eCommerce has exploded rapidly over the past five years and is predicted to continue at this rate, or even accelerate. In the future, more and more businesses will move sections of their operations onto the Internet so this is the time to invest in the technology of the future.
As eCommerce is constantly evolving, it requires serious investment from any company wishing to stay ahead of the competition and convert the most traffic into sales.
If your business has an opportunity to expand into eCommerce or you already have an active online platform, you might not be aware that R&D tax credits could inject a welcomed cash boost to drive your business forward.
What do R&D tax credits mean to SMEs?
Designed to encourage and offset costs incurred for innovation, R&D credits can also help against regular income tax outgoings, or act as grants when a company isn’t paying taxes because it is loss-making. Companies that claim R&D funding, therefore, have more cash, increased earnings per share, lower effective tax rates, and the opportunity to increase investment in areas such as staff, research, and equipment.
R&D tax credits can allow a company to:
• benefit by reducing their costs through qualifying developments
• claim a tax credit even if the company is loss-making
In order to fit the brief of research and development, your project needs to be seeking scientific or technological advances in your specific field or sector. Your project can cover various activities, which can be individually assessed when making a claim.
With regard to the online retail business, R&D tax credits can be crucial, even when you modify standard purchased software, as long as it’s substantially transformed beyond existing capabilities and features, rather than just configured for your business needs.
How can you use R&D tax credits in eCommerce innovation?
Many companies have already started to implement new technologies to evaluate efficiency and add new functionality to their existing IT systems. These improvements include:
- better accounting management with appropriate controls
- marketing and customer experience IT systems
- WebCommerce and enhanced connectivity with clients and vendors through improved online tools
R&D Credits are certainly worth looking into, after all, they are designed to assist development and growth as well as innovation. Company growth can happen in many areas and IT is certainly a huge part of any enterprise, as it provides a vital link between all of your business modules.
Anyone knows that software becomes outdated very quickly, so R&D tax credits can help you undertake a significant IT shake-up in your business, by providing the necessary investable cash you need.
It’s useful to determine what type of technology qualifies as innovative in terms of e-commerce platforms, and therefore benefit from R&D tax credits.
The most vital type is your company’s website. This may seem obvious, but if you choose a generic online package, you are restricted in what it can do, additionally, in the future, you will not be able to expand and add innovative crucial elements such as:
- Customer Authentication. This has become essential for any online business, and with the new PSD2 regulation coming into force in late 2019, it will be a legal requirement for online payments made by customers across Europe, you won’t be able to avoid it. Companies will be expected to create extra authentication steps for online card payments unless transaction-specific exemptions apply, otherwise, payments will be rejected and customers lost.
- Inventory control. Inventory control is vital to eCommerce, and investing in innovative systems that allow you to synchronise all your market places to live stock availability, not only creates an accurate picture of stock across all available platforms, it also doesn’t disappoint valuable customers.
Order Wise, for example, is an excellent eCommerce software package, as it enables your business to take full advantage of all the excellent benefits that online sales can offer, across multiple online platforms. Benefits include:
- Increase sales by allowing customers to enter their own orders at any time
- Synchronize order history, payments and customer buying trends
- Improve customer relationships with online account communications
- Customize themes and features to match your industry and your brand
- Completely automated management of your online trading
Online businesses should also consider investing in other innovations, such as:
- customer recognition and personalisation
- virtual reality
- shopping cart improvement and payments
- cybersecurity
Personalisation
Personalisation is a major factor in the development and competitiveness of an online business. Essentially, this tool selects what customers see when they click on a commercial website, so you can increase your chances of converting that visit into a sale. Not only that, but with relevant suggestions, you can up-sell and capture a potentially loyal and lucrative customer.
Kentico, an all-in-one platform for leading web-based content management, e-commerce and e-commerce systems, enables online retail businesses to tailor the content of their sites to their own customers. Parameters used include search terms, referrals, user behaviour and geolocation. Sitecore, another advanced content management system, offers similar features.
The integration of advanced systems like these, or the development of your own recommendation or customisation engine, could certainly benefit from research and development, and therefore be funded by R&D credits.
AI
Artificial intelligence (AI) is another up and coming area of personalisation, that could become an important area of investment covered by R&D tax credits. Once viewed as an undiscovered field of research, AI is now becoming an everyday reality and in some cases a necessity.
Thread, a UK-based company, has recognised the huge potential artificial intelligence in personalisation has to offer and has invested heavily in it, as an innovation in e-commerce. They use AI to help men choose clothes that suit them.
Sounds easy? It isn’t!
The company collects key personal information provided by customers, such as size, style, etc., and then adapts the way it selects its product suggestions from its apparel partners. This helps customers find clothes that not only fit well and are in stock, but items that the customer wouldn’t have necessarily put together, therefore providing a “stylist” service and significantly improving the buying experience.
Many retailers are attempting to differentiate themselves from competitors, especially giants like Amazon, by creating highly curated shopping experiences that combine the personal feel of in-store shopping, with the convenience of online portals.
Using AI to personalise the customer journey is a huge asset to retailers. Any eCommerce company which implements innovative plans of actions to personalise the customer experience can see their sales increase by up to 60% according to analysts.
Certainly, this is a massive return on an investment that could be successfully funded by R & D tax credits!
Virtual reality
This an especially exciting newcomer to the eCommerce sector. As the technology develops, online retail will be a natural deployment investment for companies, as it will enable them to totally captivate customers in the shopping experience which is uniquely relevant to them, totally new to how they have shopped in physical stores in the past. The British High Street may only exist virtually in the near future.
Virtual reality is still relatively in its infancy, however, it is hugely innovative and one of the best candidates for R&D tax credits.
Payment technology R&D
Developing payment options that are able to take payments from all over the world is a particular problem. Reducing issues at payment stage is an essential part of digital optimisation for companies operating online.
Electronic “wallets” are one solution that can offer interesting solutions for an innovative eCommerce platform.
Examples of heavily invested companies are the emerging Apple Pay and Samsung Pay, though other global financial services companies such as MasterCard and PayPal have also started using “wallets” which can store secured credit to use in online transactions.
Investment in this type of future technology could well qualify as R&D.
Cybersecurity & Biometrics
Cybersecurity is crucial in order to avoid risks of online fraud, hacking, and identity theft.
A new but growing technology in cybersecurity is biometrics: the use of fingerprint, iris and voice recognition for authentication purposes. Far superior to passwords, as the information cannot be hacked or replicated, it is the ideal way forward, however, it can be a difficult tool to integrate into an eCommerce site.
An example of a company doing innovative work with this technology is Onfido. They have developed an identity verification engine. Their facial check product uses cutting-edge computer vision techniques to provide advanced fraud detection.
The developing of biometrics in cybersecurity for eCommerce is a definite candidate for funding via R&D tax credit.
R&D Tax Credits are a fantastic opportunity for innovation and growth for many companies, and are more available than most people think. Once the concept of innovation is understood, a whole range of projects could be eligible under the scheme and will enable eCommerce to flourish at the rate it should.
For information and advice on whether your eCommerce venture might qualify for R&D tax credits, as well as further help on applying for them, get in touch with FI Group at info.uk@fi-group.com.
