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Sector Spotlight Websites

Sector spotlight: websites

An overview of business models, industry challenges, due diligence and what it takes to thrive in the 21st century’s defining industry

Facts and figures

* UK B2C ecommerce market topped £133bn in 2016 (IMRG Capgemini)
* UK is biggest ecommerce market in Europe
* Number of online shoppers in UK is forecast to grow from 41.4 million in 2016 to 50.4 million by 2021 (Statista)
* UK ecommerce sites have direct access to £1.6tn global market (eMarketer)

Business models 

There has never been a more exciting time to buy an online business in the UK. However, there’s also plenty of competition: with minimal barriers to entry, a large and growing number of websites are chasing a slice of the £133bn UK ecommerce market. 

Ecommerce (another term for online transactions) only began in 1994 with the advent of secure web payments. But it wasn’t until broadband supplanted dial-up modems in the early noughties that it became a truly viable industry. 

Fast forward to the present and mobiles and tablets now account for more than half of all UK online sales.

Rarely including premises or staff, websites are among the cheapest businesses to buy – costing as little as a few thousand or even hundreds of pounds. That said, older ecommerce stores may come with salaried staff, stock and established supply chains.

However, you don’t necessarily need space to store stock. When a customer buys an item you can instead order stock from a third party. Called dropshipping, this business model means that you, as the merchant, never actually have to handle or deliver products.

Yet there’s more to online commerce than selling physical products. Affiliate marketing websites, for instance, generate revenue through commission. Requiring neither stock nor (usually) staff, they are even cheaper and easier to run than ecommerce platforms.

You can also make money through content-driven websites. While content is unlikely to make you a millionaire, many shrewd entrepreneurs have set up blogs or online newspapers in underserved niches and generated strong revenues through website monetisation platforms like AdSense, Chitika or Total Media Group.

Websites can also be a vehicle for providing Software as a Service (SaaS). No longer running applications on their own computers and servers, businesses can, through SaaS, slash IT costs.

Buying a UK website: who owns what?

When you buy a website, ownership rights – encompassing visual design, images and text content – will transfer to you.

A website created on an open-source platform like WordPress can be saved to your computer and uploaded to any web host company’s server to be visible on the internet.

Sites like Weebly or Wix, which offer ready-made website templates and solid backend support, are increasingly popular alternatives. However, they tie-in customers to monthly or annual subscriptions and users are committed to using their systems and hosting the website on their servers.

Ownership of the site’s domain name will also transfer to you. A contract with the domain registrar grants you ownership, much like a contract with a telephone company for a phone number.

The benefits

* £133bn UK market with direct access to £1.6tn global market
* Much lower upfront and running costs than a brick-and-mortar business
* Your business is always open, even while you’re asleep or on holiday
* Flexible hours means you can supplement income from existing job or business and fit around childcare commitments
* Niche website can be shaped around personal interests or hobbies
* Online tools make it easy to automate workflows

Overcoming industry challenges

UK online sales have continued to grow following the Brexit vote. However, the future is undoubtedly now less certain.

For those with supply chains and customers within the EU, the uncertainty is particularly unsettling.

EU laws – including laws relevant to online retail and cross-border trade – must be reviewed and adapted for domestic law. No one really knows what changes to duties, taxes and red tape lie in store.

“Initially much will probably just be maintained within the UK’s post-Brexit framework and revisited at a future date”, a recent report by IMRG concluded.

What we do know for sure is that the plummeting pound has been a boon for exporters as well as websites selling products overseas. However, the reverse is true for those sourcing stock from abroad.

Support

The government’s ‘Do More Online’ campaign was set up to help micro businesses and sole traders sell their goods and services online.

You could also get support from industry associations IMRG (Interactive Media in Retail Group) and BritORA (British Online Retailing Association).

Elsewhere, self-styled online business development consultants offer free preliminary advice on web-based commerce in the hope of enticing you to pay for their expertise. 

Find a niche

If ready access to a national or global market offers rapid scalability, it also makes some retail categories extremely competitive. From books to jewellery, Amazon and other dotcom giants hoover up a huge proportion of traffic in many mainstream product areas. 

Picking a less competitive niche is an easier way to gain a foothold in a given market. SEO-wise, targeting long-tail terms like ‘buy 1950s retro furniture’ rather than ‘buy furniture’ is a more productive seam to mine for the smaller player. 

What it takes to develop a successful online business

Money helps, but is not a critical factor given the low price of entry into this market.

Running a website also arguably requires fewer sacrifices in terms of leisure time and family life. You can work from home and cut out the commute and work flexible hours to fit around childcare and other commitments.

Thanks to off-the-shelf website builders like Wix or WordPress, coding skills are not necessarily essential either.

However, some knowledge around SEO, social media and basic digital skills certainly will come in useful.

What really matters is a commitment to ongoing self-education and improvement. From mobile optimisation to marketing automation, new trends and innovations emerge with dizzying speed.

Your position on Google search results will make or break you and the rankings are in a perpetual state of flux. Sometimes you have to make progress just to stand still.

If that sounds overwhelming then help is available and it needn’t be expensive. Websites such as PeoplePerHour give you access to freelancers who can help with everything from SEO to web design, either for a fixed fee or an hourly rate.

Essential skills

* Basic proficiency in IT/digital
* Hunger to improve and stay up to date with fast-changing market
* Comfortable with multitasking – you need to wear a lot of hats
* Knowledge of online marketing and using social media (if only to verify the quality of outsourced work by freelancers)
* Being happy to spend most of your time sat in front of a computer

What to look for when buying a website

Conducting due diligence on a website is arguably much easier than on bricks-and-mortar premises. You needn’t travel anywhere to assess the business, there are few, if any, employees to consider and probably no physical property to inspect.

And you can gauge a website’s traffic, SEO rankings, usability and reputation using only Google and a plethora of (usually) free online tools and platforms.

Among other things you should look for: 

Healthy traffic from a mix of sources

Look at the website’s historic traffic, in terms of volume and source (direct or via search, paid, referral or social), and its SEO status using platforms like Moz, Google Keyword PlannerSimilarWeb, SEMRush, QuantCast and Alexa.

Google’s frequent algorithmic changes are notorious for causing havoc with search rankings. While Google’s plans can only ever be guessed at, broadly speaking the search engine is becoming ever-more effective in rewarding sites that look good, are easy to navigate and give users what they want.

The best way to assess a website’s reputation among customers is via social media monitoring and sentiment analysis tools. There are too many useful tools to list here but here are 10 recommended by iProspect.com.

How long has the website been in existence? Waybackmachine is an intriguing archive comprising snapshots of millions of websites’ home pages at various junctures throughout their history. 

Financial health

As with any other business, you will want to see financial accounts to ascertain revenues and costs over the past 3-5 years.

Revenue trends . Is the business seasonal? If revenue is declining, what might it take to revive it?

Growth potential. Look for where you can add value to increase traffic and revenue with only modest investment. For instance, a pet-accessories website might be on page one of Google for the term ‘dog toys for sale’ but sell only a limited range of dog toys. Expand your product line in this area and it’s easy to see how revenues could rise rapidly.



James Allpress

About the author

James has 18 years’ content experience with a specialism in the global energy industry. His agency Allpress Communications works with energy sector companies to provide the best newsletter and blog solutions for their business

@allpress_james

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