18 Sep 2020

Post-Brexit: What Might this Mean for Cross Border Ecommerce

When Boris Johnson insisted that the UK would leave the European Union on October 31st, a distinct sense of urgency and uncertainty ensued. In other words, even with a potential “no-deal” right around the corner, there is still so much confusion in terms of what might happen post-Brexit.

But what might this mean for eCommerce companies in Ireland and the UK?

Simply put, when it comes to trade terms, a no deal event will put the UK in a similar position to the likes of the United States, China. More specifically, this will technically remove the United Kingdom from the EU, while triggering potential tax and logistical headaches for eCommerce companies on both sides of the border.

In this eBook, we look at what might happen post-Brexit and what this might mean for you and your eCommerce business and more importantly, what impact will this have for consumers in Ireland, Europe and the UK.

Potential Complications for Consumers and Ecommerce

Brexit essentially means that Irish and EU consumers will likely experience higher prices, delivery delays and other complications with online shopping. As if that’s not enough, there is still no progress on the hard border issue in Ireland and extra costs at every other turn.

Now, that’s not to gloss over the potential impact or implications of a physical hard border but rather to focus on what we know. That is to say, we are clearly nowhere near a resolution regarding the hard border issue and this is currently nothing more than a series of unanswered questions.

Now, getting back to the “extra costs”, there are some we know and many we have yet to consider.

For instance, Irish and EU consumers pay certain taxes including UK VAT when they make a purchase on UK-based e-commerce websites. However, Brexit will mean additional taxes and import duty for each purchase and these numbers will rise depending on the specific cost or type of product being traded.

Some of the bigger online retailers will operate on a delivery duty paid (DDP) basis which will include a final price including taxes. In short, this will ensure no outstanding costs or unwanted surprises for the consumer post-purchase. The impact is a drop in conversion rate.

But let’s be honest, due to the work involved, most small to medium companies are likely to leave these extra costs to carriers who can potentially withhold goods until the fees are paid.

Think about it, consumers think they’re buying a product for €100 only to receive a extra bill on delivery to the sound of €25. At this point, they can either pay or return the goods or neither.

You see, aside from the actual monetary cost, there’s also a price to pay with respect to other apects of online retailing.

Irish and EU consumers have a 14-day cooling off period, meaning we can return goods during this period for any given reason. What’s more, EU legislation protects consumers in the event of non-delivery with the right to a refund when a product is delayed or missing in action.

Currently UK retailers recognise and offer the same benefits to all EU consumers today. But what’s going to happen when the UK leaves the EU is anyone’s guess. What we do know is that many online retailers from the UK sell to EU consumers, so a number of scenarios could unfold:

TAX

Brexit Deal - Tax

1. Status Quo - Whereby UK online retailers sell to EU consumers as they do today

2. Minor Changes – While not ideal, this should be better than a No-Deal, imports and deliveries maybe impacted but

Brexit No-Deal

1. Nuclear - Whereby UK online retailers sell to EU consumers as they do today

2. Minor Changes – While not ideal, this should be better than a No-Deal, imports and deliveries maybe impacted but

 

Recommendations

1. Strategise –

2. Outsource – For online

3. Minor Changes – While not ideal, this should be better than a No-Deal, imports and deliveries maybe impacted but

This is merely one example and scenarios that may arise for Irish and EU consumers.

What Will Happen to eCommerce Ireland Post Brexit

According to Amazon, a no-deal will temporarily prevent cross border trade with countries in the European Union. That being said, the online marketplace seems reluctant to answer queries or respond in terms of concern around their plans for whatever might transpire post-Brexit.

But what does this mean exactly?

It means that nobody really knows what will happen post-Brexit – not even the largest online

marketplace in the world.

However, we do know that a deal or no-deal Brexit will bring little more than extra fees, complications and confusion for EU and Irish consumers.

For eCommerce companies, this also means that careful planning is essential for whatever comes next. While nobody knows what “next” involves exactly, this planning refers to having the most cost effective solutions and the right logistical operations at the ready. But more on that in a moment.

Logistics

Brexit Deal - Tax

1. Status Quo - Whereby UK online retailers sell to EU consumers as they do today

2. Minor Changes – While not ideal, this should be better than a No-Deal, imports and deliveries maybe impacted but

Brexit No-Deal

1. Nuclear - Whereby UK online retailers sell to EU consumers as they do today

Recommendations

1. Strategise –

Looking on the Bright Side for eCommerce Ireland

On the other hand, if the sterling continues to decline, EU and Irish consumers will likely find much better and cheaper prices online from UK-based online retailers. While taxes and costs might add up in the short term, this could be beneficial over a longer period. What’s more, many reputable brands and companies are likely to focus on Ireland and seek opportunities that may no longer exist in the UK.

For example, eBay recently launched a Retail Expansion Programme which will use the eBay Marketplace to help improve and elevate small-to-medium sized companies in Ireland. In the past, this program was successfully launched in the UK, namely Wolverhampton.

Irish eCommerce companies can also take advantage of a burgeoning statistic relating to domestic online shoppers i.e. buyers in Ireland. Recent studies by PayPal show that Ireland is one of the top countries in the world for online shopping but more than 70% of total spend goes abroad. In fact, An Post delivers more than 14 million parcels from the UK every year which in-part illustrates how UK-based companies rely heavily on Irish consumers. Obviously the revenue from all EU consumers is multiples of this for UK based online retailers.

With this in mind, eCommerce Ireland has much to benefit from a no deal Brexit and the complications facing many online retailers in the UK. After all, Irish eCommerce companies can reassure consumers when it comes to timely delivery and the absence of hidden costs.

One might even say that this is an opportunity for Irish and EU retailers to increase market share in the UK and the EU – at least in the short term.

And that’s just part of the story...

 

Cross-Border

Brexit Deal - Tax

3. Status Quo - Whereby UK online retailers sell to EU consumers as they do today

4. Minor Changes – While not ideal, this should be better than a No-Deal, imports and deliveries maybe impacted but

Brexit No-Deal

2. Nuclear - Whereby UK online retailers sell to EU consumers as they do today

Recommendations

2. Strategise –

 

The Importance of Order Fulfillment and Careful Planning

While great uncertainty is looming over Brexit, one thing is clear – everyone is planning.

It’s true, nobody knows what might happen but eBay, Amazon and every other major marketplace or ecommerce company is getting ready for a seizemic shift. As for the specifics, order fulfillment is a major focus and potentially the most important aspect of the entire situation.

Moving goods between Irish or EU ports to British ports is one of the biggest concerns for UK-based eCommerce companies. For this reason, international companies have needed to re-align their supply chain and consult alternative transport and storage companies for post-Brexit.

Autofulfil recently struck a deal with a US online retailer due to favourable conditions :

  • EU Memebre state
  • Low Corporation tax
  • English speaking country
  • Educated workforce
  • Access to the EU
  • Favourable shipping rates

Being an island, Ireland relies on exports for international trade. As a result shipping channels offer

You see, Brexit not only promises extra costs but also complications for order fulfillment. In fact, Kellog’s is just one of many companies currently searching for storage space in Ireland instead of relying on the uncertainty of a supply chain from the United Kingdom.

Anyway, the point is, 3PL storage space is scarce in Ireland and with Brexit deadline approaching, order fulfillment is surely the most pressing concern for eCommerce companies in Ireland and the UK and beyond.

But where does that leave us now?

Order Fulfillment

Brexit Deal - Tax

5. Status Quo - Whereby UK online retailers sell to EU consumers as they do today

6. Minor Changes – While not ideal, this should be better than a No-Deal, imports and deliveries maybe impacted but

Brexit No-Deal

3. Nuclear - Whereby UK online retailers sell to EU consumers as they do today

Recommendations

3. Strategise –

Final Thoughts

It would seem that Brexit is a no-win situation for Irish, EU and UK consumers but only time will tell what will actually happen. On the contrary, there is certainly a potential land-grab on the horizon for eCommerce companies in Ireland and if history continues to repeat itself, fortune will favour the bold.

After all, both eBay and Amazon deployed a superior user experience to dominate eCommerce online and Brexit might just be the opportunity to eCommerce companies in Ireland to one-up their competition across the water.

Either way, careful planing, practical thinking and meticulous organization is sure to enable the most forward thinking eCommerce companies to stay ahead of the competition.

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