UK e-commerce businesses report revenue spikes in excess of 15% since the coronavirus lockdown

UK e-commerce companies have seen significant growth, both in revenues and repeat orders since lockdown. Firms report average annual revenue increases of more than 15% since April in line with the shift to online retail.

The study led by global M&A advisory firm Clearwater International and consumer data specialists Conjura analysed the financial performance of 21 mid-market UK e-commerce businesses ( £5m to £250m t/o) across the fashion, FMCG and beauty sectors from January to August 2020 compared to the same period in 2019.

E-commerce revenues started to increase from early April onwards. Figures show some businesses then saw week-on-week revenues spike by more than 50%, despite the fact e-commerce marketing spend didn’t trend upwards until early June.

The findings reveal companies that maintained their social marketing budgets reaped the rewards.

Richard O’Donnell, Head of Consumer and Partner at Clearwater International comments: “Companies that effectively used their customer data to back up very targeted paid search and social marketing activity during lockdown have been rewarded with far higher sales which may have been seen as a risky move but the strategy has paid off for them.”

Fran Quilty, CEO of Conjura, continues: “E-commerce businesses that held their nerve on social marketing spend during Covid saw weekly revenues rise by up to 60% when compared to 2019. Moreover, the repeat order rates of customers acquired between March and June suggest they will remain more valuable than those acquired before lockdown.

“Paid search has been the most popular marketing channel during Covid. All the companies surveyed raised their budgets, and by as much as 50% in some cases. By comparison, social marketing budgets fell by up to 30% between April and June. But paid social rebounded from late June onwards, spend is now 15% higher than at the same time last year.

Richard O’Donnell, Head of Consumer and Partner at Clearwater International, says: “Overall conversion rates have increased since lockdown began. Strong performance makes e-commerce very attractive to investors, despite the wider financial headwinds in the economy.

“There is still a lot of appetite among private equity to do deals in this space, but they will only want to invest in the very best businesses. This study illustrates how a lot of e-commerce businesses have demonstrated real robustness and strong growth over recent months, which shows there are deals to do.”

Fran Quilty, CEO of Conjura, concludes: “Some speculators worry increases in revenue amongst e-commerce businesses are temporary and more reflective of a lack of options. However, we are seeing recent cohort repurchasing rates that are stronger than before and indicative of high value long-term customers.”

MarketFinance awarded £10m grant

Fintech business lender MarketFinance has been awarded a £10m grant from the Capability and Innovation Fund (CIF), announced today by Banking Competition Remedies Ltd (BCR). The grant will be used to bring more choice and competition to the business lending industry.

MarketFinance, a household name in the UK business community, has provided over £3b in invoice finance and business loans to thousands of UK businesses since 2011. They were accredited to lend under the Coronavirus Business Interruption Loan Scheme (CBILS), providing term loans from £50,001 to £150,000 and revolving credit facilities from £50,001 to £5 million to UK SMEs.

Anil Stocker, CEO of MarketFinance commented: “We are delighted to receive this award. We will provide more businesses with a unique digital offering that allows them to get on with the day-to-day running of their businesses, giving value back to customers and bringing some much needed competition to the business lending market.”

As part of the commitments in securing the grant funding, MarketFinance will extend their services to sole traders for the first time, reaching over 3.5m business owners. The fintech business lender will also provide more finance options and create a range of new partnerships with banks, fintechs and technology companies to deliver and enhance the experience of businesses.

Anil Stocker added: “This is a difficult time for UK businesses who are desperately trying to find the right finance to keep their doors open. We know that customers find it hard to manage multiple finance products across multiple providers; it’s why many stay with the incumbent banks. We will deliver a solution that radically reduces the complexity of managing finances for our customers, combining the product sophistication of a large lender, with the user-friendliness of a fintech.”

Anil Stocker continued: “We know smaller SMEs and sole traders make up more than 90% of companies in the UK, yet they are at the greatest borrowing disadvantage. Our risk models are much better at understanding and serving these businesses than those of conventional lenders. It is our ambition to get £1b out to thousands of underserved SMEs in the next few years.

“We will match this £10m grant with money from our own funds to deliver this future vision. But, we can’t do it alone. We will be reaching out to a broad spectrum of partners who share our vision and ambition to deliver these goals. Our partnerships with Ebury, Barclays and Xero are testament to this. They are driven by agile people who deeply care and want to make a difference. We look forward to meeting more like-minded partners that will join us in this mission.”

Richard Anderson, Chair of BCR, said: “We know that the winners and all SMEs in general face challenging times as we head towards winter with both the Covid-19 pandemic and the resulting economic challenges ahead. For that reason, it has been exciting to see a very wide range of innovative approaches from so many applicants to supporting all sizes of SMEs in their banking needs. It has been difficult to narrow the awards down to a small number of outstanding winners and BCR looks forward to monitoring progress as they implement their programmes.”

MarketFinance business highlights (2019/20):

  • Updated brand name from MarketInvoice to MarketFinance to reflect launch of multi-product offering
  • Secured £56m Series B round (debt and equity funding), attracting new investors Barclays and Santander
  • Strengthened leadership team with a new CFO, CRO and CTO
  • Accredited as a CBILS lender for term loans and revolving credit facilities
  • In response to COVID-19 impact, launched a Furlough Advance product to ease cash flow pressure on businesses as they wait to be paid from HMRC

Lockdown tech trends here to stay

Six months on from the official government lockdown, Robert McKechnie, Open Banking Expert at Equifax UK, believes technology and digital transformation will continue to play an increasingly important role for companies within financial services: “The intersection between financial services companies, customers and technology has been irrefutably and permanently altered. COVID-19 and the consequent restrictions on movement and face-to-face interaction has forced businesses’ hands, increasing the appetite and urgency to explore technological solutions to replace outdated manual processes across the customer life cycle.

“The ‘digital agenda’ was already high on the list of priorities for many companies but lockdown has greatly accelerated its progress. In an effort to improve customer experience and develop more efficient and cost effective processes, many financial services businesses have introduced online customer onboarding, identification and validation. For example, the adoption of Open Banking has allowed companies in the banking, mortgage, insurance and motor finance sectors to make more informed and timely credit decisions.

“In a pandemic era of heightened financial vulnerability and uncertainty, decisions around credit and how companies interact with customers will be scrutinised more closely than ever, evidenced by the FCA’s draft guidance* last week stating firms must recognise individual circumstances and be flexible in their approach to minimise stress and anxiety. Continued digitisation, through the adoption of platforms that deliver early customer insights and real-time data, can provide a pathway to implement stringent affordability and income verification assessments, while identifying financially vulnerable customers and abiding by regulatory requirements.

“The true value and benefit of technological transformation and investment has become clear for financial services companies during lockdown. The future identification and adoption of new capabilities will be extremely important in both the short and long term, especially as the impact of COVID-19 continues to shape consumer outlook and behaviour.”

FSB: Second wave covid business support required

First Minister Nicola Sturgeon this afternoon outlined new measures designed to combat the coronavirus pandemic, including restrictions upon hospitality businesses’ opening hours. The FM also reiterated that people should work from home wherever possible.

Andrew McRae, the Federation of Small Businesses’ (FSB) Scotland policy chair, said: “Scottish business owners that listened to our political leaders’ statements today will be relieved that we’re not being forced into another full lockdown, but frustrated that the sacrifices made so far have been insufficient to control the virus.

“To avoid these restrictions becoming the final straw for many independent firms, we’ll need to see new financial support for those businesses hardest hit. Disappointingly, what we didn’t hear at Holyrood or Westminster were details of new help for firms forced to reduce hours or shut up shop. We also can’t forget about those businesses that haven’t been able to re-open due to ongoing restrictions.

“Many smaller businesses are close to exhausting their cash reserves, while others have taken on debt to adapt their operations to try and keep trading. Decision-makers looking for another push from local firms need to provide reassurance that they’ve both got a plan and got their back.”

Nolan appointed new CICM Chair

Debbie Nolan FCICM(Grad) has succeeded Pete Whitmore FCICM as Chair of the CICM Executive Board of Trustees. She is joined in her new position by Phil Rice FCICM as Vice Chair and Glen Bullivant FCICM as Treasurer.

Debbie, the UK CEO of global financial solutions company, Arvato, has been a graduate member of the CICM for more than 25 years. She has spent almost all of her working life in the credit industry in a number of different roles for high profile organisations, predominantly focused on consumer credit, recoveries and collections.

Debbie says she is honoured to be elected: “I’d like to think that I’ve been able to utilise the experience that I have gained in my ‘day job’ to help support and shape the CICM over the last two years and will continue to do so in the future. We need a collaborative, forward thinking Executive Board more than ever to tackle the challenges of a post-pandemic period that is likely to have a lasting impact on our industry.”

Sue Chapple, Chief Executive of the CICM, said she was delighted to welcome Debbie as Chair: “Pete has done an excellent job in steering the Executive Board with Debbie as his Deputy to Vice Chair, so Debbie will be able to hit the ground running. There is much to be accomplished over the next two years and Debbie’s knowledge, insight and experience will be critical as we take the CICM and its members on the next stage of our journey in promoting best-practice credit management.”

Debbie has represented Consumer Credit on the CICM Advisory Council since 2016 and has served as Vice Chair on the Executive Board for the last two years.

Other elected Executive Board Trustees are Larry Coltman FCICM, Victoria Herd FCICM(Grad) and Phil Holbrough MCICM.

SMEs running on empty as CBILS deadline looms

Bounce Back loans, the most popular HM Treasury support measure, used by SMEs are running low, finds the latest insights from fintech business lender MarketFinance. These SMEs are aware they can get more HM Treasury support by applying for larger loans through the Coronavirus Business Interruption Loan Scheme (CBILS) but did not know the deadline was end of this month.

Over 1.2m SMEs took on a Bounce Back loan to pay their suppliers (39% of SMEs did this) and bolstered their business by setting up ecommerce and online shopping channels (29% reported doing this) to attract new customers. However, they only have an average of £9,106 remaining of their Bounce Back loan and the majority expect this will run out later this month. Promisingly, 6% have already repaid their Bounce Back loan.

CBILS appetite

The CBILS initiative will conclude at midnight on 30 September 2020 with applications submitted before this deadline being valid for processing until the end of November. The majority of SMEs (77%) are aware of the larger loan scheme, CBILS, and 68% know they can refinance their Bounce Back loan using that facility.

The MarketFinance survey found that most SMEs (76%) would be keen on having a CBILS facility ‘on ice’ in case they need it later in the year in anticipation of larger bills, taxes due towards the end of the year. However, critically, almost two-thirds (63%) aren’t aware of the deadline (end of September) by when they should apply for this.

Ms Jo-Dee Loader, Managing Director of northwest-based retail supplier, The Retail Factory commented: Our customers range from small corner shops to high street retailers, when the lock down came we were heavily impacted as orders dried up and payments were delayed. Our £50k Bounce Back loan helped secure the business but as shops are reopening and need retail essentials, orders are picking up. We turned to MarketFinance to refinance with a CBILS loan and also got a revolving credit facility of £250k, for our invoices, to ensure we have the cashflow to service the demand and growth we expect in the next year. We’ve already hired more staff and plan to expand the business.”

Anil Stocker, CEO at MarketFinance, commented: “The Bounce Back Loan Scheme (BBLS) was a good short term fix for SMEs. It provided the necessary support during the lockdown but looking ahead, the CBILS cash will provide the impetus to do more. Not having the cash flow to sustain businesses at the back end of the year, could be disastrous for many of these SMEs.”

“It’s essential that businesses start looking beyond simply survival and begin evaluating how they can adapt their business to these Covid-conditions. There might be new ways to change the business model and get growth going again… Securing government-backed funding now, before the deadline, is an opportunity for businesses to access the working capital they need to build for the longer term The idea of these being “unprecedented times” has been thrown around a lot this year. Initiatives like the CBILS offer similarly unprecedented access to fee and interest-free funding – but only for a limited time.”

Financial well being

Many SMEs (77%) believe they will only hit 50% of their 2019 revenues. Two-thirds are still waiting to be paid for work they did pre-lockdown amounting to £33,906, on average. An improvement from June 2020 when they were waiting for £148,917.

Looking ahead to the end of the year, they don’t anticipate a festive rush. Over half (56%) believe seasonal demand will be lower than last year owing to the ongoing impact of COVID19.

Future and Brexit

SMES are fearful of more disruptions as 2020 draws to a close. Two-thirds (65%) reported a second mass lockdown (as COVID-19 cases increase) leading to supply chains being impacted causing delays in sales and payments as a cause of major concern.

On Brexit, two-thirds of SMEs believe that a no-deal exit presents huge risks for their business. Chief among these are having an available workforce, not having the information to guide them on how to do business and the impact on supply chains at borders. (Q12)

MarketFinance is accredited to lend under the Coronavirus Business Interruption Loan Scheme (CBILS), providing term loans from £50,001 to £150,000 and revolving credit facilities from £50,001 to £5 million to UK SMEs.

DIY fever prevents a second retail slump but it’s the High Street that really needs fixing up

Today’s ONS retail figures show the value of retail sales grew just 0.7% in August – in contrast to July’s 4.4%. The home delivery expert ParcelHero says it was only DIY’s 12.9% growth over pre-Covid levels that have prevented a second slump.

Today’s Office of National Statistics (ONS) retail figures for August show that the retail bounce-back has stumbled, says the home delivery expert ParcelHero. The value of all retail sales grew by just 0.7% in August – not the significant recovery stores had been hoping for and a marked slowdown from July’s 4.4% jump.

ParcelHero’s Head of Consumer Research, David Jinks MILT, says it was only a boom in DIY that saved retail’s recovery from stalling altogether.

‘August saw a burst of DIY fever, created because people stuck at home for months realised all the jobs that needed doing as soon as lockdown eased. Hardware, paint and glass stores’ sales were up 12.9% compared to the pre-Covid levels of February.

‘Once we have finished all those repairs and improvements while furloughed or working from home, where will any future growth come from?

‘The magic of the High Street has definitely faded. Today’s figures reveal fashion sales have tumbled 30% this year. The ONS says clothing and footwear businesses reported a disastrous -85.7% decrease in footfall this year. With a second wave of Covid reportedly surging, the outlook seems bleak indeed.

‘In contrast, online sales are up 51.6% YOY as shoppers continue to enjoy the benefits of shopping from home. Online clothing and footwear sales are up 30% on August 2019, so it’s clear many shoppers have abandoned the High Street and jumped online for fashion items. It’s true that e-commerce sales slipped a little compared to last month: -2.5% down compared to July. However, online is still gobbling over 28% of the entire retail spend, compared to the 20% share it took in February before the pandemic broke.

‘High Street retailers need to create unique and enticing reasons why shoppers will want to visit their stores again. Our town centres need their own DIY fixing-up crusade to give shoppers a reason to return.

‘Finally, as we’ve said many times, owners of physical stores and online stores need them to work symbiotically, with both services complementing each other. That is the only way forward for stores as retail claws its way back from the clutches of the coronavirus.’

Coronavirus–hit family businesses in the financial services sector continue to be the backbone of the economy

The new IFB Research Foundation The State of the Nation: The UK Family Business Sector 2019–20 report published this week showcases the unwavering relevance and contribution of family firms.

In the financial services sector there are over 71,000 family businesses, making up 79% of private sector businesses and employing almost 300,000 people.

Country-wide, the report reveals family firms contributed £657 billion to UK GDP in 2018, 31 per cent of the UK’s total GDP.

Their contribution to the UK economy has continued to grow over the years, with £196 billion paid in tax to the Exchequer in 2018, around one quarter of the UK Government’s total revenue and almost twice the budget of the NHS in England.

The new report also provides a first of its kind glance at the impact of the ongoing Covid-19 crisis on the family business sector. It estimates that, between February and May 2020, family firms’ output is likely to have declined by 30.0 per cent.

Analysis by industrial sector shows that accommodation and food services businesses experienced the greatest loss in output, contracting by 91.7 per cent, while the 390,000 family firms in the arts, entertainment and recreation, and accommodation and food services sectors are likely to have been among those which have faced the largest challenges.

Sir Michael Bibby, Chairman of the IFB Research Foundation and of Bibby Line group, commented on the findings: “This report from the IFB Research Foundation provides important new information on the state of UK family business. It provides fresh insights into what family businesses do, how many people they employ, the impact they have on, and looks at how COVID-19 may have affected the sector.

As we look forward to recovering from the current crisis, it is too early to predict the full impact of COVID-19 on the UK’s economy and society. But the resilience and long-term focus of the UK’s family businesses means that they are sure to play a critical role in the economic recovery ahead.”

Elizabeth Bagger, Director General of the Institute for Family Business, said: “We know how important family businesses are in the financial services sector. They play a central role in the economy, employment, and equally importantly communities. We should all celebrate their remarkable history, and support them in continuing to grow and innovate.

The ongoing crisis has put our nation to the test and hit family businesses hard. Speaking to our members, we know how challenging this times have been and how hard they have been working to come out the other end as strong as possible. From history we know that many family businesses have been able to navigate through wars and crises, and their intrinsic long-term outlook and care for their people and communities have always provided a unique edge to their longevity. We have seen so many examples of family businesses supporting the national effort to tackle the virus, and continuing to support people and charities throughout the crisis, often in very innovative ways.

We have many reasons to be hopeful for the future and we certainly will continue to work hard at our end too to help family businesses succeed. It is essential that family businesses are front of mind as the Government looks to recovery and building long-term sustainable economic growth across the whole UK.”

Fiduciam provides £840,000 loan to children nursery – how CBILS boosts local businesses and communities.

Fiduciam, the institutionally funded short-term lender, has just completed a Coronavirus Business Interruption Loan Scheme (CBILS) loan for £840,000. The loan was to a children’s nursery in Leytonstone, in North East London, called Harvey House.

The CBILS was designed to support the continued provision of finance to smaller UK businesses (SMEs) that have been impacted by the COVID-19 pandemic. The loans are delivered through lenders accredited by the British Business Bank (BBB).

CBILS has been playing an important role in supporting local business and communities throughout the Covid-19 crisis, as the case of Harvey House demonstrates well. Navneet Bansal, who has been a child carer for many years, took the initiative to open up her own children’s nursery, addressing a shortage of childcare in Leytonstone. It was a proud moment when Harvey House opened in December 2019, but only four months later it was forced to close because of Covid-19.

This hit the owners hard as they had to make debt service payments of £113,000 per annum, which quickly became unsustainable as the nursery waited months to hear when children could return to nursery care.

Fiduciam provided a two-year CBILS loan which decreases the debt servicing cost by 64% for the next two years. This puts the nursery on a stable financial footing, also allowing it to deal with potential future Covid-19 hurdles.

The nursery qualified for the CBILS loan because it met the requirement of being a viable business before the outbreak of the pandemic and one that is expected to do very well in a more normal trading environment. The nursery employs 17 staff to provide a high-quality childcare service, which is reflected in its 9.5/10 rating on daynurseries.co.uk.

Despite such rapid success and Navneet having an excellent personal history in the childcare sector, the high street banks were unable to provide a CBILS loan as the nursery businesses did not yet have a track record for the required length of time.

For Fiduciam, as an alternative lender, this was not an obstacle. The lender got to know the owner, Navneet, and inspected the nursery in operation. Having witnessed the professionalism and passion of the staff and owner, it was clear that such a nursery was very much in need in Leytonstone and therefore offered a very strong proposition.

The Fiduciam CBILS loan now allows the nursery to establish a track record the next two years so that it can then refinance with a cheap high street bank loan.

Johan Groothaert, CEO of Fiduciam commented, “As a start-up SME, it is difficult to get finance in the best of times. Thanks to CBILS we have been able to lower the financing costs for such SMEs. Harvey House is run very professionally by experienced and passionate staff – we love to lend to such enterprises.

“It is thanks to the brave step of Navneet, setting up their own children’s nursery that Leytonstone’s shortage of high-quality children nursery places is being addressed. We are confident that Harvey House will be very successful and provide an excellent early learning experience for hundreds of children in the coming years.”

Navneet Bansal, owner of the nursery, commented, “We are very glad to have received the Fiduciam CBILS loan. Without it, finance costs would have been overbearing and we did not want to pass on the cost to the parents or cut the quality of our childcare. The Fiduciam CBILS loan puts our nursery on a very stable financial footing and ensures that all children continue to receive the discovery and learning experience they deserve. We were also impressed by the efficiency of the Fiduciam CBILS loan application process.”

The final date for applications for CBILS loans is the 30th September although where the application process has commenced, a lender may still process and offer a scheme facility up to 30 November 2020.

Brexit has already cost more than the International Space Station – and it’s still rocketing!

The cost of Brexit to the UK economy is already over £130bn. By comparison, the International Space Station cost £115bn. It is not rocket science to see that the long-term price of a no-deal Brexit will be three times higher than the coronavirus lockdown, says ParcelHero.

The economic cost of Brexit has already passed £130bn and is likely to top £200bn by the end of the year, according to a report from Bloomberg Economics. Constructing the International Space Station (ISS), the most ambitious collaborative international project ever, cost £115bn. With the price of Brexit continuing to rocket to astronomical levels, the international courier services expert ParcelHero fears it will be significantly higher than the cost of the coronavirus pandemic to the UK economy.

ParcelHero’s Head of Consumer Research, David Jinks MILT, says: ‘ A Bloomberg Economics report found that, by January 2020, the British economy was 3% smaller than it would have been if the UK had not voted for Brexit and the relationship between the UK and the EU had been maintained. It said the economic cost to the UK was already £130bn by the beginning of 2020. Eight months on, it continues to soar.

‘The Government’s own figures confirm the widening gulf between the EU and the UK. While the Eurozone’s GDP contracted by -11.8% during the second quarter of the year, the UK’s GDP collapsed by -20%.

‘To add to the enormous loss of investment and long-term contracts, there is also the price of the Brexit preparations themselves to consider. These include last year’s disastrously mis-timed £100m ‘Get Ready for Brexit’ campaign, which made even this year’s woeful ‘Stay Alert’ Covid awareness marketing seem successful.

‘Then consider the cost of last year’s wasted stockpiled food and medicines and the chaotic Operation Brock, which closed one side of the M20 for months, creating huge tailbacks. This year, vast sums are being spent on new border equipment, recruiting and training 50,000 Customs Officials and the new electronic Smart Freight System.

‘This may be only the beginning. If the Government continues with its belligerent negotiation tactics, such as this week’s Internal Market Bill, which threatened to overthrow international agreements Britain had already signed in good faith, then we will undoubtedly be looking at a no-deal Brexit in January. ParcelHero’s own research has revealed a no-deal Brexit will create £11bn of new border tariffs and will cost the average UK SME £163,000 in increased costs and duties.

‘We fully concur with the warning given last month by Thomas Sampson, Associate Professor at the London School of Economics, who said: “When measured in terms of their impact on the present value of UK GDP, the Brexit shock is forecast to be two to three times greater than the impact of COVID-19.”

‘The most pessimistic forecast for the cost of the coronavirus comes from the Office of Budget Responsibility (OBR). According to its calculations, the cost of Covid will be £192.6bn. Professor Sampson’s warning highlights the ongoing cost of Brexit to 2035 will far exceed the short-term Covid hit.

‘People will have their own opinion whether Brexit or the International Space Station represents the best way to invest in the future. It is interesting, however, that £200bn by the end of this year is more than the value of the entire British food and grocery market. We could all have free groceries for a year for the cost of Brexit.’