Helping Every Postcode Sell
Marketplaces, Ai, and the state of Britain’s eCommerce sector
Startup Coalition’s full report is available here.
In January, Frankie Johns started hosting live selling shows on Whatnot. Frankie runs a record shop in Henley-in-Arden, a market town between Stratford-upon-Avon and Birmingham. He’d been selling online for 24 years, but only through static listings. The first live shopping show went out from his head office. Within weeks he’d moved them into the shop itself, because, as he puts it, “the demand was there.”
He now runs two or three shopping shows a week, averaging around £800 a show, and reinvests his money back into stock. He’s buying 500 to 1,000 records a week. People who found him on a livestream have driven from Norwich, Liverpool and Manchester to browse in person. And he’s expanding into the shop next door, with a permanent live-selling area, a bar, and space for DJ sets and album launches.
So here’s a question. Is Frankie “online retail” or “the high street”?
The honest answer is both. The policy answer, far too often, is that he has to be one or the other. That gap is what our new report, Helping Every Postcode Sell, is about.
A nation of digital shopkeepers
We commissioned PF Global to poll 1,906 UK adults and 501 UK businesses in September. We also worked with Beauhurst to size the startup sector behind it all. A few numbers stood out.
- 51% of adults sold something online in the past year. 9% describe selling as a business, or the start of one. That’s more than two million people scaled up to the nation.
- More than 1,800 eCommerce startups are active in the UK. Together they turn over £81.1bn, employ more than 396,000 people and have raised £24bn.
- People shop online because it works, not just because it’s cheap. Lower prices came seventh on the list of reasons, behind stock availability, convenience, comparison, delivery, choice and being able to find things you can’t get in a shop. That’s almost exactly what we found in 2022.
One of the biggest shifts over the last two years since we last published a report on eCommerce is that marketplaces have gone mainstream, and the fastest growth is coming from high street names. B&Q’s marketplace now makes up around 40% of its online sales, and it lets you click-and-collect and return marketplace orders in store. Mountain Warehouse’s marketplace brings in close to a third of its revenue. Tesco, Boots, Superdrug, The Range and Argos all run one.
At the same time, live commerce sellers are moving the other way. Some start in a bedroom and end up renting warehouses, hiring packing staff and paying business rates. On paper they’re “online”. On the ground they’re small regional employers occupying commercial property.
In 2024 we argued that online and offline selling had blurred, two years on this distinction has further broken down with business models integrating both from day one. Any policy that loads cost onto marketplaces to protect the high street is, increasingly, loading cost onto the high street’s own growth plan.
The direction is right. The detail is the risk.
Over the last two years the Government has taken on more of the plumbing of online retail. It is rewriting product safety law and bringing marketplaces into scope for the first time. It is rebuilding the customs treatment of low value imports. Platform reporting now gives HMRC sight of seller income. And HMT and HMRC have consulted on making marketplaces liable for VAT on sales by UK businesses.
We support the aim of all of this, and so does the public. Given a choice, 59% of consumers said trust was the one thing they’d most like to improve about shopping online. A market where buyers can tell a careful seller from a careless one is a market where British businesses do well.
But there’s a pattern running through these measures. Each one finds a real problem, reaches for the layer where enforcement is easiest (the platform), and assumes the cost stops there. It doesn’t.
Our polling gives the Government two simple tests.
Test one: who really pays? Asked who would end up paying for new product safety rules, consumers put shoppers first and marketplaces last. Businesses tell the same story across product safety, customs and VAT. 55% say they’d pass product safety costs on to customers. Nearly half say they’d be likely to stop selling through a third-party marketplace, which is the cheapest way for a new business to start.
That matters because of what a marketplace actually does for a small seller. Payments, fraud handling, buyer protection, customer acquisition, sometimes warehousing and delivery: each is a fixed cost that would otherwise have to be paid before the first sale. The marketplace turns them into a commission. It’s why you can start selling in an afternoon. Badly designed obligations turn that commission back into a fixed cost, and fixed costs fall hardest on the smallest seller.
Test two: does it really help the high street? Only 16% of consumers would switch to a local shop for a 5% discount. Most say it would take 10% or more. A measure that adds a little to the cost of selling online will raise prices and revenue long before it brings anyone back to the high street.
The measures that pass both tests are the ones that build verifiable trust. A verified business identity behind every listing and, in time, digital product information that works for every retail format, makes an unknown seller easier to buy from, not more expensive. Measures that simply raise the cost of selling online pass neither.
What would actually help the high street
The good news is that we can see what would work. 47% of the businesses we surveyed have considered taking physical premises, and 13% are actively looking. Asked what would make the difference, the answers were practical: a rates holiday, pro-rata rates for short lets, a standard short-form lease, one point of contact at the council.
The headline is this. A third of businesses say they’d be likely to take a high street unit within two years if business rates were waived for the first year.
The current reforms are welcome, but relief calibrated by rateable value is a discount for businesses already in premises. It does little for the digital-native brand trying to get in. Meanwhile, the new higher multiplier on large warehouses doesn’t distinguish between business models. A levy on shared fulfilment space gets passed down to the small sellers renting capacity inside it, including the live commerce sellers who’ve just started hiring.
And the online sales tax, which the Government has now rejected twice on the grounds we set out in 2024, should be ruled out for the rest of this Parliament in terms.
The next gap is already opening
Three in ten consumers have already used an AI assistant to buy something online. AI-referred traffic to retail sites is growing fast and now converts better than ordinary traffic.
But being online is no longer the same as being findable. Only 34% of small businesses know whether AI assistants can see their products, compared with 71% of large ones. One of our case studies, Vortex IQ, documents a store that was invisible to AI shoppers because of a few lines in a settings file. Nothing on the shopfront would ever have told the owner.
The protocols agentic commerce will run on are being written almost entirely in the US. The UK’s payments timetable for agent-initiated transactions runs to the end of 2028, and may slip. By then the defaults will have hardened. Britain has a strong hand here, with a mature Open Banking system, the FCA’s AI Lab and nearly 1,200 authorised payments firms. The gap is pace, not capability.
Somebody needs to add it up
Here’s the bit that worries us most: making Tax Digital for Income Tax; e-invoicing; platform reporting; marketplace VAT liability; new product safety duties and seller verification; a new low value imports regime; packaging EPR… Each is defensible on its own. Together they amount to an avalanche of major compliance changes landing on online sellers inside eighteen months, each designed in isolation.
Nobody in the Government owns the total and nearly half the businesses we spoke to (48%) hadn’t heard anything at all about the customs change due in 2028.
So our first ask is simple: publish a cumulative impact assessment, and model it on a representative two-person marketplace seller. The standard small business test assumes a firm with staff, premises and an accountant, but a large and growing share of the businesses these rules affect have none of the three.
The Blueprint
The report sets out five steps:
1. Get product safety reform right in a way that works with new business models. One safety standard for every marketplace, met in ways proportionate to size, risk, control and format. Protections should accommodate innovation and embrace new models like live commerce and agentic commerce. An accountable UK party for every consumer product, reached through more than one route, with a named responsible person kept for the highest-risk goods. Digital product information that follows the EU and works for every retail format.
2. Make the UK a leader in agentic commerce. Speed up the payments timetable, deliver the agentic payments trust framework in this Parliament, and get a UK seat where the standards are being set.
3. Bring high streets into the 21st century. Rule out an online sales tax, and reform business rates for the businesses that want to move onto the high street, not only those already there
4. Deliver G7-leading digital and AI adoption. Name an accountable minister, count machine readability as part of being “digitally capable”, and build BizPass.
5. Make the compliance stack survivable. Publish a cumulative impact assessment, design the import and VAT regimes around the small seller, and match UK customs timing to the EU’s.
When we asked Frankie what selling live had done for him, he said it “has made me think bigger about what the shop can be.” That’s the right instinct for policy too. The question isn’t how to protect the high street from the internet. It’s how to make sure the businesses already combining the two can keep growing, in every postcode.