When it comes to ecommerce, the UK is the absolute leader in Europe. It has the largest ecommerce market and its consumers shop and spend more online compared to other EU countries. But now we’re leaving the European Digital Single Market, it brings uncertainty for both ecommerce sellers and buyers.
How will Brexit impact eCommerce? What will it bring for the domestic online retailers? And how will it affect international sellers? As a leading fulfilment partner to UK, EU and International ecommerce businesses we divulge our predictions of Brexit’s impact to the ecommerce market and what actions we’ve been taking to make the transition for our clients run smoothly.
The Most Probable Future: Hard Brexit
As the case of a hard Brexit is increasingly becoming the most likely scenario, this would mean a return to WTO (World Trade Organisation) rules. Under the WTO General Agreement on Tariffs and Trade, tariffs on most manufactured goods between the UK and the EU will stay quite low, averaging around 3%. Undoubtedly, some initial disruption will be noted in cross-channel trade. This is because all products will have to pass customs.
Customs and eCommerce
Small ecommerce and fulfilment companies who use manufacturers or import their goods from the EU will unavoidably struggle. As will larger e-retailers who have a significant EU customer base. For ecommerce giants and experienced fulfilment partners, the day after Brexit will be businesses as usual.
At Dimensions, we have been shipping large volumes of orders internationally for three decades. A No-deal Brexit just means our shipping department will treat orders to the EU the same as international orders. In June 2018 we started enrolling changes to the shipping paperwork of orders being delivered to the EU. To beat customs and product conformity delays post Brexit, a declaration of contents will be handed to carriers with every order. This process comes at a very small cost, it reduces delays and it ensures orders are delivered to customers, wherever they may be, in a timely manner.
Despite being able to beat customs waiting times with a good fulfilment partner, customer returns will be a whole different issue for UK and EU online sellers. With some product categories, such as fashion, having return rates of up to 50%, the issue of delays will be even more important.
EMOTA Secretary General, Maurits Bruggink, states that ‘this will quickly lead to a serious downturn in ecommerce’. So how can the UK prevent this?
The answer is, it can’t. But this doesn’t stop e-retailers and ecommerce fulfilment suppliers from taking measures of their own. Experts predict that larger retailers will open fulfilment centres overseas, while smaller marketplaces will struggle. But with Brexit being less than 55 days away and very few major UK e-retailers announcing the opening of new oversees fulfilment premises, there are two scenarios that are more realistic, and much more likely:
1. Modify your returns process
To beat returns delays and unhappy customers, online brands will need to re-strategise their returns handling process from start to finish.
Automating order-related complaints online will enable e-retailers to quickly qualify orders or individual items for replacement or refunds. In the meantime, your fulfilment partner will receive the same information through advanced integration systems (such as the custom eCommerce-WMS API Dimensions have developed) and quickly dispatch the relevant items back to the customers.
This solution offers speed and maximum customer satisfaction, but there’s a downside. Depending on the volume of overseas returns it requires a great volume of stock to be able to dispatch replacement items and fulfil new orders while waiting for the returned items to arrive and be booked back into stock.
2. Outsource fulfilment of EU orders
If you’re after a more streamlined solution, moving to a fulfilment house that has partners or branches in the EU is the way to go.
Dimensions has forged partnerships with reputable EU-based fulfilment companies who can carry out the small portion of fulfilment and distribution that may experience disruption due to high rates of returns after a no-deal Brexit to the Dimensions standards.
Product Conformity Procedures: Not an Issue
Although there have been some arguments about product conformity procedures also causing major delays in deliveries, it is important to note that this will not be the case. Non-tariff barriers (such as arbitrary health and safety inspections and borders) would be prohibited under the WTO’s sanitary and phyto-sanitary barriers to trade agreement.
As the UK intends to retain conformity with EU regulations following Brexit, the existing low levels of health and safety risks to the public in UK products will not change. This means minimal disruption for businesses in the digital food and drink commerce.
Once the UK departs from the EU, shipping to and from the UK will certainly change, particularly in terms of an anticipated increase in shipping rates. 51% of retailers in the UK believe cross-border trading will become much more complicated following Brexit – particularly in a no-deal scenario.
Increased shipping rates are likely to significantly damage the number of international orders placed on UK ecommerce websites by EU consumers. To counter this, retail giants Next and Asos have announced moving parts of their warehouse stock and distribution operations in Germany to service the EU after Brexit. But not every ecommerce business in the UK can afford to do that. This is where a good fulfilment partner comes in. Dimensions has put strategies in place to ensure delivery rates remain reasonable for consumers. Our mission: help smaller UK e-retailers compete with the big fish in native, oversees and international markets post-Brexit.
Depending on the nature of their products, however, some ecommerce businesses may benefit more from investing their Brexit focus away from the EU altogether. The UK government is currently exploring ways to deepen trade links with countries including the US, Australia and China. Bridled by the convenience of the EU marketplace for several decades, e-retailers are now given the opportunity to enter relatively untapped commerce territory.
In order to survive in the post-Brexit world of ecommerce, UK businesses need to re-evaluate both their shipping arrangements and their current online strategy. Three major points will drastically evolve in ecommerce after Brexit:
1. Data storage of P21 (Personal Identifiable Information)
The Data Protection Directive entered into force in May 2016 gives a very strict framework on the rules that affect the location as well as the right to use data provided online by users. This could mean that stricter regulations may apply to hosting as the UK would no lover be part of the EU, particularly in the treatment and analysis of Personal Identifiable Information.
2. Cross-border transactions
Cross-border transactions may also be impacted heavily as the UK would automatically withdraw with its exit from the common EU VAT area as well as the Customs Union. These two elements mean that in the event of a cross-border transaction VAT will be paid in the country of supply. Additionally, local rules may force businesses and consumers to pay extra for local fees and tariffs. Finally, you may have to pay for customs clearing duties.
These basic changes will probably impact retailers like Amazon or other big names. For example, you’re located in the UK and want to get a chair from a Spanish website because the price is 1.5 times cheaper. Let’s pretend the government implements a price levy. That tariff would actually mean that your product will be more expensive than what you would pay on the UK website. This type of element will automatically reduce the volume of trade between the two parties.
3. Price fluctuations
These too will be a non-negligible element. It would not be surprising to see a currency devaluation happen post-Brexit which could either favour imports or exports. Additionally, devaluations and revaluations of currencies imply necessarily a redesign of your pricing strategy, which could make your product or service more or less attractive and would, in the end, have an impact on your business.
There are a few countries in the world that have embraced the shift away from high street trading to online sales so comprehensively as the UK. Despite being less than 20 days away, Brexit still remains a huge question mark. Nonetheless, the UK’s online retailers have the capacity to meet the challenges ahead. They also provide a broad range of brands that cannot be purchased elsewhere, and are alive to innovation. But unless they adopt smarter shipping methods to drive customer satisfaction and target new cross-border markets to increase their customer base, they may be leaning against the wind when the UK leaves the EU.