The hidden goldmine of the UK ecommerce market – do high return rates dampen this?
- TBA
- Dec 11, 2024
- 4 min read
Updated: Feb 25
With the fast-paced lifestyle of modern society, convenient online shopping has become essential for most people. However, a recent UK report found that the total annual value of online shopping returns by British consumers has reached a staggering £6.6 billion!
On average, each person returns around £1,400 worth of products—a figure that some may not even spend in a year on online shopping.
Let’s take a look in a bit more detail.
Returns in 2024 set to reach £27 billion?
According to a report by return logistics company ZigZag and research firm Retail Economics, UK returns are expected to reach £27 billion by the end of this year.
The amount returned by frequent returners alone accounts for £6.6 billion, or about a quarter of all returns, with this group making up around 11% of all consumers.
Why are online returns so high in the UK?
The report suggests that serial returners and slow returners tend to be more impulsive shoppers, often returning items due to buyer’s remorse, making up nearly half of all returns.
In the UK, over one-fifth of non-food online purchases are returned.
More than two-thirds (69%) of Gen Z consumers tend to shop excessively, such as buying multiple similar items only to realize they don’t need them, or impulsively buying items they later decide against.
Similarly, over two-fifths (42%) of shoppers admit to purchasing the same item in different sizes or colours to try on at home, then returning the ones they don’t want.
‘Wardrobing’ and ‘staging’ in online shopping
About one in six shoppers (16%) admit to purchasing clothes or shoes online with the intent of using them temporarily, such as for a social event. Some shoppers even buy clothes just to show them off on social media, a trend called ‘staging’. Since products can be returned as long as they are undamaged and retain their tags, many consumers take advantage of this, maximising product use at no extra cost.
Frequent returns increase pressures on sellers to manage inventory and drive sales growth. To combat rising costs and return fraud, sellers are expected to continue introducing paid return policies and measures against return abuse.
Why invest in e-commerce despite high return rates?
Despite the high rate of returns, which costs sellers considerable time, effort, and money, many still choose e-commerce—especially in recent years as cross-border trade has surged.
It’s common to see news headlines about sellers earning thousands monthly or having products sell out instantly through cross-border e-commerce in the UK.
The money-making strategy you don’t know about?
Even with return rates hitting £27 billion, UK-based e-commerce still attracts many sellers due to the advantages of operating from the UK, particularly for cross-border e-commerce.
Here are some benefits of registering a UK company for cross-border e-commerce:
Strategic Location: The UK is geographically well-positioned between Europe and North America, serving as a hub for both markets and offering a wide reach and efficient logistics.
Digitalized Consumer Base: British consumers’ digital lifestyle habits provide vast potential for cross-border e-commerce. (The £27 billion return rate also reflects the preference for online shopping.)
Strong Online Retail Market: The UK is home to well-established online retailers like Amazon, eBay, and Walmart, providing robust sales channels for cross-border sellers.
Advanced Logistics Infrastructure: The UK’s comprehensive logistics system, covering delivery, warehousing, and distribution, enables sellers to choose their logistics solutions or use platform-provided services.
Tax Benefits: Companies with a turnover under £90,000 are exempt from VAT. Above that threshold, sellers manage their VAT filings independently and can benefit from a lower tax rate.
Flexible Account Management: With no foreign exchange controls, funds can be freely transferred, making it easier to manage cross-border settlements and finances.
Simple Registration Process: Only one shareholder is required to register a UK company, with no nationality restrictions. The minimum capital is £1, with no need for capital deposits, and the process is straightforward and quick.
Brand Building: A UK-registered company helps enhance brand credibility and global visibility, strengthening competitive advantage.
Ease of Listing: The UK’s mature economy and transparent listing system make it easier for companies to go public.
These advantages make UK registration an ideal pathway for cross-border e-commerce, particularly for companies aiming to enter the international market.
What are the requirements for registering a UK company?
Company Name: The name must end with “Limited,” “Ltd.,” “LLC,” or similar, indicating limited liability. It cannot duplicate existing company names or include sensitive or misleading terms. A name check is required to ensure it is unique and compliant.
Registered Address: The company needs a UK address, which can be an actual office or a virtual address.
Director(s): At least one director aged 16 or older is required, with no nationality restrictions.
Shareholder(s): At least one shareholder, either an individual or a company, with no nationality restrictions.
Company Secretary: A company secretary is optional.
Registered Capital: Minimum capital of £1, with an upper limit of £1 million, to be specified in the articles of incorporation.
Some advice from TB Accountants
If you’re considering registering a UK company, additional requirements may apply. For example, hiring UK employees requires compliance with labour laws; specific business activities might need licenses or certifications. Tax filings and annual audits are also essential for compliance.
When preparing registration materials, ensure all information is accurate and complete.
Consulting a professional registration advisor or attorney can help ensure a smooth and compliant registration process. Reach out to TB Accountants if you have any questions.
