E-commerce and Ecosse: big changes must be on our shopping list
In this opinion piece in the Herald, Peter Mowforth, CEO of INDEZ, argues that Scotland needs to make fundamental reforms to take advantage of the online trading boom.
"E-commerce taking over the high-street is no longer news. Take a poll of your neighbours and ask them how much of their Christmas shopping they did online. I did. The answer was around 70%. More importantly for e-commerce, as with icebergs, most of what is going on is below the surface. What I'm interested in are the implications for Scotland in terms of wealth, jobs and our balance of trade.
Answers to these questions only make sense when you look at the whole thing. Do that and you quickly see that e-commerce has become the key driver for most forms of trade. It's the biggest thing in business today.
Official UK Government figures show total e-commerce transactions, just within the UK, are around £400 billion, with around one fifth of that being what e-commerce has already taken from the high street. It is growing at around 20% so there is not much chance for reversals. Four fifths of e-commerce is a mix of business-to-business and e-procurement.
I work for a Glasgow-based company called INDEZ. The company looks after over 20 Scottish e-commerce businesses. Each has sales that are six, seven or eight figure turnover. Average growth during 2011 has been around 8% (per month) with exports outwith the UK accounting for almost 40%.
Within the e-commerce industry, these figures are not unusual. When Google commissioned the Boston Consulting Group to find out which part of the world was best at e-commerce, the answer turned out to be the UK. But, before we pat ourselves on the backs, you need to look more carefully at the data. When you do, the unfortunate truth is that UK actually means England. Whilst Scots are just as likely to buy online, most of where they buy from is in England. Look at the top 100 e-commerce businesses in the UK, and not one is Scottish owned.
The consequences for Scottish jobs look bleak. Our shops employ around a quarter of a million people. If we all move to buy online we will need a lot less than a quarter of a million new posties and courier van drivers.
One of the most significant inward investments in Scotland during 2011 has been the expansion of Amazon's Scottish operations. Scottish Enterprise's SDI helped make this happen so a hearty "well done" to them. Although this initiative will produce around 2,000 new jobs here, that's only a very small fraction of the 1.5 million jobs that are expected to be created from e-commerce in the UK over the next three years.
I looked at the Scottish Government's website and looked at how many times e-commerce is mentioned. The answer was that e-commerce was mentioned less than once for every five mentions of the word expenses.
My point here is that the subject does not appear to be considered important by our Government. Although there are no official e-commerce statistics, there is a lot of circumstantial evidence suggesting that we are running a very large online trade deficit with England. We're not doing anything about it because, in part, we don't measure it. You don't know what you don't know.
Scottish ministers tell us we are part of a knowledge economy and that skills and education will be a key foundation to our future growth and prosperity. Education and skills are pivotal to our future. Our biggest problem at INDEZ is being able to recruit top quality e-commerce specialists.
What's worse is that the companies that we work with cannot recruit skilled e-commerce managers to run and grow their businesses. They can find lots of people with creative web design skills or people that know about the social media. The problem is that e-commerce has almost nothing to do with these subjects, it's more to do with sales conversion, transactional optimisation and fulfilment process.
At the moment there are no up-to-date business-led courses anywhere in Scotland that provide the necessary training and skills needed to run an e-commerce business. No training, no certification, no viability testing, no standards.
Glasgow has been built on it's ability to trade. We see a few new 21st century businesses here in Glasgow stepping aboard the e-commerce train. Jenier now exports tea in volume to countries like Russia, India and China. Toolstop sells Bosch Power tools to Germans, CenturionSigns and AlexShanks are selling to the Middle East. E-commerce is the easiest, quickest and cheapest way to export. It creates jobs. It creates wealth.
We need to create large numbers of these new export-led rapidly growing e-commerce businesses. We need to be inspired by our few but rapidly rising Scottish success stories. We need to build new logistics infrastructure and new training facilities. We need to talk about the subject and to demonstrate leadership knowledge of the subject.
Do all this and instead of focusing on the slow death of traditional ways of buying and selling perhaps in 2012 we can start to think about what we need to do to grow our economy.
To think global in all that we do, and to make the words E-commerce and Ecosse have a lot more in common than just their first three letters.
