A new report from Your Ecommerce Accountant has shown the continued growth of the ecommerce sector within the UK. Their report – using data from Companies House – showed a record 41,302 new ecommerce businesses were formed in 2021, a 38% year-on-year growth in registrations.
This took the number of new ecommerce businesses in the UK to over 100,000 for the first time (107,530 total ecommerce businesses registered in the UK at the start of January 2022).
One of the reasons for this continued growth is the shift to online business, with the pandemic helping to accelerate this process.
However, it’s not all rosy news in the ecommerce sector, with a huge proportion of ecommerce businesses being dissolved in the same period. The data shows the high rate of UK ecommerce business failure last year: with 22% of businesses created in 2020 dissolved by the end of 2021.
Considering the data, it’s clear that whilst ecommerce as a sector continues to grow, there remains a lot of casualties along the way.
The report gives some reasons as to why ecommerce businesses fail including:
- Difficulty in Competing Against Established Brands
- Unforseen Startup Costs
- Not understanding of the financial health of the business
Ben Sztejka ACA, Founder of Your Ecommerce Accountant said of the findings in the report: “The data was interesting for a number of reasons – it’s good to see so many people taking the plunge and starting new ecommerce businesses in the UK, but obviously disappointing to see that almost a quarter of these didn’t make it past the first few years of trading.”
“In our experience working with ecommerce businesses, we find that common early business issues include difficulty in gaining online visibility for their product as well as some businesses trying to scale too quickly, creating an unsustainable business model.”
“We recommend all new ecommerce business owners create a detailed business plan to be reviewed by someone with experience in the sector if possible. It’s also important to understand your finances at every step of your journey: know your profit margin inside out and have a rainy day fund for unexpected costs, which will undoubtedly surface at some point.”
You can see the full report here – https://yourecommerceaccountant.co.uk/uk-ecommerce-business-fail/.
