In or out? how brexit will impact ecommerce and how you can get ready for it
Whatever your view on Brexit, it looks as though we’ll be leaving the EU. Whether we leave with a deal or not, Brexit will alter B2B ecommerce and online retail significantly.
Up until now, eCommerce has played a foundational role in setting up complex-yet-frictionless supply chains with EU member states.
How Brexit Will Affect Online Retailers
When it comes to Brexit, even the biggest eCommerce players are concerned. Last year, Amazon’s UK head, Doug Gurr, warned that the change could cause “civil unrest”, implying that those who have defined eCommerce over the past decade are lukewarm at best over the possibility of the UK-EU separation. However, why is eCommerce at large worried about life post-Brexit, and how will it affect the majority of platforms and storefronts?
Tariffs
The major concern for eCommerce platforms and online retailers is tariffs. Currently, Britain enjoys free trade with the EU and EU-enabled states like Norway and South Korea. Figures from both sides of the debate, however, do not paint the prettiest of pictures post-Brexit, with pro-EU organisations estimating that tariffs would range from 2.2% of GDP to 9% and euro-sceptic organisations estimating that tariffs would cost exporters £7.4 billion a year.
Moving to WTO tariffs will make exports more expensive, but not only will the UK have to manage them in the event of a no-deal, the possibility that EU states could enforce additional tariff regulations and other barriers remains a distinct possibility. Overall, eCommerce will have to learn to manage additional export tariffs to the EU which, for many, is a major customer base.
Order Fulfilment and VAT
Should Britain leave Brexit without a deal, major changes will likely be made to VAT from EU sales. A no-deal Brexit would mean business can no longer collect VAT from EU sales, leading to prices that may go lower, but fulfilling sales and shipping may slow down significantly. Slowdown on shipping and orders is partially tied to this VAT change and its effect on customs, but a slew of additional red tape may scupper even the smoothest of shipping channels, too.
Additional customs formalities and longer waiting times may hold back shipping, which could majorly disrupt perishable goods and time-sensitive items. In essence, eCommerce could be affected by this knock-on effect in shipping, particularly if competitor mainland EU storefronts can boast faster delivery times.
A Weaker Pound
Since the pound’s downfall due to economic uncertainty, it has had a direct impact on exports. While the malnourished pound has made imports more expensive, it has made British exports cheaper. So, while order fulfilment may be more difficult for EU markets, the lower rate of the pound may offset this.
However, if you are an eCommerce platform that relies on goods and services from the EU, then the expense of importing may have a negative knock-on effect for your earnings. At least in the short-term, the pound’s uncertain future may continually manipulate import and export prices. Depending on Brexit’s success, this may get better or, worringly, worse.
Preparing for a Post-Brexit Landscape
Preparing for this possible future of increased tariffs and slower exports is going to be tough to adjust to for everyone. We are all in the same boat, but preparing now for the future with the right eCommerce platform can mean the difference between flourishing or floundering.
A bare minimum should be getting your paperwork in order and getting scrubbed up on what it means to have a third country EU status. You will need to consider the following three things, if you have no experience trading with third-tier countries:
- Rules of Origin – You need to know exactly where your products and their associated parts have come from and prove it. This will affect tariffs and establish other trade policy measures such as quotas, anti-dumping measures, countervailing duties and trade preferences.
- Customs declarations – All goods will need to be declared once they reach customs. Effectively, trading with the EU will be the same as trading with non-EU countries currently.
- Tariffs – As discussed above, a slew of tariffs could come into place, and you need to ensure these are paid for before export.
