Big-name pureplay retailers have formed an industry association to highlight their contribution to UK success and fight their corner – including on tax.
Electricals specialist AO.com, fashion players Asos, Boohoo and Gymshark, health and beauty group The Hut and grocer Ocado have come together under the umbrella of the UK Digital Business Association (UKDBA). More online retailers are likely to join them.
The initiative follows the growth of online during the pandemic, when consumers turned to etailers as stores were shuttered during lockdown, and as debate rages over tax and business rates that bricks-and-mortar retailers feel disadvantages them versus pureplays.
The new group’s founder Iain McDonald, who runs Belerion Capital and is on the board of Boohoo and The Hut, said that as hopes rise of an easing of Covid and in the aftermath of Brexit, it is “time to start thinking about what comes next”.
He hopes the association will shine a spotlight on Britain’s world-class ecommerce companies and help create the conditions for it to continue to prosper.
McDonald told Retail Week: “We’ve got a really successful sector, growing fast and creating well paid, highly skilled jobs. It’s important we’re part of the discussion about what happens with tech and digital.”
He said that members planned more than £1bn of investment this year and will add approximately 10,000 jobs on top of a 41% increase in staff numbers between 2016 and 2019.
The success of pureplays has drawn attacks from more established retailers, who have argued they do not shoulder their fair share of the tax burden, particularly when it comes to business rates that have hit retailers with stores hard.
McDonald rejected the criticism. He maintained that a “misconception” confused the status and tax arrangements of UK domiciled online retailers versus US tech giants such as Amazon. British companies pay tax “in the normal way”, he said.
In response to arguments from retailers such as Tesco for an online sales tax, McDonald argued: “There is an online sales tax – it’s called VAT.” He said that the cumulative profit made by members of the association was “less than Next last year” and that “success online is nothing to do with advantages over tax”.
“The British online industry is one of the UK’s greatest success stories and the UKDBA is here to champion our members, their customers’ interests, providing them a voice in a rapidly evolving world.”
A study by Grant Thornton commissioned to coincide with the UKDBA’s launch found that “specialist online retailers are positively contributing to the UK economy via taxes and … paying a comparable amount of tax compared to retailers with a predominant store-based presence”. They are also “enhancing the skills base of the industry through innovation and investment”.
McDonald said that retail trade body the BRC does “a great job” but it was important for digital retailers – who have as much in common with ecommerce businesses outside retail as with traditional retailers – to have a distinct organisation and voice.
That would be beneficial “in driving the UK’s economic recovery from Covid-19 putting customers at the heart of their ambitions, whilst supporting the government’s efforts to create a technology-driven global-facing economy” and “supporting the efforts of store-based retailers in their transition to a digital-first environment”.