What Is The Impact Of Brexit On eCommerce?
10th February 2021
We’ve all heard a lot about Brexit over the last few years, but you may not know of the impact it is currently having on different sectors across the UK. Here we take a look at the impact of Brexit on eCommerce through issues such as product supply chains, shipping times, VAT and tax regulations and how you can ensure you’re as prepared as possible for any Brexit backlash as an online retailer.
How Will Brexit Affect eCommerce Sales?
Research has found that the UK is the world’s third-largest online retail market and the top market in Europe. With an expected average of 58.8 million online shoppers this year, revenue in the UK eCommerce market is projected to reach £80,678 million in 2021.
One obvious area that many online retailers will have likely struggled with due to coronavirus is a significant slowdown in delivery times for their customers, and Brexit may only make things worse. Experts predict that supply chains will struggle during the adjustment period, as sellers and shipping companies adjust to new protocols and customs clearances.
On top of this, the addition of new tariffs on goods will either cost you, your customers, or both. This could mean that customers will refrain from buying internationally if additional costs apply after checkout.
Another factor to consider is a predicted drop in the value of the pound sterling (GBP).
Whatever the full impact of Brexit turns out to be, online retailers will have to work hard to convince European consumers that UK products will continue to be good value and can reach them in good time.
The specific fallout of Brexit is yet to be discovered and will largely be found as we move through new, unknown territory. This is why it is vital that online retailers don’t get caught in a disadvantageous position and lose out to competitors, due to lack of awareness.
Here are a few areas that online retailers will need to have considered and planned for:
1. Customs regulations
Britain now exists outside of the European Union’s single market, meaning we no longer benefit from the open borders that have allowed unimpeded trade between other EU nations.
One of the most consequential Brexit impacts will be the stricter customs regulations for parcels entering and leaving both the United Kingdom and the European Union. Specifically, these additional regulations could see some British products restricted or, in some cases, outright prohibited, depending on the details of the Brexit deal. It’s important to check that your products comply with any customs regulations, so you can avoid what could be a major supply and demand issue.
2. Longer shipping times
If you only trade domestically then it's expected that Brexit will have reasonably little impact on your eCommerce sales process, which is great for smaller UK-based retailers. However, if you trade internationally, or have international suppliers, you may need to think about your online processes.
A big factor of enticing consumers to shopping online is being able to ship their items to them in good time. However, stricter customs regulations between the UK and the EU will likely mean parcels being shipped will endure longer shipping and transit times.
This change will need either be factored into how you advertise your delivery times to customers, or you will need to consider the most efficient way that your courier network can work.
3. Customs duties and VAT changes
VAT is a consumption tax where value is added at each stage of the production process of a good, that the customer is charged for.
VAT laws were a major point of contention during Brexit negotiations, and one change that is noteworthy is the need to complete a customs declaration when exporting goods to the EU, just like to the rest of the world. UK-based online sellers of goods to consumers in EU countries will no longer be able to declare and pay VAT via their UK VAT return in countries where they are below the annual distance selling threshold.
To be able to do this, you need to apply for an EORI number, which is a unique ID code that’s used to track and register customs information in the EU. Even if you have one already, you may need to update it, so it’s worth checking.
Speaking generally, the government indicated that they are going to keep their current VAT system and won’t deviate too much from what we experienced before Brexit. However, as this is a new and changeable situation, it is still advisable to stay up to date with any changes.
What Can Online Retailers Do To Ensure They Are Prepared For Brexit Backlash?
Before the beginning of 2021, online businesses both in the UK and abroad will have taken proactive steps to prepare their eCommerce operations for the post-Brexit world.
Some actions that may still worth taking as an online retailer are to:
1. Keep your policies up to date and stay informed
If your business is engaged in cross-border eCommerce, then the taxes you pay to ship products across borders has the potential to increase. So you either need to learn how to calculate them to fairly price products for your consumers or have your customer pay them. You need to decide what is right for you and your customers.
Whatever route you take, you’ll need to update your customer terms and conditions, including your shipping policy. These clarify which party is responsible for paying any tariffs or import VAT and ensures customers know of taxes they might be liable for.
You will also need to clearly articulate to shoppers what your returns and exchange policies are, and highlight if any changes are being made.
2. Keep tabs on suppliers
Not only due to Brexit’s potential impact on tariffs, customs and supply and demand, but also with the continual uncertainty of the coronavirus pandemic in mind, it is worth identifying some additional suppliers to avoid any complications that could arise. We saw numerous manufacturers go out of business in 2020 and it’s a trend that could well grow this year.
Key locations for eCommerce brands worth thinking about in relation to Brexit are:
- Origin of raw materials
- Location of manufacturers
- Location of warehouse
- Location of customers
With Brexit, it’s time to consider the location of each, and if there is anything you can do to reduce cost and complexity.
3. Optimise your checkout
Although Britain doesn’t use the euro, it may be a good idea to adapt your site to accept multiple currency options if it doesn’t already, including pounds, euros and U.S. dollars.
Having numerous currency options can hedge against any Brexit-induced confusion and accommodate online shoppers wherever they may be. Furthermore, it’s also a good idea to optimise your checkout process for a global audience by offering customers multiple shipping options.
A big part of eCommerce is making things straightforward and usable for the online shopper.
4. Re-certifying products for sale in the EU
Lastly, if your products are developed and made in the UK, they may need to be re-certified for sale in the EU.
Regulations are very strict when it comes to health and safety, so you may also be required to modify how you manufacture, label, or market your goods.
Our Advice To Retailers
No one can fully predict Brexit’s impact on global eCommerce and UK businesses as this will take some time to fully unfold. So instead of being purely reactive, we suggest that you keep a close eye on the news and think strategically about what you can do to support your business.
These guides are worth reading:
- GOV.UK’s Brexit Transition guide
- HM Revenue & Customs’ guide: Retail sector: end of transition period guidance
- How to Boost Your eCommerce Sales
- How to Remain Competitive in Crowded eCommerce Markets
Finally, if you need support with any aspect of your online retail business, we can work with you, with the ultimate aim of helping you meet your business goals. Contact SilverDisc today.