London "well placed" to take advantage of a global boom in digital shopping

London was a driving force behind UK investment growth in 2021, with a record $5 billion raised by digital shopping companies based in the capital - ranked fourth on the global stage, behind San Francisco, New York and Bengaluru.

London is well placed to take advantage of a global boom in digital shopping, according to Klarna-sponsored research from London & Partners and Dealroom.co. The research shows that the UK capital saw record levels of venture capital investment in 2021.

The research also revealed that London is a prime location for digital shopping companies looking to rapidly scale their business, with the UK capital housing more digital shopping unicorns (21) than any other European city and fourth globally behind Beijing (36), New York (39) and San Francisco (51).

Household names in London’s unicorn club include online fashion retailer ASOS, fashion marketplace app Depop, and online travel retailer Lastminute.com.

Simon Leesley, Managing Director UK of Stitch Fix, the US online personal styling service, said: “We chose London as our first international HQ because of the UK's dynamic, fast-moving retail market - home to high street icons, some of the most exciting up and coming fashion brands and a wealth of industry-leading talent. It's a privilege to play a part in this innovative retail landscape.”

Laura Citron, CEO at London & Partners, commented: “This data shows that London is leading the way on the evolution of retail. London is a brilliant place to grow a digital shopping business – with some of the world’s most digitally savvy customers and record levels of growth capital.

“It is also home to the next generation of physical retail, with both traditional and digital-first brands investing in experiences to delight shoppers. The West End is set for a speedy recovery, with turnover hitting £10bn within two years.”

London’s digital shopping sector is also showing no signs of slowing in 2022, with the overall enterprise value of London firms soaring from $89 billion (£67.6 billion) in 2020 to $119 billion (£90.4 billion) in just a year. According to predictions from Dealroom.co, the number of future digital shopping unicorns in London is set to expand to 24 in 2022.

Global venture capital investment into digital shopping more than doubled in 2021 following a significant consumer shift to e-commerce platforms during the pandemic, with a total of $140 billion (£106.3 billion) raised in 2021, up from $68 billion (£51.6 billion) in 2020.

With an increasing demand for online purchases during a series of lockdowns in the pandemic, global investors showed a strong appetite for the UK’s digital shopping companies, with British firms raising $7 billion (£5.3 billion) in 2021, over double the $3 billion (£2.2 billion) raised in 2020.

The UK was the top ranked European country for venture capital investment into digital shopping in 2021, and fourth globally behind China, India and the United States.

Supporting data from Klarna, the leading global retail bank, payments, and shopping service, confirmed that global consumer behaviour is in line with rising levels of investment in the sector, with its new study finding UK consumers to be the most digitally savvy across the globe.

UK consumers are found to be more open to shopping online, with almost half (48%) surveyed making online purchases at least once a week. That’s higher than any other country globally, with the US (43%), Germany (40%) and Australia (38%) the other markets making up the top four.

Alex Marsh, Head of Klarna UK, said: “UK consumers are known for being quick to embrace new technology and the level of e-commerce innovation in London and the wider UK clearly reflects that. Now more than ever Brits are looking for shopping and payment options that enable them to make purchases in a safe, seamless and flexible way both in store and online.

“That’s why digital shopping and payment companies, such as Klarna, experienced such strong growth. In 2021 alone we doubled our headcount in the UK as we seek to play an increasingly important role in supporting the country’s retail sector.”

The global opportunity to tap into an increasing consumer demand for online shopping services is only expected to grow, with the study finding over half (57%) of consumers in the UK stating they expect to spend more online in the future, up from 50% in Q2 2021.

All investment data was provided to London & Partners by Dealroom.co as of 15 February 2022, while consumer trends data was taken from Klarna’s quarterly ‘Klarna Pulse Survey’. That is based on a sample size of approximately 18,000 people globally.