In this guest post today, Mark Elward, Chief Commercial Officer at Huboo, a UK-headquartered fulfilment technology provider, today takes a look at how to cope with retail turbulence as Brexit draws closer:
Coping with retail turbulence
This is already the most turbulent period for retail in decades and now, midway into a second nationwide lockdown, we’re having to turn our attention yet again to Brexit.
It’s always been the elephant in the room, but we’re running out of road at a time when the UK economy desperately needs its online retailers to keep on exporting. We need to preserve and protect retail jobs and, with the high street facing almighty challenges, ecommerce is where the opportunity lies.
Unfortunately, deal or no deal, the business of exporting goods to mainland Europe is going to get more complicated come January 1st. Amazon has pretty much guaranteed this by announcing the pending suspension of pan-European inventory transfers for Amazon FBA, relied upon by thousands of UK ecommerce providers as the backbone of their EU fulfilment strategy.
The upshot is that in the New Year our EU-exporting retailers will be forced to maintain separate FBA inventory on either side of the English Channel and prepare themselves for an onslaught of additional red tape. It’s incontrovertible proof that even Amazon cannot defy gravity when it comes to Brexit.
Maintaining inventory in multiple locations isn’t easy and relies upon accurate forecasting to determine how stock needs to be split and where it needs to be housed. If you’re a start-up retailer or you’re experiencing high levels of UK demand from housebound consumers, there’s a good chance that you won’t even have enough stock in the first place. It also means paying for storage costs which must either be swallowed or passed onto the consumer, making the exported goods less competitive.
Dampening prospects for a generation of ecommerce exporters
Of course, in the event of a no-deal Brexit, the situation for retailers – particularly smaller ecommerce providers and young, independent retail start-ups – is going to be far, far worse. These businesses can’t afford to hire dedicated in-house admin teams to handle the additional systems, processes, checks and tariffs they’ll be facing from New Year’s Day onwards – gathering country-specific VAT numbers, tax numbers and harmonised system codes, providing customs clearance documents, and more besides.
Let’s be honest, the vast majority of UK small ecommerce providers will not be able to meet these demands. Nor are they likely to be able to export anywhere else – as exporting beyond the EU generally involves further complex logistical challenges, which is why only larger retailers attempt it. The upshot will be that these smaller providers are forced to become UK-only, if indeed UK market demand during a period of deep economic turmoil is enough to sustain their operations. The impact could be catastrophic.
Is there a solution?
Unfortunately, there’s little any of us can do to influence the outcome of the ongoing trade negotiations. Hope for the best, prepare for the worst, has become a bit of a cliché over the course of the Brexit saga, but nevertheless, right now the best thing any ecommerce provider can do is clarify their own EU exporting strategy and determine the most pragmatic route to achieving future success.
For example, will you continue to export under any and all eventualities – no deal included? Which territories will you prioritise if circumstances force you to pick and choose? Where is the most sensible place to house your stock within mainland Europe to guarantee short lead times, how much will you house and what are the estimated costs of doing so?
Once an ecommerce provider has arrived at a viable long-term exporting strategy, the next question needs to address fulfilment – both the act of getting the goods out to customers, and the ability to effectively manage the additional red tape. Amazon might not be willing to help out on the second point, but that can’t be said of all European fulfilment partners. At Huboo, for example, we’re committed to helping smaller ecommerce exporters overcome these hurdles by guiding our sellers through the processes, offering software to help them choose the right markets for their products, and providing professional tax advice. We are also building out our European presence, with a view to being located across most of the EU mainland by the end of 2021, giving our sellers comprehensive access to the entire market.
In fact, if you’re already using multiple providers to support non-Amazon sales channels such as eBay or ETSY, Otto or Allegro, it may make sense to break with Amazon entirely and go with a third-party provider capable of supporting the lot, without charging a premium for the privilege.
Take a deep breath
By combining strategic thinking, pragmatism and a supportive fulfilment partner, ecommerce providers of all sizes will put themselves in the best possible position to endure the Brexit chaos awaiting us. It’s going to be a difficult period, but I still believe the UK’s thriving ecommerce scene can weather the storm and continue to achieve EU exporting success in 2021.