Scottish e-Commerce Study
Final Report to Scottish Enterprise
May 2012
Scottish e-Commerce Study
Final Report to Scottish Enterprise
Contents
1: Introduction .......................................................................................................................... 1
2: E-commerce in the UK......................................................................................................... 3
3: Scotland’s relative position in e-commerce ..................................................................... 9
4: Enablers and barriers in Scotland ................................................................................... 29
5: Quantifying e-commerce in Scotland .............................................................................. 33
6: Options for enhanced public sector support .................................................................. 40
7: Conclusions and recommendations ................................................................................ 44
Annex A: Consultees ........................................................................................................... A-1
Annex B: Data sources explored ........................................................................................ B-1
Annex C: Research documents .......................................................................................... C-1
Annex D: Sector definitions ................................................................................................ D-1
Annex E: Examples of online retail awards....................................................................... E-1
Contact:
John Nolan
Tel:
Approved by:
David Mack-Smith
Date:
0131 225 4007
email:
[email protected]
31/05/12
Director
www.sqw.co.uk
Scottish e-Commerce Study
Final Report to Scottish Enterprise
1: Introduction
1.1
In February 2012, SQW was commissioned by Scottish Enterprise (SE) to undertake a study
into Scotland’s competitive position in relation to the adoption of e-commerce by Scottish
based businesses. The aim of the research was to identify the value and potential impact on
the Scottish economy of current activity, to consider if businesses are using e-commerce to
maximise their efficiency and performance, and to consider ways in which public sector
support for e-commerce could be improved.
Definition
1.2
Defining the term ‘e-commerce’ is challenging, making benchmarking of performance
difficult. The OECD (2009) uses the following definition:
An e-commerce transaction is the sale or purchase of goods or services,
conducted over computer networks by methods specifically designed for
the purpose of receiving or placing of orders. The goods or services are
ordered by those methods, but the payment and the ultimate delivery of the
goods or services do not have to be conducted online. An e-commerce
transaction can be between enterprises, households, individuals,
governments, and other public or private organisations1.
1.3
According to this definition, e-commerce includes orders made though websites, extranets or
EDI (Electronic Data Exchange). It excludes orders made by telephone calls, facsimile, or
manually typed e-mail. On the basis of this widely accepted definition, e-commerce therefore
relates to all sectors, not solely online retail which is the most recognisable type of ecommerce.
1.4
The brief for this commission defined e-commerce as follows:
E-commerce refers to the selling or trading of goods and services online
(through web or other ‘digital’ channels e.g. mobile apps) and related
digital marketing activities to drive traffic to the online presence e.g.
Search Engine Optimisation, web advertising etc. The focus should be on
businesses transacting B2B or B2C.
1.5
This latter definition was used during our consultations. However, when assessing statistics
on Scotland’s relative position, we have allowed flexibility in the definition to ensure that our
statistical analysis draws on a range of sources to inform the study.
Methodology
1.6
This research study has involved the following main tasks:

1
A review of available research on e-commerce – including publications by the Office
for National Statistics (ONS), Interactive Media in Retail Group (IMRG), Boston
OECD (2011), OECD Guide to Measuring the Information Society
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Consulting Group and business surveys carried out by Department for Business
Innovation and Skills (BIS), Federation of Small Businesses (FSB) and Scottish
Government.

Contacting public and private sector organisations to ask about the availability of data
beneath the UK level, i.e. for Scotland and the other nations and regions. A list of the
different avenues of enquiry is provided in Annex B with information on the outcome
of our enquiry.

Consultations with industry stakeholders in the public sector and with businesses
involved in e-commerce both in terms of e-commerce suppliers and traders. A list of
consultees is attached as Annex A.
Structure of the report
1.7
1.8
The remainder of the report is structured as follows:

section 2 provides some context in terms of e-commerce activity in the UK

section 3 presents data on Scotland’s relative position in e-commerce activity

section 4 summarises the main enablers and barriers to e-commerce in Scotland

section 5 quantifies the economic impact of e-commerce in Scotland

section 6 assesses options for enhanced public sector support

section 7 summarises our conclusions and recommendations.
We have also included the following annexes:

Annex A provides a list of project consultees

Annex B summarises the different data sources that have been explored

Annex C provides a list of the main research documents used in this study

Annex D includes sector definitions

Annex E provides examples of online retail award winners.
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2: E-commerce in the UK
E-commerce in the UK - summary
Based on the ONS E-commerce Survey, e-commerce sales as a proportion of total
sales among UK businesses increased to 17% in 2010 from 14.5% in 2008. The
estimated value of total e-commerce sales in the UK was £385.4bn in 2010. Just
over 40% (£156bn) of these sales came from the ‘wholesale’ sector, and 30%
(£114bn) from the ‘manufacturing’ sector. Sales over websites (as opposed
through other ICTs such as EDI and extranets) accounted for about 25% of all ecommerce.
Research by the Boston Consulting Group (BCG) suggests that the UK is one of
the world’s leading economies for e-commerce with a higher proportion of online
retail transactions than any other major economy. BCG predicts that the UK’s
internet economy will continue to expand at a rate of 11% per year for the next four
years.
2.1
While the focus of our research has been on the position of Scotland in terms of e-commerce,
this section provides an overview of UK level statistics.
2.2
The ONS annual e-commerce survey2 estimates that e-commerce sales as a proportion of total
sales among UK businesses increased to 17% in 2010 from 14.5% in 2008. Sales through
websites represent about a quarter of e-commerce activity as defined by ONS: 4% of total
sales compared to 13% of total sales through ‘ICTs other than a website’ (Figure 2-1). This
second category mainly describes B2B transactions relates to orders placed through
mechanisms such as EDI (Electronic Data Interchange), which is described by the OECD as:
an e-business tool for exchanging different kinds of business messages.
EDI is..a generic term for sending or receiving business information in an
agreed format which allows its automatic processing (e.g. EDIFACT,
XML, etc.) and without the individual message being manually typed3.
2
ONS (2011) 2010 Annual E-commerce Survey (Note: this covers UK non-financial sector businesses with 10 or
more employees)
3
OECD (2011), OECD Guide to Measuring the Information Society
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Figure 2-1: E-commerce sales as proportion of total sales (2010)
Source: ONS (2011) 2010 e-commerce Survey
2.3
The estimated value of total e-commerce sales in the UK was £385.4bn in 2010. Just over
40% (£156bn) of these sales came from the ‘wholesale’ sector4, 30% (£114bn) from the
‘manufacturing’ sector and only 4% from ‘retail’ (£16bn) as shown in Figure 2-2.
2.4
However, if we are to look at the value of website sales alone the ‘wholesale’ sector had the
strongest website sales with sales valued at £37.5bn and the ‘retail’ sector showed the second
highest website sales of £12.8bn in 2010.
Figure 2-2: Value of e-commerce sales by sector (2010)
Source: ONS (2011) 2010 e-commerce Survey
4
The E-commerce survey provides data for groupings of SIC 07 divisions. For example, wholesale includes SIC
45 (Wholesale trade and retail trade; Repair of motor vehicles and motorcycles) and SIC 46 (Wholesale trade,
except of motor vehicles and motorcycles. The retail category includes SIC 47 (Retail trade, except of motor
vehicles and motorcycles. A full list is provided in Annex D
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2.5
Over three quarters of UK businesses (79%) had a website in 2010 but a comparatively small
proportion of businesses used the website for selling (15%) as shown in Figure 2-3. The
proportion of businesses that sell over a website increases as the business size increases –
41% of businesses that employ over 1,000 people use a website for selling.
Figure 2-3: Proportion of businesses with e-commerce sales (2010)
Source: ONS (2011) 2010 e-commerce Survey
2.6
When examined by sector, the ‘retail’ sector has the greatest proportion of businesses that sell
over a website (31%), followed by the ‘information and communication’ sector at 27%. As
shown in Figure 2-4, the ‘construction’ sector had the lowest number of businesses with
online sales at 4%.
Figure 2-4: Proportion of businesses with e-commerce sales by industrial sector (2010)
Source: ONS (2011) 2010 e-commerce Survey
2.7
Table 2-1 shows the location of e-commerce customers for businesses with website sales and
non-website sales. Nearly all businesses who reported website sales had customers in the UK
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(15% of all businesses); a little under half of these (6% of all businesses) reported also selling
to customers in other EU countries through website sales, and a third (5% of all businesses) to
customers in the rest of the world.
2.8
Nearly 7% of all businesses reported non-website e-commerce sales to UK customers.
Table 2-1: Location of e-commerce customers
10-49
employees
50-249
employees
250-99
employees
1000+
employees
All
13.4
23.3
23
41.3
15.3
Other EU
5.5
10.4
9.4
17.2
6.4
Businesses
with website
sales to
customers
located
In UK
Rest of World
4.3
8.2
7.5
13.4
5
Businesses
with nonwebsite sales
to customers
located
In UK
5.0
11.9
23.1
33.1
6.7
Other EU
1.2
4.2
8.6
15.2
1.9
Rest of World
0.7
2.1
5.3
10.4
1.1
Source: ONS (2011) 2010 e-commerce Survey
2.9
The pace of growth in UK e-commerce activity has been significant. IMRG’s e-jobs Index5
estimates that there were 228,000 online retail businesses in the UK in 2010, an increase of
30% on the year previous. It estimated that 730,000 people work directly in or support the ecommerce industry (note that this uses a different definition of e-commerce to ONS). The ejobs Index shows that just over 80% of e-commerce businesses and channels have been
established since 2000. However, the start-up rate has been stabilising, with growth levels
remaining at a constant rate of just over 7% in both 2009 and 2010.
2.10
The IMRG research highlights that for every person employed by an online retailer, another
works in support of the online industry - providing services such as distribution, delivery,
customer support, payments, marketing, security and administration. Distribution and delivery
are the most important supporting sector, and IMRG estimate that 115,700 workers delivered
approximately one billion parcels from online businesses to customers in 2011.
2.11
Research6 by the Boston Consulting Group (BCG) suggests that the "internet economy" was
worth £121bn to the UK in 2010 (note that this again uses a different definition to that of
ONS for e-commerce), equivalent to 8.3% of the UK economy, representing more than
£2,000 per person.
2.12
The UK is one of the world’s leading economies for e-commerce with a higher proportion of
online retail transactions than any other major economy (see Figure 2-5). Approximately
13.5% of all retail purchases were conducted over the internet in 2010 compared to 7% in
Germany (the country with the next highest level of retail sales).
5
6
IMRG (2011) e-Jobs Index
Boston Consulting Group (2012) The $4.2 Trillion Opportunity: The Internet Economy in the G-20
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Figure 2-5: Online retail as a proportion of total retail 2010
Source: SQW analysis of Boston Consulting Group (2012) The $4.2 Trillion Opportunity: The Internet Economy in the G-20
2.13
In terms of employment, research by BCG specifically on the UK internet economy estimated
that it supported 250,000 jobs in the UK7. The BCG research further demonstrates the UK’s
position as a leader in e-commerce and reports that the UK is now a net exporter of ecommerce goods and services, exporting £2.80 for every £1 imported. This is the opposite of
the trend seen in the offline economy, which exports 90p for every £1 imported.
Future trends in e-commerce
2.14
Overall the UK’s e-commerce activity is expected to continue to grow strongly. BCG8
predicts that the UK’s internet economy will continue to expand at a rate of 11% per year for
the next four years, reaching a total value of £221bn by 2016 representing 12.4% of GDP – an
increase of 4 percentage points on 2010. That compares with projected growth rates of 5.4%
in the US and 6.9% in China.
2.15
Estimates from Datamonitor forecast9 a similar rate of growth with the performance of the
online retail sector in the UK anticipated at a CAGR of 11.6% for the period 2010 - 2015,
resulting in a value of £42bn by the end of 2015 (note that the BCG and Datamonitor values
are not comparable as one measures the total Internet economy and the other the value of the
online retail sector).
m-Commerce
2.16
Mobile e-commerce, or ‘m-commerce’, is an area earmarked for significant growth in the
coming years. Recent research by Incentivated10 shows that the UK has the highest smart
phone ownership in Europe and 46% of internet users access the internet via their mobile in
the UK.
7
Boston Consulting Group (2010) The Connected Kingdom: How the Internet Is Transforming the U.K. Economy
Boston Consulting Group (2012) The $4.2 Trillion Opportunity: The Internet Economy in the G-20
9
Datamonitor (2011) Online Retail in the United Kingdome
10
Incentivated (2012) Mobile Data Summary
8
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2.17
In 2011, approximately 7% of all e-commerce traffic was accounted for by mobile devices,
compared to 1.4% in 2010. According to Incentivated, just over 3% of e-commerce purchases
were made from mobile devices in 2011, up from 0.4% in 2010. These are significant growth
rates over a 12 month period. Total m-commerce spend is forecast to be £19.3bn for 2021,
and already over 10% of all e-Bay UK sales are accounted for by mobile: in 2010, global
eBay sales via a mobile device more than tripled, generating $2 billion in sales – up from
$600m in 2009.
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3: Scotland’s relative position in e-commerce
Scotland’s relative position in e-commerce - summary
The ONS E-commerce Survey provides data at the UK level on the proportion of
businesses with e-commerce sales. Due to issues around its methodology, data is
not available for the UK nations and regions. In order to look at the relative
performance of Scotland to other parts of the UK, we have reviewed a number of
business surveys and proxy indicators of e-commerce activity.
There are various messages emerging from these data sources. Firstly, the
proportion of businesses in Scotland trading online (B2B and B2C) would appear
to be broadly in line with the UK, or in some cases marginally below (35% in
Scotland vs 36% for UK in the FSB survey; 36% in Scotland vs 39% for UK in the
BIS survey).
However, other indicators suggest that Scotland is way behind other parts of the
UK in terms of having “e-commerce people”. Our analysis of LinkedIn found that
about 1,200 members located in Scotland’s cities mentioned ‘e-commerce’ in their
profiles, compared with 13,000 members based in London. Data from
itjobswatch.co.uk found that Scotland had the lowest proportion of any
nation/region in terms of advertised IT jobs citing ‘e-commerce’ over the last 3
months: 2% in Scotland versus 11% in London and 10% in the East Midlands.
Data from Google Insights for Search suggests that the search intensity for certain
relevant terms was about 40% lower in Scotland than in England over the last 12
months.
Based on the ONS E-commerce Survey, a large proportion of e-commerce takes
place in the wholesale and retail sectors, and website-based sales are particularly
important for these sectors. Although data shows that the overall growth of
Scotland’s retail and wholesale sector has been broadly in line with that in other
parts of the UK, Scotland’s export performance in retail/wholesale appears to be
falling. This trend warrants further investigation; it could potentially point to some
weaknesses in the adoption of web-based e-commerce in these sectors in
Scotland, though we do not have sufficient evidence to confirm that hypothesis.
3.1
In this section we use a variety of data sources to compare e-commerce activities and
performance in Scotland to other regions and nations of the UK, and at the UK level more
generally.
Demand for e-commerce
3.2
In terms of consumer usage of e-commerce, Scotland appears to have fallen somewhat below
the UK average – perhaps reflecting the slower growth here of home internet access in the last
few years. The most recent data from Eurostat for 2010 highlights that 64% of adults in
Scotland have ordered goods and services online over the previous year, slightly lower than
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the UK average of 67% (Figure 3-1). The highest consumer demand for purchasing online
would appear to be the East and South East of England.
Figure 3-1: Demand for online purchasing of goods and services
2008
75
68
70
73 73
72 72
71 71
69
68
63
62
63
68
66 67
65
64
60
64
55
53
50
47
63
61
58
56
53
2010
67
64
61
57
53
2009
69
67
61
60
47
53
46
40
30
20
10
North East
Yorkshire and
The Humber
Scotland
Wales
North West
Northern Ireland
UK
London
West Midlands
South West
East Midlands
South East
0
East of England
% of individuals who ordered goods & services over
the internet for private use
80
Source: Eurostat
3.3
As highlighted earlier, mobile e-commerce is likely to become a more important aspect of ecommerce. Data produced by eBay shows that in 2010, 7% of eBay’s unique m-commerce
consumers lived in Scotland. Surprisingly, this is similar to the level of activity in London,
but substantially behind the relatively small North East region (Figure 3-2). The highest
proportion of users (22%) were based in the South East of England. Although this data on mcommerce only relates to eBay, this nevertheless will account for a sizeable proportion of this
type of activity and is a useful barometer.
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Figure 3-2: eBay m-Commerce data (2010)
Share of unique UK eBay m-commerce consumers
25%
22%
20%
15%
14%
13%
11%
10%
8%
8%
7%
7%
6%
5%
3%
2%
Northern
Ireland
Wales
East Midlands
Scotland
London
West Midlands
South West
East Anglia
North West
North East
South East
0%
Source: eBay UK Mobile Commerce - 2011 research
Businesses trading online
3.4
A key aim of this research has been to assess to what extent Scottish businesses have adopted
e-commerce relative to other parts of the UK. As highlighted in the previous section, results
from the ONS e-commerce survey provides data on the proportion of businesses with ecommerce sales, and the value of these sales broken down by different UK sectors. However,
unfortunately this data cannot be broken down by UK nations and regions including Scotland.
We understand from discussions with ONS that there are methodological issues around the
collection of the survey data which prevent this disaggregation (particularly in relation to
large retailers with multiple sites around the UK).
3.5
However, there are some other business surveys which provide useful data at the regional
level. The BIS Small Business Survey (2010) results show that 36% of SMEs in Scotland are
currently using the internet to sell goods and services through a website (Figure 3-3). This is
slightly lower than the UK average of 39%. These results should be caveated due to sample
sizes at the regional level, but nevertheless they do provide a useful comparison. Based on
these results, the areas with the highest proportion of businesses trading through a website are
the East Midlands and East of England.
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Figure 3-3: Proportion of small businesses selling online
45%
44%
43%
42%
39%
40%
39%
39%
39%
38%
38%
37%
36%
33%
35%
30%
25%
22%
20%
15%
10%
5%
North East
Wales
Scotland
South East
Yorkshire and
Humber
West Mids
Northern Ireland
South West
North West
UK
London
East of England
0%
East Mids
% of businesses selling goos and services
through a website
50%
Source: BIS Small Business Survey 2010 [Unweighted sample: 1901, of which 115 in Scotland]
3.6
A similar picture is presented by looking at the latest FSB members’ survey from 2011 which
asks how many (small) businesses are using the internet for online trading. The results show
that 35% of Scottish businesses are trading online compared to a UK average of 36% (Figure
3-4). In this survey, the highest performing region appeared to be the South West (40%)
followed by the West Midlands (38%).
Figure 3-4: Proportion of FSB members trading online
38%
38%
38%
37%
36%
36%
35%
35%
35%
35%
35%
32%
32%
London
40%
Northern Ireland
40%
30%
25%
20%
15%
10%
5%
Yorkshire and The
Humber
East of England
Scotland
South East
North East
UK
North West
East Midlands
Wales
West Midlands
0%
South West
% of businesses using the internet for online
trading
45%
Source: FSB 2011 Members Survey [Unweighted sample: 10,698, of which 1,066 in Scotland]
3.7
In 2011, the FSB carried out some specific research on online trading using 1600 companies
that form the ‘Voice of Small Business’ Panel. Although this involved smaller sample sizes
than the annual members’ survey, it is interesting to note that in this case Scotland compared
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reasonably well with other parts of the UK, with an estimated 40% of businesses currently
selling goods and/or services online (Figure 3-5).
Figure 3-5: Proportion of FSB panel members trading online
45%
44%
44%
40%
40%
39%
34%
35%
34%
33%
32%
30%
30%
30%
27%
24%
25%
19%
20%
15%
10%
5%
Northern Ireland
Yorkshire and The
Humber
East of England
East Midlands
South East
North West
UK
South West
West Midlands
London
Scotland
Wales
0%
North East
% of businesses currently selling goods/
services online
50%
Source: FSB ‘Voice of Small Business’Panel Survey 2011 [Sample: 1,626, of which 175 in Scotland]
The same survey asked about the proportion of sales that are generated online. Nearly half
(48%) of Scottish businesses stated that up to 20% of their sales are generated online (Figure
3-6). Just under a third of businesses with online sales (29%) stated that over 50% of their
sales are generated online. Overall, the scale of Scotland’s online sales is broadly in line with
the UK average, according to this FSB research.
Figure 3-6: Proportion of turnover generated online (of those businesses with online sales)
40%
% of total turnover generated online
38%
UK
Scotland
35%
31%
30%
25%
20%
17%
15%
15%
9% 9%
10%
8% 9%
5% 6%
5%
6%
5%
6%
5% 6%
4%
4%
6%
5% 4%
2% 1%
100% - All turnover
is generated through
online trading
91 - 99%
81 - 90%
71 - 80%
61 - 70%
51 - 60%
41 - 50%
31 - 40%
21 - 30%
11 - 20%
0%
Less than 10%
3.8
Source: FSB ‘Voice of Small Business’Panel Survey 2011 [Sample: 1,626, of which 175 in Scotland]
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3.9
The BCG research on the internet economy in the UK also found a relatively high proportion
of “high web” SMEs in Scotland (71%) compared to other regions and nations (Figure 3-7).
This put Scotland level second with London and behind only East of England in terms of the
proportion of “high web businesses”. It should be noted that the sample for this research was
900 businesses, a somewhat lower sample than the other surveys described above.
Figure 3-7: Levels of internet use amongst UK SMEs
100
90
80
71
67
66
66
63
56
17
18
25
26
50
40
30
22
22
15
17
14
20
8
8
London
Scotland
10
11
17
South East
17
31
19
19
North West
20
21
Midlands
% of SMEs
71
58
North East
72
60
62
Wales
47
70
12
19
22
Low web businesses
High web businesses
Northern Ireland
No web businesses
Yorkshire
South West
East of England
0
Source: BCG (2010), The Connected Kingdom [Sample: 914 businesses]
3.10
Another proxy that we have considered for assessing the level of interest or demand for ecommerce services in Scotland is to use Google Insights for Search to identify how popular
certain web searches are in different parts of the UK. Figure 3-8 shows the popularity of
searching for the term ‘e-commerce’ or ‘ecommerce’ and also for the names of leading ecommerce platforms such as Magento and osCommerce. With these terms being
predominantly of relevance to businesses rather than consumers (and bearing in mind the
dominance of the Google search engine), we conclude that the intensity of business interest in
web-based e-commerce (which is what most people would be thinking of by the term ‘ecommerce’ and the various platform names) appears to be far higher in England than in
Scotland.
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Search popularity (normalised to 100)
Figure 3-8: Google Insights for Search analysis – search popularity of key words (over last 12 months)
100
100
100
90
80
70
60
50
40
30
20
10
0
82
75
57
England
Northern Ireland
57
Wales
60
60
Scotland
E-commerce +ecommerce
magento + oscommerce + volusion + "zen cart" + prestashop
Source: Google Insights for Search, March 2012. Figures reflect the number of searches that have been done for a particular
term, relative to the total number of searches done on Google over the last 12 months, normalised to 100 for the country with the
highest ratio. Note that + is the OR operation on Google Insights for Search
SIC 47.91
3.11
Employment and business activity for different sectors are typically defined using SIC codes.
However, since e-commerce is effectively a sales channel or way of doing business rather
than a sector in its own right, there are no SIC codes that can be used to define e-commerce
activity. In carrying out this research we did confirm that companies that compile business
databases such as Experian and Dun & Bradstreet do not collect information on e-commerce
based sales and/or employment.
3.12
The one SIC code which is perhaps the most useful and identifiable to e-commerce is SIC
47.91 (using SIC 2007) which covers ‘retail sales via mail orders and via the internet’11. Data
drawn from SIC 47.91 is presented below to provide some comparisons of Scotland and other
parts of the UK. We accessed employment data through the Business Register and
Employment Survey (BRES) and also financial data through contact with the Scottish
Government and the ONS Annual Business Survey team.
3.13
In this SIC 47.91, there are just over 1700 employee jobs in Scotland with around 400
businesses generating annual sales of £514 million. Most of the employment in Scotland is
concentrated in Inverclyde, Glasgow, Edinburgh and North Lanarkshire. As is shown in Table
3-1, the highest level of employment is to be found in the North West of England with over
16,000 jobs, reflecting the traditional strength of the mail order sector in this part of the UK.
The East of England and the South East also have significant employment in this activity
relative to other regions.
11
This SIC code will only have a small fraction of the companies involved in e-commerce (with much of the
activity relating to mail order activity). Nevertheless, it provides information on some e-commerce activity which
can be analysed by region and nation
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Table 3-1: Employment in SIC 47.91 (2008-2010) by UK region and nation
2008
2009
2010
13,700
12,100
16,100
East of England
7,400
9,000
9,400
South East
6,100
6,800
8,200
London
8,200
5,500
6,700
West Midlands
4,000
3,000
5,500
Yorkshire and The
Humber
7,300
5,000
4,600
East Midlands
6,700
4,600
4,100
South West
5,300
6,000
3,600
Wales
1,700
2,200
2,300
Scotland
1,900
1,900
1,700
700
2,400
900
-
900
-
North West
North East
Northern Ireland
Source: BRES and Northern Ireland DETI (only 2009 data available for Northern Ireland)
3.14
Most sales from companies in this SIC code are also being generated in the North West of
England, with a total of nearly £2.4 billion in 2009 (Table 3-2). Next highest in terms of sales
are the East of England (£1.7 billion in sales) and London (£1.5 billion).
Table 3-2: Business base and turnover in SIC 47.91 (2009)
Business units
Turnover (£m)
1,008
2,393.7
948
1,682.2
1,489
1,525.0
657
945.0
1,564
863.5
Wales
298
519.9
West Midlands
776
516.9
Scotland
401
514.5
South West
903
504.6
East Midlands
678
483.9
North East
214
249.6
Northern Ireland
101
36.6
North West
East of England
London
Yorkshire and The Humber
South East
Source: BRES, ONS Annual Business Survey, and Scottish Government
3.15
Although the total level of activity in this specific SIC code in Scotland is relatively small, it
should be noted that this sector is likely to be dominated by established mail order businesses,
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rather than internet sales. The annual change in turnover figures for the UK nations and
regions is shown in Figure 3-9, and it is interesting to note that between 2008 and 2009, there
was an increase of £157 million in business turnover (44%) in Scotland: it is not unreasonable
to assume that much of this increase in Scotland will have been down to increased online
sales, counteracting a negative trend in mail order business (which, as illustrated below,
appears to have had a particularly adverse effect on regions with more established mail order
operations, such as the North West).
Figure 3-9: Change in business turnover for SIC 47.91 (retail sales via mail orders and via the internet),
2008 to 2009
Change in turnover 2008-09 (£m)
400.0
347.4
336.5
300.0
200.0
184.2
171.5
156.8
83.2
100.0
28.7
2.6
0.0
-6.3
-100.0
-59.9
-200.0
-300.0
-337.8
-400.0
-454.6
-500.0
Source: ONS and Scottish Government
Online retailers
3.16
From a review of recent online retail rankings, it is clear to see that most of the leading UK
online retailers are based outside Scotland. IMRG, the industry body for online retail
regularly produces rankings of the top online retailers in the UK. In Table 3-3 we have
presented the top 30 and identified the location of their head office in UK (with the exception
of Ryanair, based in Ireland), working on the assumption that this is where most of the ecommerce related development activity will take place.12 It is notable that the majority are
based in London or the South East of England. Based on this list there are no headquarters in
the North East, North West, West Midlands, South West, Wales, Northern Ireland or
Scotland.
Table 3-3: IMRG Experian Hitwise Hot Shops List and HQ location in the UK
Rank
Company
UK region
Rank
Company
UK region
1
Amazon UK
SE
16
Tesco Direct
SE
2
Argos
SE
17
Thomas Cook
East
12
However, it must be noted operations, customer services and fulfilment services (part of which will relate to ecommerce) will be located in various parts of the UK
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Rank
Company
UK region
Rank
Company
UK region
3
Apple
London
18
LoveFilm.com
London
4
Amazon.com
SE
19
Topshop.com
London
5
Tesco
SE
20
B&Q
SE
6
Next
East Mids
21
New Look
London
7
Play.com
East
22
ASDA
Yorkshire
8
Your M&S
London
23
The Train Line
London
9
John Lewis
London
24
Sainsbury’s
London
10
ASOS
London
25
Ryanair
Ireland
11
Debenhams
London
26
IKEA
London
12
Thomson
East
27
River Island
London
13
Expedia.co.uk
London
28
Lastminute.com
London
14
easyJet
East
29
British Airways
London
15
Currys
East
30
Comet
East
Source: SQW analysis of IMRG Experian Hitwise Hot Shops List – February 2012
3.17
We have also considered other examples of online retail awards13. The IMRG annual awards
for 2010 and 2011 have more of a geographic spread across the UK in terms of company
headquarter locations but do not feature any companies based in Yorkshire, North East,
Wales, Northern Ireland or Scotland. However, the 2011 winners Online Retail Awards do
include one company from Scotland, Labels4Kids, which won independent online retail site
of the year. Full details of these award winners are included in Annex E.
3.18
Some other Scottish based online retailers were acknowledged in the 2010 Scottish Retail
Awards with the relevant awards shown in Table 3-4.
Table 3-4: Scottish Retail Excellence Awards 2010
Large on-line retailer of the
year
Location
Small/Medium on-line retailer
of the year
Location
M&Co - WINNER
Renfrew
ROX Diamond & Watch
Specialist - WINNER
Glasgow
Advanced MP3 Players.co.uk
Edinburgh
Blackcircles.com Ltd
Peebles
Toolstop.com
Uddingston
Demijohn
Glasgow
Source: Scottish Retail Excellence Awards 2010
Online banking
3.19
Another example of e-commerce is online banking (though note that the financial sector is
excluded from ONS’s e-commerce survey). Even after the financial crisis of 2008, Scotland
13
Although we have presented data for various UK online retail awards, it is not possible to know the extent to
which these awards have been promoted in the various nations/regions of the UK which would likely have a
bearing on where nominees are drawn from.
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continues to have a strong financial services sector and is home to a number of major banks
such as RBS, Bank of Scotland, Clydesdale Bank and the Scottish Widows Bank. In Table 35 and Table 3-6 we show the recent award winners for online banking, many of which are
headquartered in Scotland (the table shows NatWest as headquartered in Scotland, as it is part
of the RBS Group).
3.20
Feedback from our discussions with e-commerce suppliers highlighted the increasing demand
from financial services for web and e-commerce development support. Edinburgh’s financial
services sector has been boosted recently by the decision of Swiss banking software company
Avaloq to create 500 jobs in the city over the next five years.
Table 3-5: Best Online Banking Provider – Money facts Awards
2009
HQ
2010
HQ
2011
HQ
Winner
Bank of Scotland
Corporate
Scotland
NatWest
Scotland
HSBC
London
Highly
commended
NatWest
Scotland
HSBC
London
Bank of Scotland
Corporate
Scotland
Commended
The Co-operative
North
West
Santander
London
NatWest
Scotland
Source: SQW analysis of http://www.moneyfactsgroup.co.uk/awards/
Table 3-6: Best Internet account provider – Money facts Awards
2009
HQ
2010
HQ
2011
HQ
Winner
ICICI Bank
London
Intelligent
Finance
Scotland
AA Banking
South East
Highly
commended
Principality BS
Cardiff
ICICI Bank UK
London
Scottish Widows
Bank
Scotland
Commended
Yorkshire BS
Yorkshire
Yorkshire BS
Yorkshire
Tesco Bank
Scotland
Source: SQW analysis of http://www.moneyfactsgroup.co.uk/awards/
E-commerce jobs
3.21
One proxy indicator for the scale of e-commerce related employment in Scotland compared to
other parts of the UK is the number of advertised e-commerce jobs. One of the top UK jobs
websites is Reed.co.uk. In Figure 3-10 we have extracted data for most parts of the UK on the
number of IT jobs14 being advertised in that area and identifying the proportion that relate to
e-commerce compared to software development and web development. This data (basically a
snapshot from early March 2012) shows around 250 IT jobs being advertised in Scotland,
with a small number relating to e-commerce (7). In fact, only the North East of England had
fewer e-commerce jobs advertised. In percentage terms, for most areas around 2-3% of IT
jobs advertised related to e-commerce (including Scotland where 2.8% of IT jobs related to ecommerce). Since these percentages are based on the number of IT jobs advertised, it is
noticeable that the number of IT jobs in Scotland is substantially lower than some of the
English regions that have similar populations such as the West and East Midlands.
14
We recognise that IT jobs in e-commerce are only a sub-set of total e-commerce jobs, but the comparison
remains useful
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Figure 3-10: E-commerce jobs as a proportion of all advertised IT jobs (by region)
25%
% E-commerce
% Web development
7,000
% Software development
Total IT Jobs
6,067
6,000
20%
5,000
15%
4,000
3,000
10%
2,619
2,000
5%
1,000
748
249
0%
Scotland
154
North
West
North
East
464
West
London
Midlands
386
488
649
0
South Yorkshire
East
East & Humber Midlands
South
West
Source: Analysis of reed.co.uk (1/3/12)* no replies for East of England
3.22
The website itjobswatch.co.uk arguably provides a more comprehensive picture of the UK’s
overall IT jobs market, with information on demand for particular skills and salary levels that
can be expected for different jobs. In Table 3-7 we present data on e-commerce jobs as a
proportion of all ‘process and methodologies’ positions for the different parts of the UK,
clearly showing the higher proportions of e-commerce employment in areas such as London
and the East Midlands, with Scotland at the bottom of the table. The data also shows the
significant differences in salaries for e-commerce positions.
Table 3-7: Listing of e-commerce jobs in IT Jobs Watch (March 2012)
E-commerce jobs as % of the
Processes & Methodologies category
E-commerce average salary
11.04%
£50,000
East Midlands
9.60%
£31,000
Yorkshire
9.38%
£35,000
England
9.01%
£45,000
East
8.89%
£47,000
North West
7.25%
£30,500
South East
5.90%
£40,000
South West
5.06%
£35,000
West Midlands
4.80%
£35,000
North East
3.77%
£26,500
Scotland
1.94%
£34,000
London
Source: itjobswatch (March 2012)
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3.23
The information shown below, again from itjobswatch.co.uk, for the share of ‘processes and
methodologies’ permanent IT jobs citing e-commerce does appear to suggest that the growing
importance of e-commerce within the UK’s IT job market may not have been matched in
Scotland over the last few years.
Figure 3-11: 3-month moving total of permanent IT jobs citing E-Commerce within Scotland, and within
the UK, as a proportion of the total demand within the Processes & Methodologies category
Scotland
UK
Source: itjobswatch.co.uk
3.24
Another interesting ‘unofficial’ source of data on e-commerce activity can be found using a
search of the LinkedIn network, of the term ‘e-commerce’ (we also searched on ‘ecommerce’,
but this spelling returned many fewer members, so we report our analysis of the former here).
Using this search, nearly 44,000 members are to be found in the UK, with London
representing just under a third with around 13,000 network members. Figure 3-12 shows the
numbers based in the largest 50 cities and towns in the UK (excluding London). With 714 ecommerce members, Edinburgh is currently ranked fifth. Glasgow has 369 members which
puts it 17th in the list of UK cities.
3.25
Drilling down into the companies of these LinkedIn members located in Scottish cities, we
note the prominence of the financial services sector – especially in Edinburgh, with Royal
Bank of Scotland (33), Standard Life (28), Lloyds Banking Group (18), and Tesco Bank (13)
being the four companies with the largest numbers of employees located in Scottish cities
returned through this search.
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Figure 3-12: Number of LinkedIn members in the UK’s largest 50 cities and towns found through a
search for ‘e-commerce’
Reading
Manchester
Brighton
Edinburgh
Birmingham
Leeds
Nottingham
Coventry
Leicester
Bristol
Southampton
Oxford
Northampton
Milton Keynes
Newcastle upon Tyne
Glasgow
Warrington
Portsmouth
Bournemouth
Norwich
Peterborough
Sheffield
Derby
Swindon
Stoke-on-Trent
Preston
York
Luton
Liverpool
Cardiff
Ipswich
Blackburn
Bradford
Swansea
Southend on Sea
Wakefield
Bolton
Doncaster
Plymouth
Huddersfield
Wigan
Hull
Telford
Newport
Dundee
Blackpool
Sunderland
Belfast
Aberdeen
1130
852
719
714
660
637
525
452
450
450
442
431
407
396
377
369
333
324
301
300
299
296
249
241
226
193
186
183
170
167
165
140
132
128
125
121
114
108
106
91
71
63
61
57
52
51
43
32
30
0
200
400
600
No. of LinkedIn members
800
1000
1200
Source: SQW analysis of Linkedin, March 2012. Note that London, with 13,000, is excluded from this chart
3.26
Aggregating the top 50 cities into UK nations and regions results in the figures in the chart
below. Scotland (based on the four cities of Glasgow, Edinburgh, Aberdeen and Dundee) is
around half the way down, on this measure, with about 1200 members mentioning the term
‘e-commerce’ in their LinkedIn profiles.
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Figure 3-13: LinkedIn members found through a search on ‘e-commerce’ – those located in UK’s largest
50 cities and towns, grouped by region
12876
12000
10000
8000
6000
3442
1924
2000
1634
1631
1399
1165
1098
1072
420
352
Wales
4000
NE
Number of LinkedIn members
14000
32
N Ireland
East
SW
Scotland
West Mids
East Mids
Yorkshire
NW
SE
London
0
Source: SQW analysis of LinkedIn, March 2012
3.27
Another picture of the relative performance of e-commerce in Scotland can be seen from the
members of Econsultancy (econsultancy.com). Globally, they have a membership of 115,000
digital marketers. They advise us that currently around 3% of the UK membership
(individuals) are based in Scotland, significantly lower than would be expected based on
population and overall business base within the UK.
Trends in wholesale and retail activity
3.28
As highlighted earlier in the discussion about the ONS E-commerce Survey, a large
proportion of web-based e-commerce takes place in the wholesale and retail sectors. It is
therefore interesting to examine overall trends in these sectors in Scotland, relative to other
parts of the UK, in order to see whether there is any notable under- or over-performance in
recent years.
3.29
Figure 3-14 shows how GVA generated by Scotland’s wholesale and retail sectors has
increased between 2003 and 2009 compared to other parts of the UK. Based on the most
recent 2009 GVA data, Scotland is generating around £10 billion p.a. in these sectors, broadly
similar to regions such as East Midlands, Yorkshire and the South West.
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Headline workplace GVA in wholesale
and retail etc. at current basic prices
(£m)
Figure 3-14: Headline workplace based GVA in the ‘Wholesale and retail trade, repair of motor vehicles’
industry sector at current basic prices, by region – 2003 and 2009
25000
20000
15000
10000
5000
2003
Northern Ireland
North East
Wales
Scotland
East Midlands
Yorkshire & Humber
South West
West Midlands
North West
East of England
London
South East
0
2009
Source: ONS Regional Accounts
3.30
Between 2003 and 2009, Scotland’s retail and wholesale sector grew by 18% in GVA terms
which compares reasonably well with other UK regions and nations: 5th highest GVA growth
over that period out of 12 nations and regions.
25%
23%
22%
19%
20%
18%
18%
18%
16%
15%
15%
12%
12%
10%
10%
9%
5%
North West
North East
West Midlands
Yorkshire &
Humber
South West
London
Wales
Scotland
South East
East of
England
East Midlands
0%
Northern
Ireland
% growth in headline wholesale &
retail etc. GVA 2003-2009
Figure 3-15: Growth in headline workplace based GVA in the ‘Wholesale and retail trade, repair of motor
vehicles’ industry sector at current basic prices, by region, between 2003 and 2009
Source: SQW analysis of ONS Regional Accounts
3.31
Looking at the retail sales index for Scotland, this data suggests that Scotland’s indexed value
of retail sales has grown somewhat faster than the Great Britain average between 2007 and
2011, as shown in Figure 3-16.
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Retail sales value at current prices
(2007=100)
Figure 3-16: Indexed retail sales value at current prices (2007=100)
120
115
110
105
100
95
90
85
80
2002
2003
2004
2005
2006
Scotland
2007
2008
2009
2010
2011
GB
Source: Retail Sales Index for Scotland - 2011 Q4 Data Tables, Scottish Government
Trends in exports
3.32
E-commerce could be a major opportunity for increasing Scotland’s exports. The annual
Global Connections Survey produced by the Scottish Government shows the value of exports
from different broad industry groupings. Unfortunately there is nothing currently in the
survey asking about e-commerce sales. However, it is interesting to look at the performance
of the wholesale, retail and hospitality sectors compared with other industry groupings.
3.33
Figure 3-17 shows that in 2010, the wholesale, retail and hospitality sectors generated around
£1.4 billion in international exports and £5.8 billion in exports to the rest of the UK, which
combined resulted in total exports of £7.2 billion. By way of context, the overall value is
broadly similar to food and drink manufacturing (£7.8 billion) and business services (£7.3
billion) but these other industry groups export a higher proportion outside of the UK. Total
exports from Scotland in 2010 were £67 billion (£22 billion in international exports and £45
billion in sales to other parts of the UK).
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Figure 3-17: Value of exports to rest of UK and international, by broad industry group (2010)
Financial Intermediation
Manufacture of Food Products and Beverages
Business Services
Wholesale, Retail & Repairs, Hotels & Restaurants
Manufacture of Coke, Refined Petroleum Products &…
Mining, Quarrying & Extraction of Petroleum
Electricity, Gas & Water Supply
Manufacture of Transport Equipment
Electrical and Instrument Engineering
Land, Water & Air Transport & Auxiliary Transport…
Mechanical Engineering
Other Manufacturing Industries
Manufacture of Paper, Print and Publishing
Construction
Manufacture of Metals and Metal Products
Agriculture, Forestry & Fishing
Education
Real Estate & Renting of Equipment
Manufacture of Textiles, Footwear, Leather &…
Post & Telecommunication
Other Services
0
International
Rest of UK
2,000
4,000
6,000
8,000
10,000
12,000
Value of export (£'000s)
Source: Scottish Government Global Connections Survey 2010
3.34
At the Scotland level it is possible to identify the performance of the wholesale, retail and
hospitality sectors compared with other industry groupings. Starting with international exports
between 2002 and 2005, the value of international exports from wholesale, retail and
hospitality averaged at around £1 billion. Between 2005 and 2008, it then saw a steep increase
to around £1.7 billion, but then fell to £1.4 billion in 2010. The indexed change since 2002
compared to selected other sectors and Scotland’s economy as a whole is shown in Figure 318.
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Figure 3-18: Indexed Scottish international exports for selected industry groups (2002 =100)
Change in international exports (2002 levels = 100)
200
180
160
140
120
100
80
2002
2003
2004
2005
2006
2007
2008
2009
2010
Manufacture of Food Products and Beverages
Wholesale, Retail & Repairs, Hotels & Restaurants
Business Services
Total International Exports
Source: Scottish Government Global Connections Survey 2010
3.35
In terms of exports to other parts of the UK, the value of exports from wholesale, retail and
hospitality increased significantly from £4.6 billion in 2002 to £6.5 billion in 2004 (Figure 319), but has since reduced to £5.8 billion in 2010.
Figure 3-19: Indexed Scottish exports to the rest of the UK for selected industry groups (2002 = 100)
170
Change in Rest of Uk exports (2002 levels = 100)
160
150
140
130
120
110
100
90
80
2002
2003
2004
2005
2006
2007
2008
2009
2010
Manufacture of Food Products and Beverages
Wholesale, Retail & Repairs, Hotels & Restaurants
Business Services
Total Rest of UK Exports
Source: Scottish Government Global Connections Survey 2010
3.36
The scatter diagram below (Figure 3-20) uses data from the Global Connections Survey for
different industry groupings and shows the change in Scottish exports to the rest of the UK
(on the Y-axis) and change in international exports (on the X-axis). The diagram shows that
over the last three years the value of both types of exports from the wholesale, retail and
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hospitality sector has decreased whilst most of the other sector groupings have either
remained the same or in some cases grown in value, notwithstanding the difficult economic
conditions (in particular, exports from food and drink manufacturing have grown by around
£1 billion p.a., both to other parts of the UK and internationally).
Figure 3-20: Change in value of exports to Rest of UK and international by industry grouping (2007-10)
Change in Rest of UK exports
2007-2010 £m
2,000
1,500
Manufacture of food
products & beverages
1,000
500
Electrical and instrument
engineering
0
-500
0
500
-500
Wholesale, retail & repairs,
hotels & restaurants
1000
Financial intermediation
Construction
-1,000
Change in international exports 2007-2010 £m
Source: Scottish Government Global Connections Survey 2010
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4: Enablers and barriers in Scotland
Enablers and barriers in Scotland - summary
Through consultations with stakeholders and desk based research we have
highlighted what we believe to be some of the main enablers and barriers for ecommerce in Scotland.
The main enablers include the availability of digital agencies (particularly in the
Glasgow and Edinburgh areas) that can provide a range of e-commerce related
services to traders looking to develop their online sales channels. There are also
some good examples of e-commerce traders based in Scotland which can act as
exemplars for others to follow including Schuh, Toolstop, Black Circles, Donald
Russell and Skyscanner. Stakeholders generally thought that Scotland was
comparing well to other parts of the UK in terms of broadband infrastructure with
perhaps the exception of the more rural areas.
Most consultees believed that due to the mix of technical, design and marketing
skills required for e-commerce jobs it is generally quite difficult to recruit for
positions that combine these skills sets. The feedback also suggested many
Scottish companies currently do not fully understand the potential of online sales
channels and the work and investment that is required to become a successful ecommerce trader (i.e. management of their supply chain and fulfilment processes).
Finally, there was also a general sense that Scotland does not currently have the
same critical mass of e-commerce activity compared to London, the South East,
parts of the Midlands and North West and has some scope to increase the levels
of e-commerce activity.
4.1
In this section we summarise our view of the main enablers and barriers to developing ecommerce in Scotland. This is based on our review of secondary sources and consultations
with industry stakeholders.
Enablers
Availability of e-commerce suppliers
4.2
Most of the consultees believed that Scotland had a reasonably good supply of e-commerce
suppliers, particularly based around the two main cities of Glasgow and Edinburgh. This
includes a range of digital agencies that focus on e-commerce to varying levels. The types of
services offered include Search Engine Optimisation, web analytics, advice on the use of
social media, digital marketing, and the development of the e-commerce website. According
to recent research carried out for e-Skills UK, there are over 60 IT service companies offering
a wide range of IT services and support that includes e-commerce.
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4.3
Some examples of e-commerce players in Scotland are listed in Table 4-1 below. Although
many such companies are relatively small, the general feedback was that they are doing well
in terms of winning work in Scotland and the rest of the UK (with some also working in
international markets). These agencies will clearly have an important role in supporting other
sectors to embrace e-commerce.
Table 4-1: Examples of e-commerce suppliers
Company name
Location
Website
Alienation Design
Glasgow
http://www.alienationdigital.co.uk/
Bigmouthmedia
Edinburgh
http://www.bigmouthmedia.com/
Digital Six
Edinburgh
http://www.digitalsix.co.uk/
Dog Digital
Glasgow
http://www.dogdigital.com/
Indez
Glasgow
http://www.indez.com/
Lynchpin
Edinburgh
http://www.lynchpin.com/
Radiator
Glasgow
http://www.the-radiator.com/
User Vision
Edinburgh
http://www.uservision.co.uk/
Whitespace
Edinburgh
http://www.whitespacers.com/
Source: Company websites
Some high profile examples of e-commerce traders
4.4
Notwithstanding the point being made in the previous section about the tendency of large UK
retailers to be headquartered in the South East of England, there are some good examples of
e-commerce traders based in Scotland which can act as exemplars for others to follow.
4.5
Amazon, generally regarded as one of the most successful e-commerce traders, has its main
UK headquarters in Slough near London. However over the last year, Amazon has increased
its presence in Scotland opening its largest UK fulfilment centre in Dunfermline (creating 750
jobs) and a Customer Services Centre in Edinburgh (creating 900 jobs over the next five
years), alongside the Amazon Development Centre at Waverley Gate. These facilities will
require a range of high and lower skilled employees. However, stakeholders highlighted that
the setting up of the Development Centre demonstrates the confidence that a company such as
Amazon has in being able to recruit the right technical skills.
4.6
A small growing company which has been successful in online retailing is Labels4Kids. It
won ‘independent online retail site of the year’ at the 2011 Online Retail Awards. Other
examples of successful Scottish-based e-commerce traders cited during our consultations
included Schuh, Toolstop, Black Circles, Donald Russell and Skyscanner. It was stated that
success of these e-commerce traders was mainly down to their ability to fully appreciate the
importance of e-commerce and make the appropriate investment in setting up and maintaining
e-commerce operations.
4.7
Stakeholders also pointed to the growing importance of e-commerce for sectors such as
tourism (with accommodation providers and visitor attractions increasingly providing
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facilities for online booking) and also food and drink companies looking to sell into new
markets.
Broadband infrastructure
4.8
According to research commissioned by the Scottish Government in 2011, 94% of Scottish
businesses with ten or more employees (and excluding those with 250 or more employees)
use broadband (with 95% using internet, and 99% of these using broadband)15. The same
research compares this figure of 94% to OECD research which indicated that, across the UK,
around 88% of businesses with ten or more employees use broadband16.
4.9
Stakeholders generally thought that Scotland was comparing well to other parts of the UK in
terms of broadband infrastructure with perhaps the exception of the more rural parts of the
Highlands and Islands region and the south of Scotland (which are soon to receive significant
investment in broadband infrastructure).
Barriers
Some gaps in e-commerce skills base
4.10
Although there were some views that Scotland had no skills gaps in relation to e-commerce,
most consultees believed that due to the mix of technical, design and marketing skills required
for e-commerce jobs it is generally quite difficult to recruit for positions that combine these
skills sets.
4.11
For many, this simply reflected that scale of e-commerce activity in Scotland and would
probably be the same in most areas outside London and the South East of England where as
we have seen in the previous section there are concentrations of this type of employment.
4.12
Some also held the views that more could be done in the FE/HE sector so that graduates enter
the labour market with better (and more up-to-date) e-commerce skills (it was also pointed
out that there needs to be the demand for these courses before colleges and universities
provide the courses).
4.13
On a more positive note, it was also highlighted that Scotland has a strong supply of skills in
technical IT roles and businesses are attracted to investing in Scotland because of these skills
and more reasonable salary expectations than certain parts of England. However, for ecommerce to further develop in Scotland, it was felt that there will be a need for more
graduates with both IT and digital marketing skills.
Limitations in business understanding of e-commerce
4.14
Our discussions with e-commerce suppliers highlighted that many companies (that they deal
with) do not fully understand the potential of online sales channels and the work and
investment that is required to become a successful e-commerce trader (i.e. management of
15
16
Scottish Government (2011), Research on Broadband and Business in Scotland
OECD Broadband Portal – Business use of broadband 2010
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their supply chain and fulfilment processes). As a result, many e-commerce suppliers report
needing to provide a degree of ‘hand-holding’ with customers.
4.15
From the customer side there are also obviously benefits from greater understanding of ecommerce so that they know exactly what services they require to buy in. It was suggested
that for some more traditional companies there remain some concerns about being ‘rippedoff’ or mis-sold ICT products and services. One supplier also raised the point that for some
small businesses only wanting to serve local markets, e-commerce may actually not be
appropriate and should not be forced upon them.
4.16
It was also highlighted that many companies do not fully appreciate the on-going investment
that is required to not only develop e-commerce operations but to maintain and improve. One
e-commerce trader that we spoke to which has grown from 12 to 40 employees over the last
four years stated that many small companies were setting up an e-commerce website
assuming that is all that is required.
Lack of critical mass…in comparison to some parts of England
4.17
There was a general sense from most consultees that Scotland does not currently have the
same critical mass of e-commerce activity compared to London, the South East, parts of the
Midlands and North West. Whilst some stated that based on the location of the population and
business base this is not really surprising, others believed that because of the export potential
Scotland should be aspiring to be competing with some of these parts of England in ecommerce. There was specific criticism about the quality of websites of some of Scotland’s
most well-known companies (e.g. in the food and drink sector) and suggestions that this
showed that much work has to be done to encourage Scottish firms to take e-commerce more
seriously.
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5: Quantifying e-commerce in Scotland
Quantifying e-commerce in Scotland - summary
Using the ONS’s definition of e-commerce and UK data from the annual UK Ecommerce Survey, we have derived an indicative estimate of equivalent Scottish
e-commerce sales.
We estimate that about 200,000 direct jobs and £10 billion in direct GVA (c.
10% of Scotland’s GVA) are associated with Scotland’s £31 billion in ecommerce sales p.a. (of which about £8 billion of sales are over websites).
It should be emphasised that these numbers are indicative estimates, to give an
idea of the scale of activity. They are based on UK-level data, adjusted for
Scotland’s share of UK employees in each sector, as there is no definitive source
for such data at the Scotland-level at present.
5.1
5.2
Quantifying the level of economic activity in Scotland associated with e-commerce is
challenging, due to:

the absence of any official Scotland-level statistics on e-commerce

the resulting uncertainty over Scotland’s relative position in e-commerce

different people meaning different things by ‘e-commerce’.
For the purposes of this study, we provide an indicative estimate of e-commerce activity in
Scotland, by:

drawing on the most definitive available information source on UK e-commerce sales
(the ONS’s e-commerce survey), using the ONS’s definitions of e-commerce

deriving an indicative estimate of equivalent Scottish e-commerce sales, by applying
Scotland’s overall share of employment in each of the industry sectors reported by the
ONS e-commerce survey

considering an adjustment for Scotland’s relative position in e-commerce versus the
UK average


in the light of the balance of evidence provided in this report, we have chosen
to assume that Scotland’s performance is currently in line with the UK
average in terms of e-commerce sales in each sector
converting sales into estimates of direct GVA and employment associated with the ecommerce sales in the sectors reported by ONS
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
adjusting sales, GVA and employment estimates to account for the for e-commerce
activity of firms with fewer than 10 employees (not included in the ONS e-commerce
survey)

applying multipliers to estimate the indirect and induced GVA and employment
associated with Scottish e-commerce sales.
Estimate of direct turnover
5.3
According to the latest ONS e-commerce survey, the UK’s e-commerce sales amounted to
approximately £385 billion in 2010 – excluding the financial sector and excluding firms with
employment of less than ten. This consisted of £96 billion of sales through websites, and £289
billion through ICTs other than a website.
5.4
As shown in the table below, sales were highest in the ‘wholesale’ sector, for both website
sales and other ICT channels. In three sectors (retail; accommodation and food; and other
services) e-commerce sales through websites outstripped those through other ICTs.
Table 5-1: UK e-commerce sales, 2010
2010 sales
over websites
(£bn)
2010 sales
over ICT
other than
websites
(£bn)
Total e-commerce
sales 2010 (£bn)
Manufacturing
3.8
110.3
114.1
Utilities
6.8
7.9
14.7
Construction
0.3
4
4.3
Wholesale
37.5
118.3
155.8
Retail
12.8
3.1
15.9
Transport & storage
9.4
25.7
35.1
Accommodation & food services
4.2
0.7
4.9
Information & communication
10.3
11.1
21.4
Other services
10.8
8.4
19.2
Total
95.9
289.5
385.4
Source: ONS e-commerce survey
5.5
In terms of assessing Scotland’s share of economic activity, the most relevant proxy is the
number of employees in each of these sectors. As shown in the table below, Scotland’s share
of total UK employees varies from 6.3% in ‘Information & communication’ to 11.9% in
‘Utilities’.
Table 5-2: Employees in UK and Scotland for the sectors covered by the ONS e-commerce survey
Manufacturing
Utilities
UK employees 2010
Scotland employees
2010
Scotland share of
UK employees
2,372,900
172,700
7.3%
282,900
33,700
11.9%
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UK employees 2010
Scotland employees
2010
Scotland share of
UK employees
Construction
1,183,500
121,400
10.3%
Wholesale
1,566,600
112,300
7.2%
Retail
2,780,600
235,800
8.5%
Transport & storage
1,212,400
92,300
7.6%
Accommodation & food services
1,790,800
165,100
9.2%
985,200
61,900
6.3%
4,284,900
327,500
7.6%
16,459,700
1,322,600
8.0%
Information & communication
Other services
Total
Source: SQW analysis of ONS Business Register and Employment Survey, 2010
5.6
Using Scotland’s share of UK employees per sector as an indicative estimate of Scotland’s
share of UK e-commerce sales would suggest that Scotland’s total e-commerce sales (in
sectors and firm sizes covered by the ONS e-commerce survey) were approximately £29
billion in 2010, of which £7.5 billion were through websites and £21.5 billion through other
ICTs, as shown in the table below.
Table 5-3: Implied e-commerce sales for Scotland, 2010 – before adjustments
Unadjusted implied
Scotland sales over
websites (£bn)
Unadjusted implied
Scotland sales
over ICT other than
websites (£bn)
Unadjusted implied
total ecommerce
sales for Scotland
(£bn)
Manufacturing
0.28
8.03
8.30
Utilities
0.81
0.94
1.75
Construction
0.03
0.41
0.44
Wholesale
2.69
8.48
11.16
Retail
1.09
0.26
1.35
Transport & storage
0.72
1.96
2.67
Accommodation & food services
0.39
0.06
0.45
Information & communication
0.65
0.70
1.35
Other services
0.83
0.64
1.47
Total
7.47
21.48
28.94
Source: SQW analysis
5.7
As discussed above, we do not have firm statistics as to whether Scotland’s current
performance in e-commerce sales is better or worse than the UK average – beyond
differences accounted for by Scotland’s industrial structure vs the UK average. For the
purposes of this analysis, therefore, we have chosen to not to apply any adjustment for
Scotland’s over/under-performance in e-commerce vs the UK average.
5.8
The ONS e-commerce survey report notes that it is not possible to estimate what the survey
results would be if business with less than ten employment were still covered by the survey.
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However, it goes on to note that in 2004, the last year that these businesses were included,
ONS estimated that they accounted for 6.6% of total sales over the internet.
5.9
In the absence of any better data, we have therefore adjusted the above totals by a factor of
1.071 [= 1/(1-0.066)], which brings our estimate of Scotland’s total e-commerce sales in
2010 to £31 billion, consisting of about £8 billion over websites, and £23 billion through
other ICTs.
Estimate of direct Gross Value Added
5.10
In order to estimate the approximate GVA associated with these sales, we have used the GVA
to turnover ratios shown in the table below.
Table 5-4: GVA/turnover ratio per sector (uses most recent data, which is for 2009)
Total turnover in
Scotland (2009)
£m
GVA at basic
prices 2009 £m
GVA/turnover ratio
35,212
12,680
36%
N/A
N/A
37%
Construction
14,820
5,825
39%
Wholesale
30,164
4,793
16%
Retail
23,468
6,426
27%
Transport & storage
9,413
5,118
54%
Accommodation & food services
5,342
2,580
48%
Information & communication
6,417
3,200
50%
23,480
12,139
52%
Manufacturing
Utilities17
Other services
Source: SQW analysis of Scottish Government Annual Business Statistics for 2009, and ONS Annual Business Survey
5.11
Applying these ratios to Scotland’s e-commerce sales per sector, we estimate that the direct
GVA for Scotland associated with e-commerce (in the sectors and business sizes covered by
the ONS e-commerce survey) was approximately £9 billion in 2010, consisting of £2.5 billion
through websites and £6.6 billion through other ICTs.
Table 5-5: Implied GVA associated with e-commerce sales for Scotland, 2010 – before adjustments
Unadjusted implied
Scotland GVA over
websites (£bn)
Unadjusted implied
Scotland GVA over
ICT other than
websites (£bn)
Unadjusted implied
total ecommerce
GVA for Scotland
(£bn)
Manufacturing
0.10
2.89
2.99
Utilities
0.30
0.35
0.65
Construction
0.01
0.16
0.17
Wholesale
0.43
1.35
1.77
17
Turnover and GVA are not available for Scotland’s utilities sector, due to disclosure issues. We have therefore
used the GVA/turnover ratio calculated from the UK-level statistics for this sector.
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Unadjusted implied
Scotland GVA over
websites (£bn)
Unadjusted implied
Scotland GVA over
ICT other than
websites (£bn)
Unadjusted implied
total ecommerce
GVA for Scotland
(£bn)
Retail
0.30
0.07
0.37
Transport & storage
0.39
1.06
1.45
Accommodation & food services
0.19
0.03
0.22
Information & communication
0.32
0.35
0.67
Other services
0.43
0.33
0.76
Total
2.46
6.59
9.05
Source: SQW analysis
5.12
Adjusting by a factor of 1.071, again, to account for firms with employment of less than ten,
brings our estimate of the total direct GVA associated with Scotland’s e-commerce sales to
£9.7 billion in 2010, consisting of £2.6 billion over websites, and £7.1 billion through other
ICTs. It should be emphasised that these numbers are indicative estimates, to give an idea of
the scale of activity. They are based on UK-level data, adjusted for Scotland’s share of UK
employees in each sector, as there is no definitive source for such data at the Scotland-level at
present.
5.13
To put this into context, the estimate of direct GVA associated with Scotland’s total ecommerce sales represents about 10% of Scotland’s total GVA (£102 billion). Although ecommerce is not a sector as such, it is still interesting to note the value of e-commerce is now
much larger than the total economic contribution of Scotland’s retail sector (£6.4 billion GVA
in 2009 for ‘Retail trade, except of motor vehicles and motorcycles’). Within this, the direct
GVA associated with Scotland’s e-commerce sales over websites (as opposed to other ICTs)
is now similar to the contribution of Scotland’s total beverages industry (£2.7 billion GVA in
2009 for ‘Manufacture of beverages’).
5.14
The ONS E-commerce Survey report does not calculate a UK GVA figure from e-commerce
sales. However, using the same approach as described above (i.e. applying average
GVA/turnover ratios per sector) suggests that e-commerce activity in the UK (excluding the
financial sector) is associated with around £128 billion in GVA (10% of the UK’s GVA in
2010, which was £1.3 trillion).
Estimate of direct employment
5.15
In order to derive estimates for the direct employment associated with Scotland’s e-commerce
sales and GVA we apply average GVA per employee per sector. As shown in the table below,
this suggests a total of about 183,000 direct jobs associated with Scotland’s e-commerce
sales, of which 61,000 are associated with e-commerce over websites, and 122,000 associated
with e-commerce over other ICTs.
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Table 5-6: Implied employment associated with e-commerce sales for Scotland, 2010 – before
adjustments
Average GVA
per employee
(2009) £
Unadjusted
implied Scotland
employment
associated with ecommerce over
websites
(thousands)
Unadjusted implied
Scotland
employment
associated with ecommerce over ICT
other than websites
(thousands)
Unadjusted
implied
Scotland
employment
associated
with total ecommerce
(thousands)
66,521
1.5
43.4
44.9
176,729
1.7
2.0
3.7
Construction
48,655
0.2
3.3
3.6
Wholesale
39,122
10.9
34.4
45.3
Retail
27,598
10.8
2.6
13.4
Transport & storage
51,674
7.5
20.6
28.1
Accommodation & food
services
15,320
12.2
2.0
14.2
Information & communication
54,759
5.9
6.4
12.3
Other services
42,438
10.1
7.8
17.9
60.8
122.6
183.4
Manufacturing
Utilities
Total
Source: SQW analysis of Scottish Government Annual Business Statistics for 2009, and ONS Annual Business Survey
5.16
Adjusting by a factor of 1.071, again, to account for firms with employment of less than ten,
brings our estimate of the total direct employment associated with Scotland’s e-commerce
sales to approximately 196,000 in 2010, consisting of 65,000 associated with e-commerce
over websites, and 131,000 associated with e-commerce through other ICTs.
Estimates of indirect & induced GVA and employment
5.17
5.18
The above estimates for direct GVA and employment do not tell the whole story, however.
There are ‘multiplier’ effects through the economy associated with those firms which are
selling products and services through e-commerce:

indirect effects, associated with the firms drawing on the products and services of
other employers in the Scottish economy (note that this includes products and
services to support the firms’ entire operations, not just for the website/other ICT
aspects)

induced effects, associated with employees spending their wages in the Scottish
economy.
These effects can be estimated through the use of ‘type II multipliers’, which reflect both the
indirect and induced effects associated with direct employment and direct GVA. The values
we assume, for the sectors covered by the ONS e-commerce survey, are shown in the table
below.
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Table 5-7: Scotland-level type II multipliers per sector
Employment multiplier
range
Assumed
employment
multiplier
GVA multiplier range
Assumed
GVA
multiplier
Manufacturing
1.00 to 13.41, with a mean
of 2.04
2.04
1.00 to 7.40, with a
mean of 1.93
1.93
Utilities
1.77 to 4.15, with a mean of
3.37
3.37
1.31 to 2.83, with a
mean of 2.17
2.17
Construction
2.19
2.19
2.14
2.14
Wholesale
1.28 to 1.65, with a mean of
1.47
1.47
1.42 to 1.63, with a
mean of 1.53
1.53
Retail
1.31
1.31
1.52
1.52
Transport & storage
1.37 to 2.49, with a mean of
1.91
1.91
1.51 to 2.54, with a
mean of 1.90
1.9
Accommodation &
food services
1.24
1.24
1.5
1.5
Information &
communication
1.64 to 2.02, with a mean of
1.83
1.83
1.41 to 1.61, with a
mean of 1.51
1.51
Other services
1.33 to 2.70, with a mean of
1.66
1.66
1.13 to 1.77, with a
mean of 1.50
1.5
Source; SQW analysis of Scottish Government Type II multipliers for 2007
5.19
Applying these multipliers to the employment and GVA per sector shown above, and
adjusting to account for firms with employment less than ten, we estimate that Scotland’s ecommerce sales could be supporting an additional 146,000 jobs and £7.5 billion of GVA in
Scotland18 through indirect and induced multiplier effects.
18
These calculations make use of standard employment and GVA multipliers to calculate an estimate of the wider
economic impact of e-commerce in Scotland. In order to produce a more accurate figure, research would be
required to assess whether business output generated through e-commerce results in different multiplier effects.
We would suggest that overall the additional demand for suppliers and the local spending of business employees
are likely to be broadly similar and for that reason are satisfied that the available multipliers are appropriate to use.
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6: Options for enhanced public sector support
6.1
In parallel with our desk research, our consultations tested a number of potential options for
improved public sector support of e-commerce in Scotland. As would be expected, there were
varying views on what should be done. In the sub-sections below, we present SQW’s view on
each type of support tested, in the light of our consultations, and our review of the relevant
literature and data for this study. Whilst the available evidence suggests that Scotland is
broadly in line with the UK average in terms of business adoption of e-commerce, the scale of
the potential opportunity, the recent performance in wholesale/retail exports and the views of
consultees suggest that a number of potential improvements in support for e-commerce could
be considered.
6.2
Consultees were asked to comment on how the current provision of e-commerce support in
Scotland compares to what is offered in other parts of the UK. However for most, this issue
proved difficult to answer. For some of the consultees, there was a perception that there are
more events are available in England specifically dealing with the topic of e-commerce. What
was not clear was whether these events were being delivered by the public or private sector.
Awareness-raising
6.3
6.4
Given our findings from our consultations and desk research, there appears to be considerable
scope for awareness-raising re e-commerce in Scotland. The issue is not now so much
introducing the concept to Scottish businesses, but rather to:

increase the profile of our e-commerce success stories – celebrating examples of
businesses achieving rapid growth through online exports to the rest of the UK and
overseas; this would help to attract recruits into Scottish e-commerce operations and
suppliers, stimulate potential entrepreneurs, and encourage established businesses
who have tried e-commerce, without great initial success, to re-engineer their
implementations/processes and make it work well

help to raise awareness of how to go about doing e-commerce well (as opposed to just
doing it)

establish a more consistent understanding and usage of the terminology –
distinguishing between the particular challenges of e-commerce (e.g. analytics,
design, payment systems, conversion rates, logistics, etc.) from the more general
issues around e-business

help to raise awareness of the e-commerce suppliers available in Scotland, making it
easier for potential e-commerce traders to know where to go for support and advice;
this could be the role of public sector organisations alongside relevant trade
organisations such as ScotlandIS.
Potential mechanisms for such awareness raising could include:
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
Scottish Government ministers making more frequent mention of Scottish ecommerce success stories (from a wide variety of sectors) in their public speeches –
especially those managing to create substantial export growth; these would need to be
informed by concise, timely case study examples collated by Scottish Enterprise and
Highlands and Islands Enterprise (and not necessarily just those companies directly
supported by SE and HIE)

making frequent and consistent references to ‘e-commerce’ on SE’s, HIE’s and SDI’s
websites, supported by relevant and up-to-date information and examples: increasing
the ‘keyword frequency’ as one of our consultees put it

exploring the potential for major e-commerce events to be hosted in Scotland.
Development of official statistics on e-commerce in Scotland
6.5
The need for this study arose from the current lack of any official statistics on e-commerce
activity in Scotland. With e-commerce accounting for an increasingly important proportion of
Scotland’s GVA, and GVA growth, we would suggest that this is a serious gap in the current
official economic statistics for Scotland, and one that the Scottish Government should seek to
address with ONS.
Guides to help companies with e-commerce adoption
6.6
Some of our consultees were sceptical as to the extent to which SE could realistically develop
and maintain detailed practical guides to help companies with e-commerce adoption (e.g. on
the Business Gateway website). Given the pace of change in e-commerce, we share that
scepticism.
6.7
We suggest that SE, working alongside other public sector organisations, focuses on ensuring
that the basic advice on the Business Gateway website is up to date, in as far as it goes, with
links to other relevant sources of more detailed information and support, and ensuring that
this site is itself search engine optimised to be high on the rankings of results for companies
based in Scotland looking for help and information on e-commerce.
6.8
In addition, we understand that the new Scottish Business Portal is currently being developed
by SE and this would appear to be another vehicle for ensuring effective information and
advice on e-commerce for Scottish businesses.
Facilitating enhanced networking opportunities
6.9
The views of consultees were particularly varied with respect to the advisability of creating
new networking opportunities – with some suggesting that Scotland is already ‘awash’ with
such opportunities, while others were of the view that there were few opportunities for people
involved in e-commerce to come together and discuss issues of specific relevance to ecommerce.
6.10
We consider that both perspectives are correct: there are many opportunities for networking
through channels such as the Chambers of Commerce, the FSB, ScotlandIS and other industry
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associations; but few of these organisations’ events focus specifically on e-commerce. Given
the fast-moving nature of e-commerce, we agree with some of our consultees that there is a
case for there being more in the way of regular events in which established and potential ecommerce traders can come together and share their experiences, exchanging ‘tips and tricks’,
and being able to engage in conversations with expert suppliers, on a commitment-free and
cost-free basis. We would suggest that SE engages with organisations such as those already
mentioned, to explore the potential for incorporating such events into their programmes.
Changes in education curricula (schools, FE, HE)
6.11
The availability of people skilled in e-commerce was variously described by our consultees as
‘abysmal’, ‘the main weakness’, and ‘not a problem’.
6.12
However, it appears to be clear (primarily from unofficial sources such as LinkedIn,
ITjobswatch, Econsultancy etc.) that Scotland is an order of magnitude behind the Greater
South East of England in terms of the numbers of people considering themselves to be ‘in ecommerce’. This would suggest that ways of strengthening the supply of e-commerce skills in
Scotland should be assessed.
6.13
Although SE could have an influencing role, we would anticipate the main organisations for
leading skills related support would be Skills Development Scotland and the Scottish Funding
Council19. There may be a case, for example, for one of Scotland’s central belt universities
offering a one-year MSc course specialising in e-commerce, offered to students with a variety
of first degrees and developed and delivered in liaison with industry, in order to help
strengthen the supply of skills into the e-commerce market – both for traders and suppliers.
This would be analogous to the role that Abertay University has played in strengthening the
supply of skills into Scotland’s video games industry.
Grants
6.14
Most consultees agreed that grants would not be an appropriate form of public sector support,
in encouraging businesses to up their game in e-commerce. If carefully researched and done
correctly, there is a compelling Return on Investment for e-commerce operations, and this
should be one of the key messages from SE and HIE (an argument which would be made less
convincing if a grant was offered).
Better access to support in embracing e-commerce
6.15
We have uncovered various issues in terms of current or potential e-commerce operations
getting access to both public sector and private sector support:

some confusion over whether SE is currently ‘allowed’ to support retailers
19
It is worth highlighting that a related research study on the skills requirements for Scotland’s IT profession has
been commissioned by Skills Development Scotland and Scottish Enterprise. This considers wider issues around
promoting IT as a career with young people, including those at school, FE and HEIs.
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
6.16
lack of awareness amongst some e-commerce operations of the expertise available in
Scotland, and where to go for help.
In the light of these issues we suggest the following:

Ensure there is complete clarity internally, within SE and SDI, on the position re
support for retailers based in Scotland, and communicate this position externally; we
would suggest that it would be entirely appropriate to support retailers in developing
e-commerce operations focused on exports to the rest of the UK and overseas.

Consider developing some form of online resource listing Scottish suppliers of ecommerce services in Scotland – preferably with some information on their areas of
expertise, the size of company, example clients, and location (similar to what has
been provided for priority sectors). In order to minimise administrative burden this
would need to incorporate a mechanism for member updating. Social media (such as
LinkedIn Groups) may be a useful vehicle for such a resource.

Ensure that publicly-funded ICT advisers and international trade advisers are kept
aware and up to date as to the expertise available in the e-commerce supplier base in
Scotland, possibly using the above online resource as a means of staying up to date.
Greater investment in /more intensive business support
6.17
In terms of the one-to-one support provided by the public sector, we suggest the following:

Recognising that e-commerce is a particularly fast-moving and wide-ranging area,
invest in regular training of SE’s ICT advisers on e-commerce as part of the
Continual Professional Development – perhaps delivered in partnership with some of
the leading Scottish suppliers. The aim would not be to position these advisers as ecommerce implementation advisers, but to ensure that they are able to ask the right
questions of their clients, spot weaknesses in existing e-commerce set-ups, and know
where to point the client for more detailed advice and support.

Consider offering/facilitating e-commerce site reviews for large Scottish companies,
including retailers, and food and drink companies. Various consultees made the point
that there is a big difference between having an e-commerce website and doing ecommerce really well. With much less critical mass of e-commerce activity in
Scotland than there is in the Greater South East, there is a risk that even our larger
companies are less ‘savvy’ than their counterparts in southern England in their ecommerce implementations. The economic impact to Scotland from big
improvements to these companies’ e-commerce performance (in terms of exports to
the rest of the UK and overseas), could potentially be substantially greater than the
accumulated benefits from supporting many smaller companies.
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7: Conclusions and recommendations
Summary of conclusions
E-commerce is large and important (obviously)
7.1
It hardly needs to be said that e-commerce is a critical aspect of modern business life. Using
the ONS’s definition of e-commerce, we estimate that about 200,000 direct jobs and £10
billion in direct GVA (c. 10% of Scotland’s GVA) are associated with Scotland’s £31 billion
in e-commerce sales p.a. (of which about £8 billion of sales are over websites). As previously
noted, it should be emphasised that these numbers are indicative estimates, to give an idea of
the scale of activity. They are based on UK-level data, adjusted for Scotland’s share of UK
employees in each sector, as there is no definitive source for such data at the Scotland-level at
present.
It offers substantial opportunities for Scotland
7.2
This is a rapidly growing area. According to ONS, the UK’s e-commerce sales increased by
19% over the period 2008 to 2010, notwithstanding the economic downturn.
7.3
The UK has a world-leading position in one important aspect of e-commerce: online retail.
Boston Consulting Group estimates that online retail accounted for 13.5% of all retail in the
UK in 2010, versus 7.1% in Germany (the next highest share amongst the major economies).
7.4
A high proportion of the e-commerce sales of Scottish businesses are exports – to the rest of
the UK or overseas. Statistics are not available on this, but our consultations suggested that
the large majority of sales (90% +) are typically to customers outwith Scotland. The ONS’s ecommerce survey found that about 42% of UK business with online sales had online sales to
customers based in other parts of the EU, and 33% of UK businesses with online sales had
online sales to customers based outside the EU.
Scottish consumers are somewhat less likely than average to use e-commerce
themselves…
7.5
Eurostat figures indicate that about 64% of adults in Scotland had ordered goods and services
online over the previous 12 months, in 2010 – below the UK average of 67%.
…but, on the face of it, various indicators point to Scotland’s businesses being
broadly in line with the UK average in terms of online sales
7.6
Some regional breakdown information has been obtained from surveys of small businesses by
BIS and FSB; these appear to indicate that Scotland is broadly in line with the UK average in
terms of the proportions of businesses trading online (35% in Scotland vs 36% for UK in the
FSB survey; 36% in Scotland vs 39% for UK in the BIS survey).
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7.7
Looking specifically at the wholesale and retail sector over the period 2003 to 2009 (in which
e-commerce was growing rapidly), we find that Scotland’s GVA in this sector increased by
18% over that period: the 5th highest growth rate out of 12 nations and regions.
However, other indicators suggest that Scotland is way behind other parts of
the UK in terms of having “e-commerce people”…
7.8
Our analysis of LinkedIn found that about 1,200 members located in Scotland’s cities
mentioned ‘e-commerce’ in their profiles, compared with 13,000 members based in London.
7.9
Data from itjobswatch.co.uk found that Scotland had the lowest proportion of any
nation/region in terms of advertised IT jobs citing ‘e-commerce’ over the last 3 months: 2% in
Scotland versus 11% in London and 10% in the East Midlands. Looking at the time series
since 2004, there has been a clear growth in this ratio for the UK as a whole (c. 3% in 2004
rising to c. 9% in 2012), while the proportion for Scotland has oscillated around the 3% mark.
7.10
Statistics from Google Insights for Search suggest that the intensity of business interest in
searching for information on web-based e-commerce has been about 40% lower in Scotland
than in England over the last year.
…and it should be investigated whether this may have accounted for some of
the reduction in Scotland’s wholesale and retail exports over the last few years
7.11
Of all the sectors covered by the Scottish Government’s Global Connections survey, the
‘wholesale, retail and repairs, hotels & restaurants’ sector posted the worst change in export
performance over the period 2007 to 2010: an £875 million reduction in exports (-11%)
between 2007 and 2010, compared with overall exports from Scotland increasing by £4.5
billion (+7%) over the same period, notwithstanding the economic downturn.
7.12
As found by the ONS e-commerce survey, these wholesale and retail sectors are the most
dependent on website sales. With e-commerce being a rapidly moving area, and with the
numbers of ‘e-commerce people’ being relatively few in Scotland (both in terms of suppliers
and in-house experts), it would seem to be entirely possible that Scotland’s wholesale and
retail sector’s export performance could be suffering from a relatively weak position in ecommerce. However, this is a hypothesis that we are not able to prove with the available
data,20 and the factors behind the trends in Scotland’s wholesale/retail export performance
warrant further investigation.
There is scope for improvements to the public sector’s support for (webbased) e-commerce in Scotland, in order to help develop a critical mass of
activity
7.13
Whilst the available evidence suggests that Scotland is broadly in line with the UK average in
terms of business adoption of e-commerce, the scale of the potential opportunity, the recent
performance in wholesale/retail exports and the views of consultees suggest that a number of
potential improvements in support for e-commerce could be considered. Our overall
20
An alternative hypothesis is that the growth in ‘manufacture of food & beverages’ exports has to some extent
been at the expense of exports previously allocated to the wholesale and retail sectors.
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conclusion is that e-commerce – especially web-based e-commerce - is sufficiently large,
important, fast-moving and ‘easy-to-get-wrong’ that it warrants a refreshed approach by the
public sector. The relevant market failures are imperfect information (e.g. knowing who the
suppliers are, knowing ‘tips and tricks’ on how to do e-commerce well) and externalities
(with the numbers of e-commerce people heavily concentrated in the Greater South East, that
area benefits from a virtuous circle of people setting up e-commerce operations where there is
already a plentiful supply of skills and experience; our sense is that Scotland is still some way
off from having genuine critical mass of e-commerce expertise).
7.14
Our recommendations are presented below for the most important actions by public sector:
most of these are relatively straightforward, and none are particularly resource-intensive,
relative to other areas of investment. We think that some simple, smart changes in approach
can make quite a substantial difference in this area.
Summary of recommendations
7.15
In the light of our research and the above conclusions we offer the following
recommendations21. Whilst we anticipate that in most cases SE should have a leading and
coordinating role, there are some recommendations that will require the involvement of other
public sector organisations (such as SDI, HIE, the Scottish Government, SFC and SDS) and
industry bodies such as ScotlandIS and eSkills UK.

Recommendation 1. Undertake re-vitalised awareness-raising activity on ecommerce. Our suggested approach to this would include, for example: working with
the Scottish Government to increase the frequency of ministers referring to our ecommerce success stories; making frequent, consistent references to e-commerce on
SE and SDI websites and in events/training for businesses; and exploring the
potential for major e-commerce events to be hosted in Scotland.

Recommendation 2. Seek to put in place the collection and analysis of regular
official statistics on e-commerce in Scotland, through official requests to ONS.

Recommendation 3. Explore the potential for more frequent and regular
networking opportunities specific to e-commerce, in discussion with organisations
such as Chambers of Commerce, FSB, ScotlandIS and other industry associations.

Recommendation 4. Assess ways of strengthening the supply of e-commerce
skills in Scotland. We suggest, for example, that it would be worth assessing the
feasibility of a Scottish university offering an MSc in e-commerce, in liaison with
HEI partners.

Recommendation 5. Enhance public sector support for e-commerce operations
in Scotland. We suggest that specific actions here could include:
21
The rationales for these recommendations are given in section 6, and not repeated in this summary.
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
ensuring that the e-commerce areas on the Business Gateway website and
new Scottish Business Portal are kept up to date and optimised for relevant
web searches by Scottish companies looking for help on e-commerce

ensuring there is complete clarity internally, within SE and SDI, on the
position re support for retailers based in Scotland, and communicating this
position externally

developing/ facilitating some form of online resource listing Scottish
suppliers of e-commerce services in Scotland

ensuring that publicly-funded ICT advisers and international trade advisers
are kept aware and up to date as to the expertise available in the e-commerce
supplier base in Scotland

investing in regular training of SE’s ICT advisers on e-commerce as part of
the Continual Professional Development – perhaps delivered in partnership
with some of the leading Scottish suppliers.

considering offering/facilitating e-commerce site reviews for large Scottish
companies, including retailers, and food and drink companies.
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Annex A: Consultees
A.1
We are grateful to the following consultees who have participated in this study.
Table A-1: Consultees
Name
Organisation
Finlay Carmichael
C2 Software
John Cavanagh and Kate Little
Digital Six
David Murdoch
GSPC
Theresa Swayne
Highlands and Islands Enterprise
Peter Mowforth
Indez
Ann-Maree Morrison
Labels4Kids
Steve Dalgleish
Lynchpin
Andrew Cairns
Murray Farm Care
Carolyn Burnett
NN4M
Stephen Hunter
Radiator
Polly Purvis
ScotlandIS
Alex McGuire and Derek Dougall
Scottish Development International
Jim Timmoney
Scottish Enterprise
Trudy Nicolson
Scottish Government
Marion Beattie
Skills Development Scotland
Gerry Docherty
Technology Advisory Group
Calum Kegg
Toolstop
Chris Rourke
User Vision
A-1
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Final Report to Scottish Enterprise
Annex B: Data sources explored
Table B-1: Potential data sources explored
Source
Rationale
Outcome
Akamai
Enquire if any potential data on geographic analyses
of e-commerce transactions/ traffic at a sub UK level
Data is collected at a national (UK)
level only
BIS: Small Business
Survey
To access a regional breakdown on the section on
business capability and use of technology
Regional breakdown provided
British Retail
Consortium: Online
retail stats
Enquire if any online retail statistics are collected at
a regional level and if any data is collected on
Scotland
No online retail statistics available for
Scotland as the online retail monitor
is based on number of retail searches
through Google
Cisco
Enquire if any potential data on geographic analyses
of e-commerce transactions/ traffic at a sub UK level
Data is collected at a national level
(UK) only
Dun & Bradstreet business database
Enquire if information is collected on e-Commerce
businesses.
No information on e-Commerce
businesses is collected
eBay
Access breakdown of eBay traders by region and
get a more detailed breakdown of available mcommerce data
Still waiting to hear back at time of
finalising report
Experian - business
database
Enquire if information is collected on e-Commerce
businesses
No information on e-Commerce
businesses is collected
FAME database
Check if any data is collected on online sales
No data is collected on online sales
through company records
FSB: Member
Survey 2010 and
2012 Voice of Small
Business
To access a geographic breakdown (Scot vs. UK) of
data in particular the sections on internet usage
Geographic breakdown of survey
data provided
IMRG: e-Jobs index
Enquire if any of the data used to compile the e-Jobs
index can be accessed at a regional geographic
level and if IMRG collect any data on Scotland. Also
enquire about accessing anonymous IMRG
Membership data by geography
IMRG have not broken any of their
research into a regional level in terms
of e-commerce. However they hope
to launch a delivery index that tracks
the percentage of parcels to regions
in Spring 2012. It was not possible to
access IMRG membership data
Logistics sector
bodies (Skills for
Logistics, Freight
Transport
Association)
Enquire if any data on e-commerce related
employment in the sector
Checked with both organisations –
unfortunately could not provide any
relevant data
ONS: BRES/
Annual Business
Survey
To access employment and financial data for
relevant SIC code 47.91 and access more detail
from the Annual Business Survey question 754 on
proportion of sales generated through mail order and
website
Data provided re SIC 47.91 but they
could not provide regional extracts of
the data from question 754
ONS: e-Commerce
and ICT survey
Enquire if the survey data can be accessed at a
lower geographic level than the UK.
The e-Commerce and ICT Survey
cannot be extrapolated to a Scotland
level due to conceptual challenges
with locational activity as it's possible
that all the activity gets allocated to a
single contact point where the
finance HQ for the enterprise is
based.
ONS: Retail Sales
To access data on value of online retail sales as a
Not possible to access this data at a
B-1
Scottish e-Commerce Study
Final Report to Scottish Enterprise
Source
Rationale
Outcome
Time Series
percentage of all sales by region
regional level.
Paypal
To request information on accounts and transaction
value in Scotland compared to other parts of the UK
No data available below the UK
market
WorldPay
To request information on accounts and transaction
value in Scotland compared to other parts of the UK
Still waiting to hear back at time of
finalising report
Post Office
Check if any data on e-commerce as a proportion of
all business broken down to Scotland and UK
regions.
No data of this kind is collected.
Scottish
Government: Global
Connections Survey
Enquire if data collected on online exports.
No data collected on online exports
Scottish
Government:
Scottish Annual
Business Statistics
To access employment and financial data for
relevant SIC code 47.91
Data provided
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Final Report to Scottish Enterprise
Annex C: Research documents
C.1
The following documents helped to inform this study.
Table C-2: Relevant research documents
Title
Author
Year
“Economic and Social Impact of Ecommerce:
Preliminary Findings and Research Agenda
OECD
1999
2010 annual survey into e-commerce and ICT –
Statistical bulletin
ONS
2011
A Review of eBusiness in Scotland in Small and
Medium Sized Businesses: Trends and Issues
Douglas Cruickshank (in
‘Scottish Affairs’)
2005
Assessing the contribution of retailing in
Scotland
DTZ
2011
BIS Small Business Survey 2010
BIS
2011
BT Scotland Young E-ntrepreneurs Awards
PYSTB
2012
Business Consumer Experience
OFCOM
2009
Communications Market Report – Scotland
OFCOM
2011
eCommerce in Europe: trends and outlook
FactFinder
2011
FSB Scotland Members Survey 2010
FSB
2010
IMRG e-Jobs index 2011
IMRG and edigital research
2011
Information economy report
UN
2011
Mobile Stata Summary
Incentivated
2012
OECD Guide to Measuring Info Society
OECD
2011
Online retail profile UK
Datamonitor
2011
Online Retailing: Britain and Europe 2012
Centre for Retail Research
2011
Pick n Mix – meeting the demands of the new
multi-channel shopper
PwC
2011
Research on Broadband and Business in
Scotland
Scottish Government
2011
Scotland’s Digital Future a Strategy for Scotland
Scottish Government
2011
Skills requirements for e-commerce and their
provision in Scotland
e-Skills UK
2011
The Connected Kingdom
Boston Consulting
2010
The State of the Internet
Akamai
2012
VNI Index and forecast
CIISCO
2011
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Annex D: Sector definitions
ONS E-commerce Survey
D.1
Table D-1 defines the industry groupings used in the ONS E-commerce Survey.
Table D-1: SIC codes used in ONS E-commerce Survey
Industry grouping
SIC categories (2007)
Manufacturing
Divisions 10-33
Utilities
Divisions 35-39
Construction
Divisions 41-43
Wholesale
Divisions 45-46
Retail
Division 47
Transport and Storage
Divisions 49-53
Accommodation and Food Services
Divisions 55-56
Information and Communication
Divisions 58-63
Other Services
Divisions 68-74, 77-82 and 95.1
Source: ONS E-commerce Survey 2010
D.2
The sectors not included are Section A (Agriculture, Forestry and Fishing), Section B (Mining
and Quarrying), Division 75 (Veterinary Activities), Section O (Public Administration and
Defence, Social Security), Section P (Education), Section Q (Health and Social Work),
Section R (Arts, Entertainment and Recreation) and Section S (Other Service Activities
except SIC 95.1 (Repair of computers)
Scottish Government Global Connections Survey
D.3
Table D-2 provides the SIC codes used in the Scottish Government Global Connections
Survey.
Table D-2: SIC codes used in Global Connections Survey
Industry grouping
SIC categories (2007)
Agriculture, Forestry & Fishing
01, 02, 05
Mining, Quarrying & Extraction of Petroleum
10, 11, 13, 14
Manufacture of Food Products and Beverages
15
Of Which Manufacture of Distilled Potable Alcoholic Beverages
15.91
Manufacture of Textiles, Footwear, Leather & Clothing Products
17, 18, 19
Manufacture of Paper, Print and Publishing
21,22
Manufacture of Coke, Refined Petroleum Products & Nuclear Fuel,
Manufacture of Chemicals & Chemical Products
23, 24
Manufacture of Metals and Metal Products
27, 28
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Final Report to Scottish Enterprise
Industry grouping
SIC categories (2007)
Mechanical Engineering
29
Electrical and Instrument Engineering
30, 31,32,33
Manufacture of Transport Equipment
34, 35
Other Manufacturing Industries
20, 25,26,36,37
Electricity, Gas & Water Supply
40, 41
Construction
45
Wholesale1, Retail & Repairs, Hotels & Restaurants
50, 51, 52, 55
Land, Water & Air Transport & Auxiliary Transport Acitivities
60, 61, 62, 63
Post & Telecommunication
64
Financial Intermediation
65, 66, 67
Real Estate & Renting of Equipment
70, 71
Business Services2
72, 73, 74
Education
80
Other Services3
85, 90, 92, 93
Source: Scottish Government Global Connections Survey 2010
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Final Report to Scottish Enterprise
Annex E: Examples of online retail awards
E.1
Table E-1 includes a list of IMRG’s annual awards for 2010 and 2011, indicating the location
of the companies’ headquarters.
Table E-1: IMRG annual award winners and HQ location in the UK 2010 and 2011
2010 Winners
Region
2011 Winners
Region
Online Gold Award (OLGA):
Marks & Spencer
London
ASOS
London
Best Multichannel Retailer:
Marks & Spencer
London
John Lewis
London
Best Large Online Retailer:
ASOS
London
ASOS
London
Best use of Online Content:
Marks & Spencer
London
Kiddicare
East
International e-Retail:
Wiggle
SE
ASOS
London
e-Commerce Site
Innovation:
Payvment
CA, USA
PrismaStar Limited
London
Re-design/Re-launch of the
Year:
L.K. Bennett and Marks
and Spencer (joint
winners)
London
Charles Tyrwhitt LLP
London
Further Search
Marketing
East
Best e-commerce Marketing
Agency:
Innovation in Delivery:
DPD UK
West Mids
Collect+
SE
Best Customer Service:
Kiddicare
East
Lovehoney Ltd
SW
Best e-Commerce
Marketing Initiative:
eBay Fashion Outlet
London
RS Components
East Mids
Best Small Online Retailer:
Prezzybox.com
West Mids
Party Delights Ltd
NW
Best e-Commerce Payment
Innovation:
Oasis (Aurora Fashions)
London
App55 Ltd
NW
Best Use of Social Media:
ASOS
London
ASOS
London
Best m-Commerce Retailer:
Ocado
East
Jessops
East Mids
Consumer Choice Award:
Webtogs
SW
Tonergiant.co.uk
NW
Source: IMRG, SQW analysis
E.2
Table E-2 includes details of the 2011 Online Retail Awards which includes one Scottish
based company, Labels4Kids.
Table E-2: 2011 Online Retail Awards
Award
Company
Region/ country
Online Retail Site of the Year:
Ty Mawr (www.lime.org.uk)
Wales
Multiple online retail site of the year
Sears Holdings (www.sears.com)
USA
Independent online retail site of the
year
Labels4Kids (www.labels4kids.com)
Scotland
Online retail portal site of the year
NotOnTheHighStreet (www.notonthehighstreet.com)
London
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Final Report to Scottish Enterprise
Award
Company
Region/ country
Online retail marketing campaign of
the year
Dairy Crest Milk&More (www.milkandmore.co.uk)
SE
Online retail mobile site of the year
Kiddicare (www.kiddicare.com)
East
Online retail launch site of the year
Made.com (www.made.com)
London
Babies & Children
Twisted Twee (www.twistedtwee.co.uk)
London
Beauty, perfumes & cosmetics
Escentual (www.escentual.com)
Wales
Books, magazines & newspapers
Green Metropolis (www.greenmetropolis.com)
NE
Cars and car accessories
Halfords (www.halfords.com)
West Mids
Computers and telecommunications
(inc mobile/cell)
MobileFun (www.mobilefun.co.uk)
West Mids
Electrical
Appliances Online (www.appliancesonline.co.uk)
East Mids
Fashion & clothing
Brand Alley (www.brandalley.co.uk)
London
Finance & insurance
Barclays Bank (www.barclays.co.uk/investments)
London
Food, soft drinks and alcoholic
drinks
Dairy Crest (www.milkandmore.com)
SE
Garden & gardening
Worldstores – Gardening
sites (www.worldstores.com)
London
Source: onlineretailawards.com, SQW analysis
E-2