UK

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Payments

Domestic and Preferred Card Schemes

In the United Kingdom (England, Wales, Scotland and Northern Ireland) credit cards are the most frequently used payment method for online purchases. About four in ten online transactions in the UK are paid by credit card. Debit cards also do well, as 35% of online transaction are paid this way. PayPal is the country’s third most used online payment method. These three represent 96% of the online payments, so you could say other payment methods don’t have a say. In Ireland debit and credit cards are very popular, with the Irish debit card Laser being the most popular. [1]

Payments in the UK are dominated by credit card and debit card payments. Debit cards (Maestro and V-PAY) and PayPal are relatively popular compared to other European countries. Online banking is virtually non-existent. The UK is the only European country where Address Verification Service (AVS) is supported by Visa and MasterCard issuers. There is also strong issuer support for 3D-Secure. For Maestro and V-PAY, 3D-Secure is compulsory. Over 90% of the population is a Visa or MasterCard cardholder (including Visa Debit cards).

Alternative Payment Methods

77% Visa/MasterCard 10% PayPal 8% Debit Cards 5% American Express [2]

40% Credit Cards, 35% Debit Cards, 21% PayPal [3]

Other Payment Methods

1. Currently the UK is the only European country with where AVS (Address Verification Service) is supported. 2. There is strong issuer support for 3D Secure (an extra security step in the payment process designed to stop fraudulent transactions), with the UK being one of the few countries where enabling 3D Secure actually improves overall conversion. [4]

Digital Invoicing

TBD

Customer Experience

TBD

Payments Regulation

TBD

Local entities

TBD

Mobile payments

TBD

Logistics

UK online consumers are arguably the most sophisticated in the world when it comes to delivery expectations. Almost 27 million households packed onto an island, where the maximum distance between major population centres is only 650 miles, means that a signi cant number of carriers and couriers can claim to offer national delivery services, creating a highly competitive environment where retailers and their customers have a wide choice of services. There is a concentration of online orders in London and the South East of England but in order to succeed in the UK a non-UK retailer will need to offer a fully national delivery solution.

UK consumers are also highly attractive to non-UK retailers with a high per capita online spend and a con dence in online retailing which means they are fully prepared to look outside of the UK to buy the products they want if the price, quality etc. are right. The latest IMRG Blackbay UK Consumer Home Delivery Survey confirms that almost 65% of respondents have shopped cross-border but that when making that decision it is still delivery and returns issues that create the biggest concerns.

So when dealing with UK online shoppers it is important to get the logistics offer right and just as important to communicate this offer clearly and frequently through the buying process - two-thirds of UK consumers feel that access to clear delivery and returns information, before they start to shop, is important in making their shopping experience more convenient.[5]

Infrastructure

A non-UK retailer wishing to deliver to UK consumers at home has a number of service providers to consider. The first of these is of course the UK postal service, Royal Mail which provides the ability to reach every home, every day with a number of service options. Royal Mail works alongside its sister company, Parcelforce to offer delivery services through most weight ranges and with its now commercial partner, the Post Office to provide collection and returns services available to non-UK retailers. The delivery lead time will of course depend on the destination and how long it takes to enter Royal Mail’s UK network. From arrival, the delivery levels are:

• 1-day delivery with signed and unsigned for options

• 2 to 3-day delivery with signed and unsigned for options

In addition to the postal options, retailers in most countries will have access to the major global carriers, namely:

UPS - Subject to the point of origin, UPS uses a suite of services - UPS Standard, UPS Express Saver, UPS Express and UPS Express Plus to offer a delivery range typically between 5 days and 1 day with pre 12:00 and 09:00 options.

FedEx - Dependent on the exact delivery location FedEx typically offers 1 to 3-day delivery options from the US using its ‘International First’ and ‘International Priority’ options. From other destinations, delivery times are typically 2 to 5 days (International Economy) or up to 7 days (International Ground).

DHL - DHL’s standard offer for deliveries into the UK is DHL Express Worldwide which offers ‘delivery by the next possible working day’ which is a little vague and each country will have its own lead times. From some markets it will offer pre 09:00, 10:30 and 12:00 options.

DPD - DPD offers cross-border delivery services to the UK from 35 countries, mostly within Europe. DPD Classic offers Europe to UK in 1 to 4 days. DPD Guarantee is available from 14 European countries providing a money back, specified day delivery option and DPD Express extends this to next day delivery with pre 08:30, 10:00 and 12:00 options.

Hermes Europe - Hermes-Europe offers cross-border delivery services to the UK from Germany, Austria, Italy (and France as part of the Mondial Relay network). Upon arrival in the UK Hermes Standard Service offers direct coverage to 99.5% of UK addresses with a 2-day delivery to most locations. Deliveries are made Monday to Saturday but a Sunday delivery option is also available. There is also a Next Day option to 98% of the UK for Tuesday to Saturday delivery again with the Sunday option available.

When sending goods from outside the UK, Royal Mail services are accessed through either the postal authority in the originating country or a commercial service partner. Most notable of these are the companies that are part of the GLS (General Logistics Systems) network, covering 37 countries across Europe. Transit times and service options to the UK will depend on the country of dispatch and the service range offered by the selected carrier. GLS estimates that for parcel shipments, deliveries to the UK will be made between 24 hours and 96 hours from dispatch dependent on where they are sent from.

The other carriers mentioned above will provide their own branded access options in each of the countries they serve which are fully integrated with their UK operations. Senders looking for a more managed carrier solution can look to integration specialists who will provide the interface with a range of carriers and services. This will generally include the production of the right labels (and where necessary, customs documentation) for each carrier and service the sender wishes to use and data exchange including any pre-advice and tracking information.

Providing carrier integration within the UK market are companies like Electio, GFS and MetaPack. MetaPack in particular provides carrier management and integration across 200 countries including into the UK where it can access all of the postal and global carrier solutions already mentioned plus the wider range of UK domestic carriers including Yodel, DX, TNT and UK Mail.[6]

Customer Experience

Price, demand and a lack of availability with UK retailers are cited as the key drivers behind shoppers venturing to international retailers with many being unconcerned about where a retailer is based, as long as they’re selling the right product at the right price. A significant number of cross-border purchases are made via marketplace sites such as eBay and Amazon suggesting consumers mainly head to international retailers when the product they’re after is niche. However, price and choice aside, delivery and returns are very important to UK consumers and has now become an important factor, differentiating retailers they will and will not shop with. In order to win customers non-UK retailers should appreciate that 70% of UK consumers positively con rm that a good delivery experience will encourage them to return and shop again with the retailer providing it.

When it comes to delivery location UK consumers still overwhelmingly want delivery to home with in excess of 80% consistently giving this as their top preference. However, home delivery needs to work efficiently. This has become possible in the UK due to the growing popularity and use of:

• Pre-delivery alert - Increasingly UK retailers are able to advise shoppers the day, and often the time their order is likely to arrive and if this is not convenient, offer options:

– Deferment to a later day

– Delivery to a neighbour

– Delivery to a nominated safe-place – Delivery to a nominated parcel-shop

Between two thirds and three quarters of UK consumers rank this speci c option as important in making their delivery experience more convenient

• Safe-place delivery – Providing the customer the option to give safe-place delivery instructions can avoid a missed delivery and the need for a repeated delivery.

• Neighbour delivery - Providing the customer the option to select a neighbour to accept goods on their behalf can avoid a missed delivery and the need for a repeated delivery. This option has increased in use especially since Royal Mail has been given the regulatory freedom to offer to delivery to a speci ed neighbour.

Despite the preference for home delivery, over the past five years click & collect has been gaining in popularity. This is where the customer can choose to collect their online order from the retailer’s own store, a parcel-shop or a locker bank at a time and place to suit them. Awareness of this option is now very high with 98% of UK consumers and with three quarters having used it or intending to use it in the future. Non-UK retailers should actively look at their ability to access local parcel-shop or locker networks because up to 35% of UK shoppers have used this option which is also popular for returning unwanted orders. This also provides an element of brand association. If the shopper knows and trusts the click & collect provider, that trust extends to an overseas retailer.[7]

Returns

A very important element for any retailer’s offer to UK consumers must be the ability to accept returns and make the returns and refund / replacement process convenient. When surveyed, 60% of UK consumers stated that the ability to return unwanted orders and get a credit was a concern and potential barrier for them shopping with a non-UK retailer. For non-UK retailers unable to offer their own stores for the customer to return to, the most used option is Post Offices, using Royal Mail or Parcelforce to provide the logistics link to the local postal administration. Royal Mail is a leading participant in the recently developed IPC (International Post Corporation) Common Return Platform which allows the seller to provide the consumer with an internationally accepted, pre-paid label. With the UK and Royal Mail as one of the original participating countries, the service is now available from nine other markets.

In addition to Post Offices for accepting returns, non-UK retailers may also have access to the click & collect networks and collection from home services offered by global carriers, which then integrate with their corresponding returns distribution services. As with deliveries there is also the option to use a managed solution through a ‘returns portal’. This is a website (which may have the option to be integrated into the retailer’s website) which the consumer is asked to visit when making a return. This can identify the product, the reason for the return etc. and give the consumer returns options best suited to that situation. Labels and instructions are then provided and once again some click& collect networks may be available. Providers of such returns portals, serving the UK market include RoyalMail, MetaPack, wnDirect and ReBound. When sufficient volumes of orders (and returns) are being generated, another option for dealing with returns is to arrange for them to be consolidated and managed ‘in country’. When selecting the delivery solution, a non-UK retailer should consider in parallel the returns solution.[8]

Taxes

For companies engaged in e-commerce in the UK, taxes divide into three parts:

• Corporation Tax, which is a direct tax levied on UK companies’ profits. This is paid to the UK tax authorities, HMRC, via an annual tax return.

• Value Added Tax (VAT), which is an indirect sales tax, levied on sales of goods or services by companies to UK consumers. This is paid to HMRC through a quarterly VAT return.

• Customs duties, which are excise charges charged when businesses import goods into the UK. These are paid to HMRC at the time of the import. Note – there are generally no customs duties to be paid on goods imported from other EU member states.

There is only one major tax on a company’s pro ts, which is currently levied at a maximum rate of 20% (from 1 April 2016). Rules are fixed in advance and announced in the Budget each year. Within three months of commencing trade or becoming active, a UK company or establishment is required to notify HMRC that it falls within the charge to UK corporation tax. Failure to notify can result in a penalty. A company (including the subsidiary of an overseas company) that is resident in the UK for tax purposes is liable to pay corporation tax on its UK pro ts and chargeable gains. Those foreign companies with UK establishments will be liable to this tax on chargeable gains arising on the disposal of any assets that are situated in the UK and used for the purposes of the UK establishment or its trade. Particular rules and exemptions apply to this, and professional advice should be sought.

A company will be considered ‘resident’ if the organisation’s central management and control takes place within UK borders. UK permanent establishments of non-UK resident companies are liable to UK corporation tax generally on:

• trading income arising directly or indirectly through the UK establishment

• income from property or rights used by or held by or for the UK establishment

• chargeable gains accruing on the disposal of assets situated in the UK and used for the purposes of the establishment

Corporation tax is assessed on total taxable profits (after certain statutory tax adjustments) and chargeable gains in respect of each accounting period. The rate of corporation tax is set for the financial year ending on 31 March. If the rate is changed, the profits of an accounting period that straddles the date of change are apportioned and charged at the appropriate rates.

Trading losses may be utilised in four principal ways by UK resident companies:

• against other income or chargeable gains arising in the same accounting period

• against profits of any description in the previous accounting period

• against trading income from the same trade arising in subsequent accounting periods, or

• as group relief in the same accounting period to qualifying companies

Taxation of foreign branches Broadly, UK companies are subject to UK corporation tax on the profits of their foreign branches (with credit for overseas tax paid). A UK company may elect for exemption from UK tax on the results of overseas branches. The exemption will apply from the first accounting period starting after the election is made. The election cannot be revoked once that rst accounting period has commenced.

Corporation tax administration Companies have to `self-assess’ their tax position in a similar way to individuals. The times at which corporation tax is payable depend on the size of the company or group paying the tax. Companies should inform HMRC of their annual Corporate Tax liability and pay it nine months after the financial year end.[9]

Import Duties

If goods are imported into the UK from outside the EU, various import duties may become due based on factors such as the tariff classification, customs value and the origin of the goods. VAT will become due upon importation from non-EU countries and certain EU ‘special territories’ when these goods are to be declared for use within the UK. As a general rule, the UK follows EU customs procedures. The UK Customs/VAT Warehousing Procedure allows the storage of goods without such goods being subject to import duties – in such cases, neither VAT nor customs duties are due.

The UK VAT regime is based on the EU VAT Directive, which the UK is required to adopt as a member of the European Union. Like all EU countries, the UK is broadly free to set its own VAT rates within certain criteria. The UK has three VAT rates: 20% standard rate levied on most goods and services; 5% due on limited number of goods; and 0% due on books, foodstuffs and other essentials. Some services are exempt from UK VAT, including financial services. There remain, however, some signi cant and confusing differences of detail between different member states of the EU.

VAT is essentially a tax on consumer expenditure that must be charged by a taxable entity in the course of furtherance of a business. This tax is levied on most goods and services provided by registered businesses in the UK, and most goods imported into the UK from outside the EU. A UK taxable entity is anyone registered or liable to be registered for UK VAT. All VAT registered businesses are obliged to charge VAT on the full sale price of the goods or services that they provide, unless exempt or otherwise deemed outside the scope of VAT. In theory, the final burden of the tax should not fall on business activity. This objective is achieved by an arrangement known as the input/output system. When a business buys goods or services, it pays VAT to the supplier (input tax).

When the business sells goods or services, whether to another business or to a final consumer, it is required to charge VAT (output tax) unless the supplies are specifically relieved from the VAT charge. If the business makes only taxable supplies, it must total the input tax it incurs and deduct this from the output tax charged, reporting and paying the balance to HMRC on a calendar quarterly basis. The result of this is that the final consumers bear the cost of VAT on the final price of the goods or services they purchase.

If you are a UK resident business that supplies taxable goods and services in the UK and your annual taxable turnover exceeds the stated threshold - £83,000 from 1 April 2016 – you must register for VAT. This fairly high VAT turnover registration limit means that a large number of small turnover businesses are not within the VAT system, though smaller businesses can also voluntarily register for the tax. A taxable person is liable to register for VAT if the combined value of their taxable supplies in the UK exceeded the registration limit in the preceding 12 months, or there are reasonable grounds for believing that the value of taxable supplies to be made in the next 30 days alone will exceed the registration limit.

A business may also de-register if the anticipated value of the taxable supplies in the next 12 months is less than the de-registration limit (currently £82,000). Taxable persons from other EU countries selling goods via e-commerce face different rules. If they hold the stocks in the UK, at a rented warehouse space, then they must register their foreign company for UK VAT immediately. They will have to do this to report the movement of the goods from their home state into the UK. If EU foreign companies are holding the stocks in their home state prior to receiving a UK order, then they are not immediately required to UK VAT register. Instead, they are allowed to charge the VAT rate of their home country. However, once they exceed the UK’s threshold for e-commerce sales, known as the distance selling threshold, of GBP 70,000 per annum, they will have to UK VAT register. They then charge UK VAT on their sales to UK consumers and le quarterly UK returns.

It is highly likely that a company seeking to set up in the UK will wish to register for VAT or be required to do so. The registration process requires the non-resident company to complete a registration form verifying the basis under which it will become a taxable person, provide statistical information, etc. The registration should be processed in three weeks. However, during busy periods HMRC can take up to 12 weeks. There are other returns that will need to be rendered if a UK based business trades with customers / suppliers located outside the UK.[10]

Marketing

In the UK in 2015, e-retail revenue was largely derived from natural, paid and direct marketing, which together accounted for 75% of this revenue. Interestingly, though, this figure has decreased in recent years to make way for other methods growing in popularity. Email marketing continues to grow in popularity, with almost 50% growth in penetration between 2010 and 2013. The development of mobile commerce has been identified as one of the key drivers of this growth. Natural search provides by far the biggest share of revenue, at 33%, for an e-retail website according to IMRG’s Quarterly Benchmark. Interestingly, this also remains true irrespective of device; desktop (37%), tablet (34.8%) or smartphone (33.7%). Direct traf c, at 22% is the next biggest source of revenue and obviously the most cost effective. Revenue from paid-for traffic accounts for 19.4% of the total and whilst having a direct cost, still provides a strong Return on Investment (ROI). For example, for every £1 spent on Pay-Per-Click (PPC), the average ROI is £5.51.[11]

Shoppers

TBD

Email Marketing

Email marketing is renowned as one of the most effective and developed methods for driving sales in the UK. From IMRG / Capgemini data, one clear emerging trend is that email marketing continues to grow in popularity and become a more important tool for the online community. The development of mobile commerce has been identified as one of the key drivers of this growth and a strong correlation has been identified between the growth in mobile commerce over recent years and the increase in visits and revenue generated from email marketing. IMRG / Capgemini data indicates that during 2010, revenue generated from email marketing accounted for 7.7% of UK e-retail sales, and by 2015 this had reached 12.0%, representing almost 50% growth in terms of penetration in just four years. Visits to e-retail websites through email marketing have decreased, from 14.5% in 2014 to 14.4% in 2015.[12]

Direct Mail

Although online retail is very much a digital activity, given the influence of all channels mail still has a place in winning and keeping online shoppers. In fact, as a means of bringing customers to web sites and to cross sell after an initial purchase, it still proves to be an ideal partner with digital, making it a medium that is enjoying a renaissance. Mail remains central to UK consumer’s lives, homes and behaviour. 83% of consumers open all or most of their mail. And it has staying power - 80% of adults have kept some mail that companies sent them in the last four weeks.

Specifically, mail can be used in the following ways in the UK e-retail market;

• Direct mail communications and catalogues add another dimension to online shopping, allowing more relaxing browsing time.

• Consumers still like receiving mail from retailers. It reminds them about brands, brings them new information.

Importantly, there is ample evidence that mail drives e-retail sales in the UK market and that customers shop more and spend more when they receive mail from a retailer.

• Mailed catalogues are opened and read; 71% of consumers open a catalogue from a company they have ordered from before and over half, 54%, say they will open one from a company they don’t know.

• Catalogues drive consumers to buy more and more often. 40% of consumers report that they buy more than they originally intended to when shopping from a catalogue and 50% say they buy more frequently if they regularly receive a catalogue.

• 74% of consumers who received a catalogue bought from the retailer within 6 months and 81% said their purchase was influenced by the catalogue.[13]

TV & Radio

On average, 90% of the UK population tuned into the radio each week in the 12 months prior to March 2012, and radio marketing revenue grew 7.2% to £575m in 2014. Interestingly, in the OFCOM Communications Market Report of August 2015, it was reported Radio’s share of overall ad-spend is up marginally at 3.2% in 2015. National ad revenue for commercial radio stations has also increased, up by 17.3%, to £243m. This spend is by brands with a national footprint. Ad-spend by local brands is down 6.6%, a reflection on the growing importance and cost effectiveness of targeted, localised, internet advertising. Data from OFCOM has shown that one recent development in radio listening has been substantial growth in listening via a mobile device as a proportion of total listening - an increase from 13% to 20% over the last year.

GroupM, part of WPP, was reported as forecasting TV advertising spend to increase by 9% in 2015, to £4.2bn; Overall ad-spend is also expected to increase by 6% to £15.9bn.(www.ft.com). The same report also talks about the overall fall in TV audiences, down 5% in 2014 on the previous year. However, the availability of Video-on-Demand and ‘catch-up-TV’ is replacing much of this as viewers now consume programming at a time to suit them, rather than by schedules set by broadcasters. Rather than being a challenge for advertisers, many of whom were worried about audiences skipping past the adverts, GroupM estimates that brands will spend about £300m this year advertising on these channels.[14]

Affiliate Marketing

Affiliate marketing is also becoming an increasingly developed method of marketing within the UK. Affiliate marketing and lead generation channels generated an estimated £16.5bn worth of sales in 2014 according to IAB UK. On an ROI basis, performance varied depending on digital channel used. For example, on the desktop / laptop, an ROI of circa £19.96 was achieved whilst on smartphone this was higher at £20.94, as reported by IMRG. In total, UK businesses spent £1.1bn on af liate marketing in the UK in 2014 according to IAB UKVia mobile channels, affiliates still provide valuable traffic, averaging a 7% contribution to total revenue contribution. Affiliates are particularly strong in the fashion vertical, with nearly 12% of revenue coming from this marketing channel; pointing to the strong role that these sites have in building range awareness and facilitating transactions.[15]

Social Media

Revenues derived from social marketing are negligible, accounting for just 0.2% of total e-retail revenue in 2014. In comparison, revenue derived from social marketing in the UK is currently limited, accounting for just 0.3% of total e-retail revenue in 2015, down from 0.8% in 2010. Social media marketing has had a mixed effect for many brands. Data from the IMRG Capgemini Quarterly Benchmark in 2015 reported that it was only responsible for driving 0.2% of total e-retail revenue. The challenge for this measure however is that it averages out over different verticals and business sizes. Perhaps the best measure for social is actually around brand awareness, customer interaction and as a promotional tool. There is evidence where businesses have driven commercially successful promotions through social media and as a tool for having conversations with your customers, it is unparalleled. Whilst it is currently hard for many brands to see social media’s direct effect on sales in the UK, it is still considered to be a valuable marketing and brand-education tool.

As with other territories, it is important to understand the demographics of the users of each of the social media platforms. Facebook is by-far the most popular social media platform in the UK but is it more widely used by older generations. Part of the challenge is that youth audiences don’t want to be on the same platform as their parents. The younger audience’s demands from these platforms are also different, with messaging being a key component, along with immediacy.[16]

Major shopping categories

Clothing and fashion is recorded as the top-selling retail category in the UK, followed by electrical goods. IMRG recorded 114.5% growth for the clothing and fashion sector between January 2009 and January 2014.[17]

Major retail holidays

Black Friday – the fourth Friday in November; a commercial import from the US where ‘Black Friday’ is the day after Thanksgiving. Black Friday now accounts for more sales than Cyber Monday and pulls forward ‘peak’ into November. Online, Black Friday week is worth £4.3bn. ‘Cyber Monday’ - the rst Monday in December and the two weeks starting on Black Friday and moving into December now constitute online peak sales period.[18]

Legal / Regulatory

England and Wales, Scotland and Northern Ireland are largely separate jurisdictions for a number of legal purposes. Scotland has a mixed common law and civil law system whereas England and Wales and Northern Ireland have a common law system.

Data Protection Act 1998 (DPA) (passed to implement the European Data Protection Directive 95/46/EC) - Data protection in the United Kingdom is regulated and enforced by the Information Commissioners Of ce (ICO), which also produces guidance and best practice guidelines for compliance with the legislation. To regulate the processing of personal data by businesses and other organizations.

Privacy and Electronic Communications (EC Directive) Regulations 2003 (the PECR) (passed to implement Directive 2002/58/EC) - To regulate, amongst other things, unsolicited electronic direct marketing to individuals. The PECR also regulate the use of cookies (and similar technologies) by websites.

European General Data Protection Regulation - The European Data Protection Directive (Directive 95/46/EC) (which is implemented in the UK by the Data Protection Act 1998) will be superseded by the pan-General Data Protection Regulation (GDPR) and represents the single largest change to data protection legislation for over twenty years. The text of the GDPR is expected to be finalised by mid-2016 and apply directly across all 28 EU Member States from 2018.

Consumer Rights Act 2015 (CRA) - The CRA reforms and consolidates pre-existing consumer laws in relation to:

• Rights and remedies in respect of goods, services and digital content.

• Unfair terms in consumer contracts.

• Enhanced consumer remedies which can be imposed by public enforcement bodies.

• Consolidation of existing legislation concerning enforcement powers for public bodies (currently over 60 instruments in place).

• Consumer collective re-dress in relation to anti-competitive behaviour.

Consumer Protection from Unfair Trading Regulations 2008 (CPRs) – as amended by the Consumer Protection (Amendment) Regulations 2014 - The CPRs are in place to protect consumers from misleading commercial practices committed by traders.

Consumer Contract (Information, cancellation and additional charges) Regulations 2013 – known as the Consumer Contract Regulations 2013 (in force from 13 June 2014) - The regulations apply only to contracts between traders and consumers and implement the provisions of the EU Consumer Rights Directive into UK law. The Regulations do not cover certain types of contract, including: gambling, financial services, rental accommodation, construction, package travel or timeshare contracts.

Consumer Rights (Payment Surcharges) Regulations 2012 – in force since April 2013 - The regulations introduced a ban on charging consumers excessive surcharges relating to certain payment methods. The Regulations do not cover certain types of contract, including: gambling, financial services, rental accommodation, construction or timeshare contracts.

Electronic Commerce (EC Directive) Regulations 2002 - Regulations which detail certain requirements imposed on online traders.[19]

FX Policies

TBD

Technology

While almost half of online shoppers in the UK own a smartphone (48%) and 13% own a tablet device - some of the highest penetration amongst European consumers - purchasing on these platforms remains broadly in line with the global average. Only 14% of UK consumers currently buy using their smartphone, 6% their tablet. Around 29% say that they are likely to use those devices to purchase online in the next 12 months. [20]

There is an increasing use of apps in the UK, with 48% of smartphone users downloading in 2014, versus 37% in 2012. Of these users, the average number present on the smartphone is 23 whilst only 10 are regularly used (OFCOM 2014). The usage case for apps is centred on gaming, streaming music and video. Consumers of news output also preferred apps (50%) to browsers (36%) on their smartphone. 50% of app users also preferred to use browsers for online shopping. The balance is made up of app usage and using other devices for their shopping experience, including using tablets. Anecdotal evidence from UK retailers suggests that consumption of information, store finders and in-store product comparison are the main reasons for app usage. The key is to ensure relevance and engagement with the app in order to achieve value from it.[21]

Security

Internet shopping has been made considerably safer through the introduction of 3D secure - the online equivalent of the chip and PIN system. The UK has recently seen the introduction of online fraud prevention initiatives like American Express SafeKey, MasterCard SecureCode and Verified by Visa, which require cardholders to register their cards and create passwords for provision when shopping online with participating retailers, adding an extra layer of protection through two-factor identification. Recent years have also seen the introduction of the automated address verification service (AVS) and the card security code (CSC).

These checking systems provide extra protection against fraud by endowing participating businesses with additional information to help identify fraud risks. Respectively, these initiatives allow retailers to verify the billing addresses of cardholders and cross-check the security code that is contained on the signature strip at the back of a payment card. Banks and card companies are also implementing increasingly sophisticated fraud detection systems, for example using consumer pro ling to identify unusual spending patterns or atypical behaviour in a consumer, helping to identify potentially fraudulent transactions.

The card company will contact the cardholder to enquire about the transaction in question, and can instate an immediate card block if necessary. Adding to the above, there are a variety of additional initiatives in place to reduce fraud both in the CNP and wider payment industry context, including ID verification techniques, more advanced fraud screening tools, free security software for consumers and partnerships between banks, interested companies and governmental bodies which aim to monitor, advise on and implement new fraud-fighting strategies.[22]

Mobile appetite

Mobile commerce (which includes both sales via tablets and smartphones) accounted for 45% of the UK e-retail market in 2015, up from less than 1% in 2010. Four out of ve of the devices making up this gure in 2015 were tablets and the remainder smartphones. 63% of retail website visits are now coming via mobile, according to the IMRG Capgemini Quarterly Benchmarking Report. The latest data from eDigitalResearch indicates that 44% of UK consumers have used their smartphones to shop online for products, while 54% have purchased goods via a tablet device.[23]

References

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  2. Expert Market "Online Payment Methods Around the World."
  3. ECommerce News. "UK."
  4. Adyen. Global E-Commerce Payments Guide. 2015.
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  20. Worldpay. "Global Shopper."
  21. eCommerce Worldwide. United Kingdom Country Guide. "eCommerce in the United Kingdom"
  22. eCommerce Worldwide. United Kingdom Country Guide. "eCommerce in the United Kingdom"
  23. eCommerce Worldwide. United Kingdom Country Guide. "eCommerce in the United Kingdom"