The UK economy saw just 1.7 per cent growth in 2017, and inflation that exceeded the Bank of England’s target, reaching 3.1 per cent. This has led to higher prices in the shops and a squeeze on consumers’ budgets. But 2018 could be a better year as inflation is set to reduce and wages may start to rise.
Madalina Aghinita, Financial Analyst at GlobalData, comments: “Despite the positive forecast for 2018 spending, the year has so far seen a number of physical stores close down, and it is likely that there will be acceleration in this respect. More consumers are moving towards online shopping in order to save time and ensure they get the best value for money – particularly given the performance of the economy.”
GlobalData’s E-commerce Analytics database shows that the UK is the largest e-commerce market in Europe, with a market size of £149bn, and growth of 12.8 per cent in 2017 compared to 2016. Based on the current growth rate, it is expected that UK e-commerce will exceed £200bn by 2021.
The growing digital channels are disrupting not only the retail landscape, but also cash and card payment methods. Internet penetration has facilitated the growth in e-commerce, with 89% penetration in 2012 and 96 per cent in 2017. Technology has innovated the way consumers shop online and pay for their products or services.
Aghinita adds: “Consumers want a quick and frictionless payment process, and having to enter their card details every time they purchase something online, or the unavailability of their preferred method of payment, can be frustrating and lead to shopping cart abandonment. Retailers need to understand the benefits of these alternative payments and work closely with payment processors, in order to ensure customers are happy when it comes to parting with their money.”