Resident business law firm, DWF, advises on innovating in digital age

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Watkins: digital opportunities and challenges

Watkins: digital opportunities and challenges

According to recent research, the digital economy has grown at a faster rate in the UK than any other G20 nation in recent years, fundamentally changing the way Britons shop and do business. With the consumer shift towards e-commerce showing no sign of slowing down, many high street retailers have reacted by integrating their online and in-store service offerings to create a more unified and immersive shopping experience for customers. Dominic Watkins, senior associate in the regulatory team at business law firm, DWF, provides an overview of the new opportunities and challenges created by the growth of the digital economy

A brave new world of shopping

The growth of e-commerce in the UK over the last few years has been little short of astonishing, increasing at a rate of around 11% a year. With 13.5% cent of the population buying goods online in 2011, the value of internet retailing has been estimated at £77bn in the UK. 

Over the last couple of years, the spread of internet-enabled smart phones has allowed an increasing number of individuals to shop online more efficiently and while on the move. Consumers have been quick to take advantage of these new possibilities, with research indicating that 50% of smart phone owners in the UK have used their device to purchase a product online. 

This has led to the growth in multi-channel commerce – the merging of in-store and online retailing platforms into one integrated shopping experience. With easy internet access at all points of the day, consumers are increasingly weaving between physical and online sources when researching and purchasing goods and products. As a result, an entirely new segment of the retail market is evolving and businesses are coming under new pressure to keep up with the pace of evermore savvy cross-channel shoppers.

Keeping up appearances

Many high street retailers are striving to meet these evolving expectations by developing new ways to converge the online and offline services they provide to consumers. An example of this is the increasingly popular use of in-store QR codes that link through to relevant online content for products or services. It’s also now common to see click and collect mechanics on retailers’ websites, meaning consumers can buy something online and collect it in-store.

However, while many retailers are successfully embracing new synergies between platforms to deliver enriched customer experiences, this convergence of activity has created some new practical and legal challenges. 

New data challenges

One of the more obvious challenges retailers face is the need to ensure multi-channel IT systems can process and integrate vast amounts of data. If a retailer’s consumer facing website does not effectively communicate with the systems that deal with the stock management of its physical stores, for example, the entire operation could suddenly grind to a halt. Of course, all retailers will want to avoid any issues with their stock management systems, as a company that develops a reputation for unreliability will quickly lose custom.  

More fundamentally, the management of the real time data now on offer to consumers – such as prices and promotional materials – can also present a significant challenge. There have been various high-profile examples of the decimal point in a price appearing in the wrong place on a retailer’s website, for example, leading to consumers rushing to take advantage of TVs or other big ticket items on offer at a fraction of their actual price. When errors such as this occur, retailers tend to find themselves in a lose-lose scenario – either having to honour the incorrect price and lose money, or risk damaging their brand reputation by refusing to stand by it. This type of mistake is not limited to price, of course, and care must be taken with data handling at all times. 

Going global

The growth of the digital economy has also provided new ways for retailers to move into foreign markets more easily and with considerable less initial investment. This is a huge opportunity, especially for the relatively mature online retail sector that exists in the UK. Ambitious businesses can theoretically develop a presence in another country with a few simple adjustments to their website and the arrangement of some basic foreign exchange facilities.

However, one of the biggest barriers that retailers moving into new markets are likely to face is consumer aversion to shopping on overseas-based websites. EU statistics show that while 53% of the UK population feel comfortable purchasing online from domestic businesses, only 9% are happy to deal with businesses based outside of the EU – even if they’re cheaper. 

Of course, another difficulty with moving into new markets is the challenge of getting to grips with a whole new set of unfamiliar rules and regulations. Even within the EU, for example, there are a wide range of different contractual laws across member states and significant variance in levels of consumer rights and protections. 

To try to encourage cross-border trade, the European Commission has recently proposed a Common EU Sales Law, which would operate as an optional second legal national framework and set common standards for consumer rights across the entire EU. However, other than potentially attracting a limited number of new customers who understand the benefits of the framework, it’s hard to see how the proposals would make a real difference to businesses moving into new markets in practice. 

Therefore, any retailer considering cross-border trade for the first time should ensure they take sufficient time to thoroughly understand the marketplace they are moving into. It is invaluable for businesses to be fully aware of all the relevant regulations they will have to adhere to and the official institutions they will have to register and liaise with. 

Moving forward in a digital age

Overall, the growth of e-commerce has created exciting new possibilities for consumers and retailers alike and many businesses within the sector are developing innovative ways to make the shopping experience more engaging and exciting for consumers.

However, the rise of the digital economy has also introduced a range of new challenges. Therefore, it is crucial retailers put in place policies to deal quickly and effectively with any potential failures in communication between channels and are aware of all extra regulations they will need to adhere to as and when they open up to new markets.