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Online retail competition grows

Its great to see growth is coming back to the high street as small and medium sized e-retailers  (SME’s) expand into bricks and mortar. The latest annual tracker study by Royal Mail revealed that one in six UK SME e-retailers are planning to expand into physical stores during 2014 as online retail competition for sales grows.

In total, 40 per cent of the UK’s SME online retailers are planning to start trading from new channels in the coming 12 months to increase sales.

Royal Mail’s annual tracker study into the expectations and challenges facing UK SME online retailers revealed more than half (56 per cent) are confident sales will increase in 2014. However, with the number of new market entrants meaning online competition is increasing, this is down on the 64 per cent of UK SME online retailers who were confident of growing sales a year ago.

The study found 54 per cent of more than 400 UK SME online retailers surveyed believe competition for online shoppers is more intense than last year. Six in ten (59 per cent) said this was because there are more websites to compete with. 57 per cent said customer price sensitivity was a reason for increased competition.

In addition, the research found pricing more competitively has overtaken increasing the range of goods available as the top priority for increasing customer satisfaction.

The concept of online retailers expanding into bricks and mortar stores is not new, with the arrival of pop-up stores and a try before you buy approach to help brands distinguish themselves from the increase in competition online.

Nick Landon, managing director of Royal Mail Parcels, said: “Royal Mail’s annual tracker study of UK SME online retailers shows that while the majority expect to increase sales, competition is more intense than it was last year.

“UK SME online retailers are thinking carefully about how they can develop their businesses during 2014. They are concentrating on exploiting as many channels to market as possible, adding space in physical premises and online marketplace listings to complement their existing web channel.”

With shoppers becoming increasingly focused on value and more websites offering the same stuff, it’s important for retailers to look at ways to compete more effectively in their markets.

Our view on the growth of online retail competition

Expanding channels with physical stores seems a high risk and high cost strategy but we would recommend looking at expanding channels into online marketplaces such as Amazon, Play.com and eBay.

We’d also recommend that you invest in price management tools to give you access to up to date price information on your competitors and changes in market conditions to keep you informed and ready to make your next move!