At 11 p.m. GMT on 31 January 2020, the United Kingdom officially stepped out of the European Union. The move has created considerable uncertainty for the country and for the whole of the EU, not least when it comes to business.
Every e-commerce retailer trading in, with and through the UK now face major concerns about what impact this will have on their business, and whether or not they will be able to sustain the same level of business they did pre-Brexit.
According to Statista, the (UK) has the most advanced e-commerce market in Europe. In 2020, 87% percent of Great Britain’s population made purchases online and the most recent figures from the Office of National Statistics, show the UK’s e-commerce revenue in 2018 amounted to £688.4 billion.
With its exit from the EU, online merchants and retailers are left with an endless list of mostly unanswered questions related to implications on the movement of goods, VAT, customs duties, and the impact on pricing for the consumer.
And, in a year that has heralded a boom for online sales, the looming deadline of December 31 could still see unprepared companies closing their doors for good.
Effect on Trade Post BREXIT
Since the 31st of January, the United Kingdom has been in an 11-month transition period after leaving the EU. During this time, both the EU and the UK have been holding tense negotiations to address issues such as tariff rates, trade regulations, immigration laws, and more.
Once the UK pulls out of the single market, regulations around duties and taxes will become more complicated. UK retailers selling their products in the EU will likely have to contend with more complex VAT implications, increased customs fees and additional tariffs, as well as delayed delivery times as additional checks and balances have to be observed.
Businesses in the UK may well be less able to introduce new products if standards cannot be aligned and increased customs fees may see the cost of moving goods become untenable for many.
At the moment, there is simply too much ambiguity and not enough detail for businesses operating in the UK to have any certainty over what the immediate future holds. Only time will tell as negotiation developments are released over the coming weeks.
Impact of Brexit on E-Commerce
Experts believe that irrespective of the outcome of Brexit, the e-commerce sector will be heavily impacted. New tariffs, regulations and structures will leave all small and medium scale companies operating in the UK facing the heat.
Business for the larger ecommerce companies is also expected to become more difficult. It’s expected that the following changes are most likely coming down the line for all sizes of ecommerce businesses:
- Product pricing may increase as companies pass on the increased costs of new tariffs, customs and shipping to consumers.
- Companies are likely to face a high cost of adopting new processes and policies.
- Long delays in e-commerce shipments are expected as new customs procedures and fees are introduced where there have been none for so long.
Additional complications are also expected to arise if no incoherent legal framework between the UK and the EU can be agreed upon.
Important Points To Focus On
Until a deal (if there is to be a deal) is finalised, e-commerce and retail companies need to keep a close eye on developments regarding the following points in particular:
Changes in VAT
A major point of debate between the UK and EU, VAT laws are surely going to change. Once Brexit is finalised, it’s most likely that the UK will no longer be allowed to use the current EU VAT Refund System.
A new system will have to be introduced, which will likely take time to define and roll out, which can lead to internal delays, accounting issues and price fluctuations.
Longer Delivery Time
Since new custom laws and regulations will be in effect between the UK and EU, it’s expected that the time and costs for shipping both to and from the UK will increase, and considerably at that.
Some estimations are considering the likelihood of anywhere between €30-€90 per delivery.
It’s likely that both the UK and the EU will have a new set of tariffs imposed on imports between the two. This may set off a trade war and in increased pricing of products resulting from negotiation tactics, strong-arming and eventual deals.
Custom Policies And Arrangement
One of the major consequences of Brexit will likely be stricter customs laws between the EU and the UK which may also lead to greater restrictions on products moving across the boundaries.
Act, Rather Than React
It’s advisable for all e-commerce companies, whether situated in the UK or abroad, to prepare beforehand for a post-Brexit world. Look for ways to reduce the impact this mammoth process will have on your business.
Here are some tips for preparing for Brexit to smooth the transition:
1. Get Policy Amendments Ready
If you’re involved in business with both the UK and EU, you will need to have the correct procedures shipping and tariff policy in place to conform with the laws of both entities given that the UK will be leaving the EU Customs Union.
In the event of a no-deal Brexit the tariffs that the EU have registered with the World Trade Organisation are likely to be applied.
Take time now to review your policies and procedures and identify the financial and procedural implications of a no deal Brexit.
2. Look At an Outsourced E-Commerce Fulfilment Solution
Many e-commerce companies providing to the EU are looking to move their business to Ireland and mainland Europe to avoid any additional cost or delivery time. For example, Amazon moved its logistics arm to Ireland.
This, however, can be a very costly process that may end up eating a lot of your resources.
Another alternative is to adopt an order fulfilment solution from a reliable order fulfilment partner with a strong existing network in both the UK and the EU.
3. Analyse The Impact On Your Delivery Times
Fast delivery is one of the most important factors in e-commerce sales. What if your delivery times grew from next day to 3-day? Or to 5-day delivery times? What impact would this have on first-time sales, repeat purchases and consumer satisfaction?
The time to look at the impact of increased delivery times is now. Examine the impact that lost revenues and increased customer support requests would have on your business and look for ways to mitigate these risks such as outsourcing your warehousing and deliveries to within EU states.
4. Assess Your Suppliers
If your online store is based in the UK but your manufacturer is based in mainland Europe, explore other options in case tariffs end up being too high to maintain profitability. If you are already using third party suppliers for warehousing, will they be able to provide you with a way of minimising the fees you will need to pay post-Brexit?
Identify and engage with some additional suppliers that you can revert to so that you can avoid any complications that arise from Brexit quickly.
5. Accept Multiple Currency Options
While the UK have not been using the Euro, online sales can still be impacted by consumer perceptions. Having a variety of currency options, like USD, Euro, and Pound, will make it easier for your consumers to shop with ease without any confusion, whether they are in the UK, EU or the U.S.
Speak To An Advisor
Flexibility is the key to progress and remains afloat in turbulent times like these. Being prepared for every possible outcome will ensure that Brexit does not affect you negatively in any way.
To speak to one of our team about outsourcing your e-commerce fulfilment post-Brexit, get in touch today. At ParcelPlanet, we can provide you with the warehousing, logistics, delivery and customer support services that you need to go into Brexit in the confidence that your business will thrive.