UK e-commerce companies increase business investment despite economy - Business Leader News

UK e-commerce companies increase business investment despite economy

Despite high inflation and macroeconomic uncertainty, UK e-commerce companies significantly increased investment in their businesses during Q1 2023, compared to Q4 2022.

According to data released by Juni, the financial platform built for e-commerce, British online retailers have increased spending by 43%, with advertising accounting for 45% of total spending, inventory 19% and tax 9.12%. The data suggests that underlying business confidence is growing amongst UK online retailers.

Google made up ground on Facebook as platforms compete for UK e-commerce ad investment

Advertising spending amongst online retailers typically falls in Q1 compared to Q4, which is traditionally the peak investment period due to Black Friday and Christmas. However, ad spend saw modest gains this year (6.9%), with spend per platform evolving. In Q1 2023, UK companies placed 53% of their ad spend with Facebook, down from 59% in Q4 2022.

The second most popular platform was Google (32%), an increase from 25% in the last quarter. TikTok came in third with 3.7% of UK e-commerce ad spend, up from 2.7%. Microsoft was a surprise entry to the top five, securing 2.2% of investment – increasing from 0.45%. While Snapchat claimed 0.7%, a 300% increase from the last quarter.

This is a very different picture from Europe, where overall ad spend increased by 20%. Across the EU, Google took 60% of e-commerce ad spend in Q1 2023 (even more pronounced in Sweden at 66.15%), Facebook claimed 31%, Microsoft 2.6%, Taboola 2.1% and Amazon 1%.

    Samir El-Sabini, Co-founder and CEO at Juni, commented: “While an 6.9% increase in ad spend may not seem significant, UK retailers would typically spend substantially less in Q1 than in Q4. This suggests a high level of confidence amongst British companies – especially online retailers and fashion stores – that they can weather the macroeconomic challenges and continue to grow their businesses.”

    Inventory booms, software softens

    For Q1 investment in inventory grew significantly vs. Q4 2022 – some 197% – now accounting for 19% of overall spending for UK online retailers. This is not just significant in itself, but also in comparison to retailers across the rest of Europe, where inventory spending decreased by 2.9%. and where inventory claims just four percent of their spending.

    Investment in software reduced by 11% amongst UK online retailers in Q1 compared to Q4, whereas European companies were more stringent, cutting back 58% of their spending. Major areas of investment are sales support platforms, such as Zendesk and LinkedIn, and cloud, AWS, Google Cloud and Microsoft Azure, representing 17% and 8.7% of software spending across the entire cohort respectively.

    El-Sabini added: “Whether it’s UK retailers taking advantage of bulk pricing or planning for a significant increase in sales, it’s encouraging to see the sector backing itself with increasing inventory spend.

    “The reduction in software spend is mildly concerning. E-commerce companies should be continually investing in new, software-enabled capabilities to better support their customers and their businesses. Overall, the UK e-commerce sector seems optimistic about the future and is actively investing in its growth.”