The Fallout from Brexit on Ecommerce Delivery
Retailers had barely had chance to begin to recover from the effects of 2020 when the new Brexit deal was finally reached - and with it came a whole host of different challenges.
Confusion over new paperwork needed to clear customs along with duty and tax changes meant many shipments were sent with insufficient or missing customs information, resulting in many parcels being returned either at customs, or worse – by the customers themselves. This coupled with carriers adding surcharges and limiting services has led to huge delays at the border. As a result, parcel volumes were down a massive 25% within the first week of this year compared to the year before.
All this has come at a big expense for retailers to such an extent that a 5th of all SME’s have already stopped selling to the EU, either temporarily or for good. Those continuing to sell to the EU are left with the painful decision to either take a big cut from their margins to pay for the additional administration costs, or hike up their prices to customers to keep up with the logistics requirements - in turn making them less competitive.
Unpicking the new Brexit deal
Implementation of the new Brexit deal has brought many issues to light. Amongst one of the biggest is around new tariffs for goods traded between the UK and the EU.
The TCA (Trade Cooperation Agreement) defined that goods traded between the UK and the EU would be subject to zero tariffs and quotas. What has come as a sticking point for many is that, in order for the product to qualify, the majority of its content must originate from either the EU or UK. This means that retailers who rely on a supply chain outside of the EU are now subjected to additional import duties plus VAT – a cost which is having a huge effect on company margins.
In addition, customs controls required under EU law now apply to any goods traded between the UK and the EU. This means that safety and security declarations now apply as well as import and export declarations, adding further complexity to the paperwork.
All these changes add to the ongoing confusion over EORI (European registration and identification) numbers and product codes, where missing or incomplete documentation increases the chance of fines for the retailer and damages the customer experience. Of equal concern is that many carriers are now looking at increasing their prices to account for the extra time spent at the border. This is not only adding further to the cost, but also indicates that longer waiting times are set to become part and parcel of international selling.
What does the new deal mean for retailers who sell to the EU?
What we know for certain is that the Trade Cooperation Agreement is only the start of forming the UK’s new relationship with the EU – there is still a long way to go. And whilst many of these issues will be ironed out as both retailers and carriers get to grips with the new regulations - it is likely that the landscape of cross-border selling has changed for good.
This means that the longer-term impact for retailers who wish to continue selling to the EU is an increase in cost. For many, this means facing an impossible trade-off between profit or competitive prices. For SME’s the picture is even more bleak and could spell the end of selling abroad because their margins are simply too tight.
Looking beyond the Brexit fallout with a move towards EU operations
Hope for international sales is not lost, however. As the effects of the fallout from Brexit have become apparent - and following on from the advice of the Department for International Trade - there has been an increasing trend towards retailers moving their fulfilment and operations to the EU, thus bypassing many of these issues.
The only challenge now is finding a way of keeping the costs down whilst still offering a competition beating and customer winning service - which is where GFS can help. As part of GFS Europe, retailers have been able to move large parts of their supply chain to the EU, meaning they are able to continue selling across Europe and the rest of the world without the hassle of complex cross-border documentation, or the expense of additional duty fees.
This teamed with technology to calculate duties and taxes at the checkout and automated label printing helps to eliminate the risk of any hefty fines or unexpected fees - thus maintaining a good retailer-consumer relationship while avoiding any nasty surprises, all for one affordable fee.
With the EU still providing the largest market for UK exports, the potential for international growth is huge. There is no doubting that there will be unexpected twists and turns along the way, however, if retailers can find a cost-effective way of continuing to trade internationally and weather the post-Brexit storm, the possibilities are endless.