The environment for online retail in Britain is changing. The pandemic lockdown is driving sales, while the looming end of the Brexit transition period brings in uncertainty - a threat for one and opportunity for others.
Here are the essential facts you need to know if you are launching an e-commerce project in the UK.
The business environment for online retail has never been more exciting. We want to share the most important trends and rules you need to follow when building your online store.
The trend towards digital accelerated for good
The pandemic of early 2020 struck Britain. The government was late to react and the coronavirus spread across the country. Due to a high number of infections and an intense pandemic outbreak in London and North East England, the UK government imposed a strict lockdown.
People formed new habits during the lockdown, and these behaviors are set to stick beyond 2020, as the high street is unlikely to recover - states UK E-commerce 2020 report by eMarketer.
From March 23 to June 15, only essential stores were open. E-commerce became the only way to purchase goods. The researchers from eMarketer predict the share of online sales in total retail sales should jump sharply from 21.8% in 2019 to 27.5% in 2020.
Although the restrictions are being lifted, even if the epidemic won't accelerate later this year, digital habits should prevail. Analysts don't predict the offline retail sales in the UK will ever reach pre-lockdown levels again.
Mobile commerce will have to wait until 2024 as eMarketer researchers predict this would be the year when m-commerce will account for 20% of all retail sales.
E-Commerce regulations are changing
Currently, the UK is going through a transition period, which is a result of Brexit. Until the end of 2020, British businesses must follow EU E-Commerce Regulations. Here's a summary of the essential requirements:
Your company's details. The e-commerce site has to provide details of membership with any society, the professional body that they belong to, or another publicly available register that they appear on. It is also compulsory to provide additional information, such as company registration.
If your VAT taxable revenue exceeds £85,000, you have to register for VAT, which would put you under obligation to post your VAT number on your e-commerce site.
Pricing. The E-Commerce Regulations say prices referred to on the website should state whether they include 'hidden' charges such as VAT and delivery costs.
You need to enable your users to complete all the fields of electronic contracts online, as well as provide them the possibility to revise any mistakes in the order before making the purchase. The online store needs to know whether the seller will file the electronic contract and if it is readily accessible by the consumer.
Advertising and email. Any type of commercial communication needs to be identifiable as such by the consumer or recipient. There's no room for pretending to be other customers or individuals recommending a product or a service. Additionally, an email sent by a store must include the name of the intended recipient to which the communication was posted alongside the promotional offer.
According to the Directive, 'Spam' emails are supposed to be identifiable as unsolicited. In practice, the email subject line should explain the message, so there's no need for the recipient to open it.
Compliance after January 1, 2021
The British government intends to remove the e-commerce Directive’s Country of Origin principle from UK legislation. As a result, online service providers will have to comply with UK laws.
The transition period ends on December 31, 2020. From that time, the EU E-commerce Directive will no longer apply to the UK.
The E-commerce Directive currently allows European Economic Area (EEA) online service providers to operate in any EEA country while only following rules in the state in which they are established. This situation will change since the UK has left EEA.
UK-based e-commerce businesses may fall under additional licensing requirements in EEA countries where they operate. The UK government asks local e-commerce businesses to "have processes in place for ongoing compliance if individual EEA states change their requirements governing online activities."
You should also check for any additional legal requirements in the EEA member states you operate in. The rules that you may need to start following are those that fall within the Directive's field. These are rules relating to online information, advertising, shopping, and contracting. All these are essential for an e-commerce business.
Starting in 2021, e-commerce sites in the UK won't be able to sell their goods on the internal market, the UK will be treated as a third country. Customs duties may apply. This would make EU trade more expensive for UK retailers.
You need to pass the PCI Compliance assessment
PCI DSS compliance isn't a legal requirement in the UK. The vast majority of UK banks and financial institutions comply with the PCI standard introduced in April 2016.
If you deal with money on your website, you're required to pass the PCI compliance procedure. In most cases, you'll need to fill a self-assessment questionnaire and then send it to PCI representatives. The survey will tell you precisely what you should do to be approved.
What you need to remember when dealing with PCI compliance:
- Proper database architecture: keep credit card information out of the system. You'll probably use third-party systems for processing payments (we cover this topic later in the article). You need to be sure that you don't store credit card numbers, expiry dates, and CSV codes in the database.
- Stress tests. You want to have a lot of users visiting your site 24/7, which will generate substantial income. Prepare your servers for such a load. You need to be ready to handle hundreds or even thousands of requests per minute. You don't want to go offline for whatever reason. You go offline, and you lose money. As simple as that.
- SSL certificate. Even if you don't store credit card information, you still collect other kinds of information from users: email addresses, passwords, names, delivery and billing addresses, age, etc. You need to be sure that your connection is secure, and you will not lose users' data.
Implementation of 3D Secure is obligatory in the UK
3D secure is an additional measure to boost the level of security of the payment process created by Visa and MasterCard. It allows users to use a 3D secure password to confirm their online purchases. It has to be implemented for every payment method and is obligatory.
It's important to choose an appropriate online payment method for your e-commerce platform. It should be convenient for your users and your business at the same time. It needs to be popular among your target audience, because if they already use your online payment provider, they will buy faster and buy more. You don't want to lose your customers just because they aren't familiar with the payment system. Also, you want your payment provider to have excellent customer support and adequate operational costs.
When choosing your payment gateway, you should remember the following aspects:
- If you're going to operate on a global scale, use PayPal. It works all over the world, but you need to be ready to tackle higher operational costs.
- SagePay and Stripe are popular in the UK. They have excellent customer support and similar operational costs. SagePay additionally offers a simple process of 3D Secure implementation. We've already written about 3D secure and how to implement it with SagePay here.
Expectations are growing. Be prepared for same-day delivery
Everything's becoming faster. Your customers are used to fast internet connections, fast computing devices, and quick services like Uber. Amazon Prime Now has launched in the UK and offers same-day delivery for free. You need to be efficient in your warehouse management, operations, and logistics to deliver your products to customers as fast as possible.
Focus on UX, because it drives sales
You need to remember that your customers visit your site not only to purchase your products but also to get a pleasant buying experience. You should elicit customer insights and do data-driven marketing to deliver the best quality to your users and boost your sales.
Follow the above rules and you'll avoid the most frequent mistakes made during the development of an e-commerce application. If you're ready to start developing your online store, don't hesitate to contact us.
Making an entry during the transition may be the right move
Online stores will face significant disruption when the transition period ends. This is a challenge for established players as they have to adapt to many environmental changes. At the same time, newcomers may enter the market ready for the new reality.
This list is mainly going to apply to businesses operating within the UK; however, if you are operating in Europe or the USA and sell in the UK, some points on this list will be of interest.
Being flexible has never been more critical. You need to oversee each aspect of your activities carefully.
Keep an eye on your suppliers. Make sure you are regularly in touch, especially with partners from mainland Europe. Even your local UK-based suppliers may be dependent on imports.
Remember about your logistics network. The movement of people and goods will likely work differently in 2021. You should have some insight into what's going on in the courier or postage companies you cooperate with.
One way to get ready for the upcoming surge in uncertainty is to watch the competition closely.
Finally, make sure you communicate smoothly with your customers. Make sure they know about every change on your website, eBay account, or process. Gather feedback proactively, so you are the first to know about new trends. The next months are the right time to focus your investments on improving your customer support.
The best way to boost your adaptivity is to control your business's processes, especially costs. You simply need room to operate and the best way to do it is to provide cash flow and flexibility to spend when necessary. Control your costs at every level, so you are prepared for the turbulence that may come when the transformation period ends.