online retail will remain prevalent with consumers’ day-to-day lives. While the latest ONS figures point to a more modest 27.7% market share, this represents a substantial acceleration of the growth of online retail, which had previously charted a course of incremental but consistent growth.
That said, the eCommerce market is not guaranteed continued success. And even with changing purchasing habits, there are numerous factors, which could threaten its future growth – particularly when it comes to issues surrounding data security. As such, it is important to understand what could hinder market progress, and whether these factors can be overcome.
Data privacy at the forefront
When compared with the ‘wild west’ early days of online retail, the sector has become vastly more sophisticated. Consumers, in turn, are more savvy, and increasingly conscious of the need to act judiciously with their personal data.
A study conducted by McKinsey in 2020 found that an overwhelming majority (87%) of consumers would not do business with a company with question marks over its security practices, while 71% reported they would stop engaging with a business that gave away sensitive data without permission. Across the study, they found a culture of distrust towards businesses and data privacy, with no industry reaching a trust rating of 50%.
Many states globally have responded with tighter data laws. In the UK, we have GDPR, which has gone some way to introduce minimum protective standards and improve transparency around data usage, though does not ultimately prevent businesses using personal data in ways customers would be uncomfortable with.
This is not a fear consumers hold without basis. Recent figures have shown a 179% growth in online fraud in the last decade. Reportedly, more than half of Brits have suffered financial loss as a result of fraud. As digital literacy increases, and the convenience and price level benefits of online shopping become more entrenched, companies who are unable to prove they can be trusted with sensitive personal information will lose customers – either to online competitors, or high street businesses who do not require these details to complete a transaction.
Even those companies with the most stringent ethical practices around customer data face the emerging threat of cyberattacks. Recent data breaches among even some of the world’s most prominent business entities will lead consumers to question if the value of online retail is worth trusting third parties with their personal and financial information. Digital crime will continue to become more sophisticated, and so businesses must place investment in security, and exploring tech innovations to combat risk, at the forefront of their strategies if eCommerce is to flourish in the long run.
Dealing with the security issues which threaten eCommerce’s ascendancy in the market may, in turn, have consequences. Should consumers choose to favour established enterprises with the most to invest in innovating their security practices, monopoly formation may accelerate, leading to less competition and higher price levels – diminishing the key components of online retail’s appeal to customers.
An approach which balances market knowledge and consumer sensitivity will allow businesses to be agile in response to shifts in consumer preference, while centring the transparency necessary to provide consumers with assurance on the reliability of the operator. Of course, this will take a cross-sector effort from eCommerce businesses, as well as the government and industry regulators to agree this. Whilst such developments will take time, they will certainly go a long way in creating a fair, and consumer-centric market.
Today, small to medium businesses can still compete for emerging opportunities – as evidenced by the innovation and growth maintained throughout the pandemic – though these leaner firms must be conscious of the risk factors which may limit the market in the coming years.
Atul Bhakta is the CEO of One World Express, a position he has held for over 20 years. He also holds senior titles for other retail companies, underlining his vast experience and expertise in the world of eCommerce, trade and business management.
