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					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:     0131 225 4007           email:     jnolan@sqw.co.uk



Approved by:          David Mack-Smith                          Date:       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 e-
      commerce.

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:

                A review of available research on e-commerce – including publications by the Office
                 for National Statistics (ONS), Interactive Media in Retail Group (IMRG), Boston

      1
          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   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.

1.8   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 e-
            commerce.

            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          50-249          250-99           1000+              All
                                            employees       employees       employees       employees
       Businesses        In UK                     13.4            23.3             23             41.3           15.3
       with website
       sales to          Other EU                   5.5            10.4             9.4            17.2            6.4
       customers
       located
                         Rest of World              4.3             8.2             7.5            13.4             5

       Businesses        In UK                      5.0            11.9            23.1            33.1            6.7
       with non-
       website sales     Other EU                   1.2             4.2             8.6            15.2            1.9
       to customers
       located
                         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 e-
       commerce industry (note that this uses a different definition of e-commerce to ONS). The e-
       jobs 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
           IMRG (2011) e-Jobs Index
       6
            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 e-
       commerce 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
       8
          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




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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


                                                            80                                                                                                                                                                                                                        2008                  2009        2010
                                                                                        75
                                                                                                  73 73             72 72
       % of individuals who ordered goods & services over




                                                                                                                                         71 71
                                                                      68                     69                                                                            68                 68                                                                         69
                                                            70                                                                                                                       65                 66 67                           67                                                                         67
                                                                                                                                    63                     63                                                                                                  64                64                    64                           63
                                                                 62                                                                                                             61                                                                                                          61                          61
                                                                                                                                                                                                                     60
                                                                                                                                                                                                                                                                                       58
                                                            60                                                                                                                                     57                                             56                                                          55
                                                                                                               53                                     53                                                                                                            53                                                                           53
                    the internet for private use




                                                            50                                                                                                                                                  47                           47                                                                                46


                                                            40

                                                            30

                                                            20

                                                            10

                                                            0
                                                                                                                                                                                     London




                                                                                                                                                                                                                                                                         Wales
                                                                                                                                                                                                        UK




                                                                                                                                                                                                                                                                                            Scotland
                                                                      East of England




                                                                                                                                                                                                                                                                                                               Yorkshire and
                                                                                                                    East Midlands




                                                                                                                                                                                                                                                                                                                                    North East
                                                                                                                                         South West
                                                                                                  South East




                                                                                                                                                                                                                                                  North West
                                                                                                                                                           West Midlands




                                                                                                                                                                                                                     Northern Ireland




                                                                                                                                                                                                                                                                                                               The Humber
      Source: Eurostat

3.3   As highlighted earlier, mobile e-commerce is likely to become a more important aspect of e-
      commerce. 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 m-
      commerce 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)

                                                        25%


         Share of unique UK eBay m-commerce consumers
                                                              22%


                                                        20%




                                                        15%                14%
                                                                                        13%

                                                                                                     11%

                                                        10%
                                                                                                                   8%           8%
                                                                                                                                                7%         7%          6%

                                                        5%
                                                                                                                                                                                       3%
                                                                                                                                                                                                2%


                                                        0%
                                                                                                                   South West




                                                                                                                                                London
                                                                                                     East Anglia




                                                                                                                                                                                       Wales
                                                              South East




                                                                                                                                                            Scotland



                                                                                                                                                                       East Midlands
                                                                           North East




                                                                                                                                West Midlands




                                                                                                                                                                                               Northern
                                                                                        North West




                                                                                                                                                                                                Ireland
      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 e-
      commerce 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


                                                                     50%
                         % of businesses selling goos and services         44%             43%
                                                                     45%                                        42%
                                                                                                                         39%             39%            39%          39%                  38%                 38%
                                                                     40%                                                                                                                                                        37%                            36%
                                                                     35%                                                                                                                                                                                                               33%

                                                                     30%
                                    through a website




                                                                     25%                                                                                                                                                                                                                                          22%

                                                                     20%
                                                                     15%
                                                                     10%
                                                                      5%
                                                                      0%
                                                                               East Mids




                                                                                                                                                        South West
                                                                                                                         UK




                                                                                                                                                                                                                                South East
                                                                                              East of England




                                                                                                                                                                                                             Yorkshire and
                                                                                                                                         North West




                                                                                                                                                                     Northern Ireland


                                                                                                                                                                                          West Mids




                                                                                                                                                                                                                                                                                       Wales


                                                                                                                                                                                                                                                                                                                  North East
                                                                                                                London




                                                                                                                                                                                                                                                               Scotland
                                                                                                                                                                                                                Humber
      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

                                                                     45%
                                                                           40%
       % of businesses using the internet for online




                                                                     40%                   38%                  38%      38%             37%            36%           36%                   35%                    35%               35%                            35%
                                                                     35%                                                                                                                                                                                                                   32%                                 32%

                                                                     30%

                                                                     25%

                                                                     20%
                        trading




                                                                     15%

                                                                     10%

                                                                     5%

                                                                     0%
                                                                                                                                                                                                                                                                   Yorkshire and The
                                                                                                                                                                                                South East
                                                                                                                Wales




                                                                                                                                                                                                                                                                                                                               London
                                                                           South West




                                                                                                                         East Midlands




                                                                                                                                                           UK




                                                                                                                                                                                                                     Scotland
                                                                                                                                           North West




                                                                                                                                                                                                                                             East of England
                                                                                                                                                                             North East
                                                                                           West Midlands




                                                                                                                                                                                                                                                                                               Northern Ireland
                                                                                                                                                                                                                                                                       Humber




      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

                                                      50%
        % of businesses currently selling goods/


                                                             44%              44%
                                                      45%
                                                                                            40%                   39%
                                                      40%
                                                                                                                                       34%                  34%
                                                      35%                                                                                                                        33%
                                                                                                                                                                                            32%
                                                                                                                                                                                                           30%                     30%
                    services online




                                                      30%                                                                                                                                                                                                      27%
                                                                                                                                                                                                                                                                                      24%
                                                      25%
                                                                                                                                                                                                                                                                                                               19%
                                                      20%
                                                      15%
                                                      10%
                                                       5%
                                                       0%
                                                                                                                                       West Midlands




                                                                                                                                                                                            North West
                                                                                            Scotland


                                                                                                                  London
                                                                               Wales




                                                                                                                                                                   South West


                                                                                                                                                                                   UK




                                                                                                                                                                                                                                   East Midlands
                                                                                                                                                                                                           South East




                                                                                                                                                                                                                                                               East of England
                                                                 North East




                                                                                                                                                                                                                                                                                     Yorkshire and The



                                                                                                                                                                                                                                                                                                                 Northern Ireland
                                                                                                                                                                                                                                                                                          Humber
      Source: FSB ‘Voice of Small Business’Panel Survey 2011 [Sample: 1,626, of which 175 in Scotland]

3.8   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%   38%
                                                                                                                                                               UK                Scotland
               % of total turnover generated online




                                                      35%
                                                                 31%

                                                      30%

                                                      25%

                                                      20%
                                                                                   17%
                                                                              15%
                                                      15%

                                                      10%                                     9% 9%                                                    8% 9%
                                                                                                                           5% 6%                                                5%
                                                                                                                                                                                     6%              6%       5% 6%                                     6%
                                                                                                                                                                                                                                                                                 5% 4%
                                                                                                                                                                                            4%                                                     4%
                                                      5%
                                                                                                                                                                                                                                                                                                          2% 1%

                                                      0%
                                                                                 11 - 20%



                                                                                                       21 - 30%



                                                                                                                            31 - 40%



                                                                                                                                                        41 - 50%



                                                                                                                                                                                 51 - 60%



                                                                                                                                                                                                61 - 70%



                                                                                                                                                                                                                        71 - 80%



                                                                                                                                                                                                                                                    81 - 90%



                                                                                                                                                                                                                                                                                  91 - 99%
                                                              Less than 10%




                                                                                                                                                                                                                                                                                                         is generated through
                                                                                                                                                                                                                                                                                                          100% - All turnover

                                                                                                                                                                                                                                                                                                             online trading




      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
                                                                                                                                                                  47
                                                                                                                                             58      56
                           70                                                                                               62
                                                                      67            66          66           63
                                72                71
                                                           71
                           60

                           50
              % of SMEs




                           40
                                                                                                                                                                  31
                                                                                                                                             17      18
                           30                                                                                               19
                                                                                    19          17           22
                                                                      21
                           20   17                22       20
                                                                                                                                             25      26
                           10                                                                                               19                                    22
                                                                                    15          17           14
                                11                                    12
                                                   8        8
                            0
                                                                      South West




                                                                                                                                                     North East
                                                  London




                                                                                     Midlands




                                                                                                                                             Wales
                                                           Scotland




                                                                                                                            Yorkshire
                                East of England




                                                                                                North West


                                                                                                             South East




                                                                                                                                                                  Northern Ireland
                                                  No web businesses                Low web businesses                     High web businesses

       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 e-
       commerce 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 e-
       commerce 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 ‘e-
       commerce’ and the various platform names) appears to be far higher in England than in
       Scotland.




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       Figure 3-8: Google Insights for Search analysis – search popularity of key words (over last 12 months)


                                                               100    100



                 Search popularity (normalised to 100)
                                                         100
                                                          90                       82
                                                          80                                          75

                                                          70                                                             60      60
                                                                                         57                 57
                                                          60
                                                          50
                                                          40
                                                          30
                                                          20
                                                          10
                                                           0
                                                               England         Northern Ireland        Wales            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
       North West                                          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                                    7,300                            5,000                      4,600
       Humber

       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

       North East                                             700                            2,400                        900

       Northern Ireland                                          -                              900                          -
       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)
       North West                                                                  1,008                              2,393.7

       East of England                                                               948                              1,682.2

       London                                                                      1,489                              1,525.0

       Yorkshire and The Humber                                                      657                                945.0

       South East                                                                  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
       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

                                                  400.0    347.4   336.5

                                                  300.0
                Change in turnover 2008-09 (£m)




                                                                           184.2   171.5
                                                  200.0                                    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

                                                  -500.0                                                                                         -454.6



       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 e-
       commerce 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 e-
       commerce) 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      Location               Small/Medium on-line retailer          Location
       year                                                      of the year
       M&Co - WINNER                      Renfrew                ROX Diamond & Watch                    Glasgow
                                                                 Specialist - WINNER

       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 3-
       5 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       Scotland    NatWest          Scotland         HSBC                London
                        Corporate

       Highly           NatWest                Scotland    HSBC             London           Bank of Scotland    Scotland
       commended                                                                             Corporate

       Commended        The Co-operative       North       Santander        London           NatWest             Scotland
                                               West
       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         Scotland      AA Banking         South East
                                                             Finance

       Highly           Principality BS        Cardiff       ICICI Bank UK       London        Scottish Widows    Scotland
       commended                                                                               Bank

       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 e-
       commerce). 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                               % Software development                7,000
                                      % Web 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                                                                       649
                                                             464                             386       488
                           249                    154
              0%                                                                                                       0
                    Scotland     North       North     West    London            South Yorkshire  East       South
                                 West         East    Midlands                    East & Humber Midlands     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
       London                                                                           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
       Source: itjobswatch (March 2012)




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                                                                                 Scottish e-Commerce Study
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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 e-
       commerce 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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                                                                                                         Scottish e-Commerce Study
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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                                                                                                1130
                  Manchester                                                                               852
                      Brighton                                                                     719
                   Edinburgh                                                                       714
                 Birmingham                                                                  660
                         Leeds                                                             637
                  Nottingham                                                         525
                     Coventry                                                  452
                     Leicester                                                 450
                         Bristol                                               450
               Southampton                                                    442
                        Oxford                                               431
                Northampton                                                407
               Milton Keynes                                              396
         Newcastle upon Tyne                                             377
                     Glasgow                                            369
                  Warrington                                         333
                  Portsmouth                                        324
               Bournemouth                                        301
                      Norwich                                     300
               Peterborough                                       299
                     Sheffield                                    296
                         Derby                              249
                     Swindon                               241
              Stoke-on-Trent                              226
                      Preston                          193
                          York                        186
                         Luton                        183
                     Liverpool                      170
                        Cardiff                     167
                       Ipswich                      165
                    Blackburn                     140
                     Bradford                    132
                     Swansea                    128
            Southend on Sea                     125
                    Wakefield                   121
                        Bolton                 114
                   Doncaster                  108
                    Plymouth                  106
                 Huddersfield                91
                        Wigan              71
                           Hull           63
                        Telford           61
                      Newport            57
                      Dundee             52
                    Blackpool            51
                  Sunderland            43
                        Belfast        32
                    Aberdeen           30

                                   0             200              400         600                    800         1000         1200
                                                             No. of LinkedIn members
       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

                                        14000
                                                12876
           Number of LinkedIn members
                                        12000

                                        10000

                                        8000

                                        6000

                                        4000              3442

                                                                 1924
                                                                        1634         1631         1399
                                        2000                                                                   1165        1098   1072
                                                                                                                                          420   352
                                                                                                                                                         32
                                            0




                                                                                                                Scotland
                                                 London




                                                                                                   West Mids
                                                           SE


                                                                  NW




                                                                                      East Mids




                                                                                                                            SW




                                                                                                                                                 Wales


                                                                                                                                                         N Ireland
                                                                         Yorkshire




                                                                                                                                   East


                                                                                                                                          NE
       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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       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



           Headline workplace GVA in wholesale
                                                    25000

           and retail etc. at current basic prices  20000
                                                    15000
                                                    10000
                                                        5000
                             (£m)




                                                           0




                                                                                                                                                                                                                                                                                      Northern Ireland
                                                                                    London




                                                                                                                                                            South West




                                                                                                                                                                                                                                                  Wales
                                                                                                                                                                                                        East Midlands
                                                                  South East




                                                                                                                                                                                                                              Scotland
                                                                                                  East of England

                                                                                                                         North West




                                                                                                                                                                                                                                                                 North East
                                                                                                                                          West Midlands



                                                                                                                                                                             Yorkshire & Humber
                                                                                                                                            2003                         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.

       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


                                                        25%    23%
                     % growth in headline wholesale &




                                                                               22%
                         retail etc. GVA 2003-2009




                                                        20%                                    19%
                                                                                                                    18%               18%                 18%
                                                                                                                                                                         16%
                                                                                                                                                                                                  15%
                                                        15%
                                                                                                                                                                                                                        12%              12%
                                                                                                                                                                                                                                                          10%
                                                        10%                                                                                                                                                                                                                   9%


                                                        5%

                                                        0%
                                                                               East Midlands




                                                                                                                                                                                                                                                          North East
                                                                                                                                                          Wales
                                                                                               England




                                                                                                                                                                          London

                                                                                                                                                                                                  South West
                                                                                                                                                                                                                        Yorkshire &
                                                               Northern




                                                                                                                    South East

                                                                                                                                      Scotland




                                                                                                                                                                                                                                                                              North West
                                                                                                                                                                                                                                         West Midlands
                                                                                               East of
                                                                Ireland




                                                                                                                                                                                                                         Humber




       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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                                                                                                      Scottish e-Commerce Study
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       Figure 3-16: Indexed retail sales value at current prices (2007=100)



        Retail sales value at current prices   120

                                               115

                                               110
                    (2007=100)




                                               105

                                               100

                                                95

                                                90

                                                85

                                                80
                                                     2002   2003   2004   2005   2006   2007   2008   2009     2010     2011

                                                                             Scotland     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   2,000   4,000     6,000    8,000     10,000   12,000
                International   Rest of UK                                       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 3-
       18.




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       Figure 3-18: Indexed Scottish international exports for selected industry groups (2002 =100)

                                                                                                                         200



                                                              Change in international exports (2002 levels = 100)
                                                                                                                         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 3-
       19), 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

                                                                                           160
           Change in Rest of Uk exports (2002 levels = 100)




                                                                                           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)



                                                                    2,000
      Change in Rest of UK exports




                                                                    1,500
            2007-2010 £m




                                                                                                             Manufacture of food
                                                                                                             products & beverages
                                                                    1,000


                                                                      500
                               Electrical and instrument
                               engineering
                                                                        0
                                 -500                                        0                  500                                 1000
                                                                     -500                       Financial intermediation

                                     Wholesale, retail & repairs,                Construction
                                     hotels & restaurants
                                                                    -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 e-
           commerce 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 e-
           commerce 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 e-
      commerce 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 e-
       commerce 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
            Scottish Government (2011), Research on Broadband and Business in Scotland
       16
            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 e-
       commerce 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 ‘ripped-
       off’ 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 e-
       commerce. 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 E-
           commerce 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 e-
           commerce 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   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’.

5.2   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 e-
             commerce 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 ICT
                                                          2010 sales       other than
                                                       over websites        websites      Total e-commerce
                                                               (£bn)            (£bn)      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
                                                                  Scotland employees      Scotland share of
                                             UK employees 2010                  2010        UK employees
      Manufacturing                                   2,372,900               172,700                  7.3%

      Utilities                                        282,900                 33,700                 11.9%




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                                                                             Scotland employees      Scotland share of
                                                    UK employees 2010                      2010        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%

      Information & communication                                985,200                  61,900                  6.3%

      Other services                                            4,284,900                327,500                  7.6%

      Total                                                   16,459,700               1,322,600                  8.0%
      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    Unadjusted implied
                                                     Unadjusted implied           Scotland sales      total ecommerce
                                                     Scotland sales over      over ICT other than    sales for Scotland
                                                          websites (£bn)          websites (£bn)                  (£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)         GVA at basic
                                                                          £m        prices 2009 £m          GVA/turnover ratio
       Manufacturing                                                     35,212               12,680                     36%

       Utilities17                                                          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%

       Other services                                                    23,480               12,139                     52%
       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       Unadjusted implied
                                                        Unadjusted implied        Scotland GVA over          total ecommerce
                                                        Scotland GVA over             ICT other than        GVA for Scotland
                                                            websites (£bn)            websites (£bn)                    (£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    Unadjusted implied
                                             Unadjusted implied   Scotland GVA over       total ecommerce
                                             Scotland GVA over        ICT other than     GVA for Scotland
                                                 websites (£bn)       websites (£bn)                 (£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 e-
       commerce sales represents about 10% of Scotland’s total GVA (£102 billion). Although e-
       commerce 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
                                                                                                                    Unadjusted
                                                                     Unadjusted       Unadjusted implied                implied
                                                               implied Scotland                  Scotland              Scotland
                                                                   employment                 employment           employment
                                                              associated with e-        associated with e-           associated
                                          Average GVA           commerce over         commerce over ICT             with total e-
                                          per employee                 websites       other than websites            commerce
                                               (2009) £             (thousands)               (thousands)          (thousands)
       Manufacturing                              66,521                       1.5                      43.4                44.9

       Utilities                                 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                       15,320                      12.2                       2.0                14.2
       services

       Information & communication                54,759                       5.9                       6.4                12.3

       Other services                             42,438                      10.1                       7.8                17.9

       Total                                                                  60.8                     122.6               183.4
       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   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.

5.18   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             Assumed          GVA multiplier range         Assumed
                                range                             employment                                    GVA
                                                                  multiplier                                    multiplier
       Manufacturing            1.00 to 13.41, with a mean        2.04             1.00 to 7.40, with a         1.93
                                of 2.04                                            mean of 1.93

       Utilities                1.77 to 4.15, with a mean of      3.37             1.31 to 2.83, with a         2.17
                                3.37                                               mean of 2.17

       Construction             2.19                              2.19             2.14                         2.14

       Wholesale                1.28 to 1.65, with a mean of      1.47             1.42 to 1.63, with a         1.53
                                1.47                                               mean of 1.53

       Retail                   1.31                              1.31             1.52                         1.52

       Transport & storage      1.37 to 2.49, with a mean of      1.91             1.51 to 2.54, with a         1.9
                                1.91                                               mean of 1.90

       Accommodation &          1.24                              1.24             1.5                          1.5
       food services

       Information &            1.64 to 2.02, with a mean of      1.83             1.41 to 1.61, with a         1.51
       communication            1.83                                               mean of 1.51

       Other services           1.33 to 2.70, with a mean of      1.66             1.13 to 1.77, with a         1.5
                                1.66                                               mean of 1.50
       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 e-
       commerce 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   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.

6.4   Potential mechanisms for such awareness raising could include:




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              Scottish Government ministers making more frequent mention of Scottish e-
               commerce 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 e-
       commerce.

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 e-
       commerce 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 e-
       commerce’. 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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              lack of awareness amongst some e-commerce operations of the expertise available in
               Scotland, and where to go for help.

6.16   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 e-
               commerce 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 e-
               commerce 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 e-
               commerce 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 e-
               commerce 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 e-
      commerce 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 e-
       commerce. 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 (web-
       based) 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 e-
                   commerce. Our suggested approach to this would include, for example: working with
                   the Scottish Government to increase the frequency of ministers referring to our e-
                   commerce 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




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Annex B: Data sources explored

Table B-1: Potential data sources explored
Source                Rationale                                                  Outcome
                      Enquire if any potential data on geographic analyses       Data is collected at a national (UK)
Akamai                of e-commerce transactions/ traffic at a sub UK level      level only

BIS: Small Business   To access a regional breakdown on the section on
Survey                business capability and use of technology                  Regional breakdown provided

                                                                                 No online retail statistics available for
British Retail        Enquire if any online retail statistics are collected at   Scotland as the online retail monitor
Consortium: Online    a regional level and if any data is collected on           is based on number of retail searches
retail stats          Scotland                                                   through Google

                      Enquire if any potential data on geographic analyses       Data is collected at a national level
Cisco                 of e-commerce transactions/ traffic at a sub UK level      (UK) only

Dun & Bradstreet -    Enquire if information is collected on e-Commerce          No information on e-Commerce
business database     businesses.                                                businesses is collected

                      Access breakdown of eBay traders by region and
                      get a more detailed breakdown of available m-              Still waiting to hear back at time of
eBay                  commerce data                                              finalising report

Experian - business   Enquire if information is collected on e-Commerce          No information on e-Commerce
database              businesses                                                 businesses is collected

                                                                                 No data is collected on online sales
FAME database         Check if any data is collected on online sales             through company records

FSB: Member
Survey 2010 and
2012 Voice of Small   To access a geographic breakdown (Scot vs. UK) of          Geographic breakdown of survey
Business              data in particular the sections on internet usage          data provided

                                                                                 IMRG have not broken any of their
                                                                                 research into a regional level in terms
                      Enquire if any of the data used to compile the e-Jobs      of e-commerce. However they hope
                      index can be accessed at a regional geographic             to launch a delivery index that tracks
                      level and if IMRG collect any data on Scotland. Also       the percentage of parcels to regions
                      enquire about accessing anonymous IMRG                     in Spring 2012. It was not possible to
IMRG: e-Jobs index    Membership data by geography                               access IMRG membership data

Logistics sector
bodies (Skills for
Logistics, Freight                                                               Checked with both organisations –
Transport             Enquire if any data on e-commerce related                  unfortunately could not provide any
Association)          employment in the sector                                   relevant data

                      To access employment and financial data for
                      relevant SIC code 47.91 and access more detail
ONS: BRES/            from the Annual Business Survey question 754 on            Data provided re SIC 47.91 but they
Annual Business       proportion of sales generated through mail order and       could not provide regional extracts of
Survey                website                                                    the data from question 754

                                                                                 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
ONS: e-Commerce       Enquire if the survey data can be accessed at a            finance HQ for the enterprise is
and ICT survey        lower geographic level than the UK.                        based.

ONS: Retail Sales     To access data on value of online retail sales as a        Not possible to access this data at a




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Source                Rationale                                             Outcome
Time Series           percentage of all sales by region                     regional level.

                      To request information on accounts and transaction    No data available below the UK
Paypal                value in Scotland compared to other parts of the UK   market

                      To request information on accounts and transaction    Still waiting to hear back at time of
WorldPay              value in Scotland compared to other parts of the UK   finalising report

                      Check if any data on e-commerce as a proportion of
                      all business broken down to Scotland and UK
Post Office           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       To access employment and financial data for
Business Statistics   relevant SIC code 47.91                               Data provided




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      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:           OECD                                 1999
      Preliminary Findings and Research Agenda

      2010 annual survey into e-commerce and ICT –        ONS                                  2011
      Statistical bulletin

      A Review of eBusiness in Scotland in Small and      Douglas Cruickshank (in              2005
      Medium Sized Businesses: Trends and Issues          ‘Scottish Affairs’)

      Assessing the contribution of retailing in          DTZ                                  2011
      Scotland

      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         PwC                                  2011
      multi-channel shopper

      Research on Broadband and Business in               Scottish Government                  2011
      Scotland

      Scotland’s Digital Future a Strategy for Scotland   Scottish Government                  2011

      Skills requirements for e-commerce and their        e-Skills UK                          2011
      provision in Scotland

      The Connected Kingdom                               Boston Consulting                    2010

      The State of the Internet                           Akamai                               2012

      VNI Index and forecast                              CIISCO                               2011




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                                                                                       Scottish e-Commerce Study
                                                                                 Final Report to Scottish Enterprise



      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




                                                                                                                D-1
                                                                               Scottish e-Commerce Study
                                                                         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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                                                                                             Scottish e-Commerce Study
                                                                                       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                   Payvment                   CA, USA        PrismaStar Limited            London
      Innovation:

      Re-design/Re-launch of the        L.K. Bennett and Marks     London         Charles Tyrwhitt LLP          London
      Year:                             and Spencer (joint
                                        winners)

      Best e-commerce Marketing                                                   Further Search                East
      Agency:                                                                     Marketing

      Innovation in Delivery:           DPD UK                     West Mids      Collect+                      SE

      Best Customer Service:            Kiddicare                  East           Lovehoney Ltd                 SW

      Best e-Commerce                   eBay Fashion Outlet        London         RS Components                 East Mids
      Marketing Initiative:

      Best Small Online Retailer:       Prezzybox.com              West Mids      Party Delights Ltd            NW

      Best e-Commerce Payment           Oasis (Aurora Fashions)    London         App55 Ltd                     NW
      Innovation:

      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




                                                                                                                         E-1
                                                                                   Scottish e-Commerce Study
                                                                             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

                                        Worldstores – Gardening
Garden & gardening                      sites (www.worldstores.com)                         London
Source: onlineretailawards.com, SQW analysis




                                                                                                              E-2

				
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