How Brexit Affects Dropshipping

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Brexit Affects Shipping Company
How Brexit Affects The Eu

Since the referendum to leave the EU rocked the UK in 2016, commentators, privacy personnel, and corporate officers alike have been speculating as to how Brexit will affect Britain's subjugation to the General Data Protection Regulation 2016/679 (GDPR) and other EU privacy laws.

HomeStrategyHow will Brexit affect e-commerce in the UK?

It’s hard to read the news without seeing the word Brexit in every other story. The entire world is speculating about it because the ramifications of Brexit, both in terms of political and economic change, are huge. As businesses – including online businesses – are famously frightened of unpredictable changes – it’s important to be prepared for whatever changes Brexit brings with it.

The eventual outcome of this huge geopolitical shift is still unknown, so the conversation around Brexit tends to be either total guesswork or educated guesswork. Educated guesswork is obviously much more preferable, so with the input from Peacock Carter, a longstanding UK-based web development company, here is an informed run down of how Brexit is affecting – and will affect – the e-commerce world.

The devaluing of the pound

When the Brexit referendum results first came in, the pound fell to a 30-year low against the USD$ and the Euro€. There was also a huge shockwave through the markets. In the months following the referendum results, the pound gradually picked up again, but now that Teresa May has triggered Article 50, we can expect the pound to drop again, especially when the UK eventually severs its ties with the EU.

From an e-commerce perspective, this could present problems for consumers in the UK who like to purchase goods from European online stores, as their money will not go as far as it used to. In the short term for UK online stores, it could actually be a positive change, as people in the EU will want to spend their Euros on UK-based websites because their Euros are stronger and will go a lot further. So, although bad for UK e-commerce consumers, it may be good for UK e-commerce businesses.

How British e-commerce stores can take advantage of this situation

On most Magento e-commerce websites, customers can select which currency they would like to pay for goods with. If you’re a British website, ensuring your website has this feature will help you take advantage of the pound’s drop in value as it will give customers the opportunity to pay for your products in Euros or US dollars. Without this feature, you may struggle to tap into a European or American customer base. Given this, if your website isn’t on a Magento platform, this may be the last reason you need to finally change platforms. Magento is undoubtedly the best e-commerce platform, so the benefits go far beyond taking advantage of European and American customers post Brexit.

The businesses most able to take advantage of the pound’s drop against the Euro and USD are companies with universal products, such as clothes, beauty products, music, books, etc. If your business sells electronic goods, however, you may not be able to tap into a European customer base as the different plug sockets and adapters put customers off purchasing electrical products, even though it is relatively simple to use an adapter plug.

Another positive ramification of this change in the pound’s value is that UK consumers who often bought goods from American and European websites will now find that their pounds don’t go nearly as far. As such, they are more likely to shop from UK websites in the future. Overall, it is very likely that Brexit will result higher traffic from UK customers on UK ecommerce stores, forcing Brits to spend their pounds at home in order to get a good deal.

Online commerce in the UK will likely increase

E-commerce sales in the UK are huge. 14.5 % of the UK’s purchases are made online, making it the e-commerce hub of Europe. And given that the drop in the pound’s value is likely to increase e-commerce activity, it is a very good time to have an e-commerce store in the UK. It is very likely that we will see a large rise in UK online sales; this means that there has never been a more important time to invest in your website.

You can also take advantage of this by putting time (and a little money) into your marketing campaigns. It’s important to tap into this potential Brexit market however you can. Communicate the potential savings to European and domestic customers. You could even create a PPC campaign targeting European customers, telling them how far their Euros will go on your online store.

Shipping post Brexit

Obviously, the UK hasn’t left the EU yet, so it still enjoys all of the benefits of free movement that come with its membership. But Article 50 has been triggered and the process is underway. As the UK’s departure from the EU is negotiated, we may find that shipping to and from the UK changes somewhat, at least with respect to mainland Europe. A likely event will be that the cost of international shipping to and from EU countries will increase significantly in a year or two. This may severely hurt the amount of international traffic ordering from UK e-commerce stores as people will be put off by very high shipping costs.

The potential rise to shipping costs when the UK has finished its Brexit negotiations will likely be the biggest challenge facing British e-commerce stores. This problem is approximately two years away, so it’s important to factor this in to your business’s long term plan.

Whatever happens in the next year or two as a result of the Brexit negotiations, it is undoubtedly worth redoubling your efforts if you run an online business. Keep a close eye on any changes to legislation and do your best to ensure your website is as futureproof as possible – even if you’re not entirely sure what the future holds. The best way to do this is to have an open mind and be willing to change how your business works if the rules change.

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European ecommerce is at a cross roads as new laws regarding payment and geoblocking of products are in the final stages of adoption. Britain’s decision to leave the European Union (Brexit) in 2 years time is going to also change the European ecommerce ecosystem. British based business are able to use ecommerce as a channel will also definitely change as well.

Currently – for the next 2 years there will be discussion and changes to policy and legislation for ecommerce in Europe. The status quo remains intact until the European Union and the UK Government agree on their separation.

First impact – The Pound Sterling

As soon as the Brexit vote took place and results were tallied, the markets made their feelings known on the decision and suddenly the Pound lost value in comparison to the Euro. When the Pound lost value cross border ecommerce shopping costs increased for customers who purchase merchandise from outside of the UK. Business that are focused on the UK alone might see a short term boost but as the Pound increases value against the Dollar – international and US sales might become a new revenue generator for UK based ecommerce businesses.

Keep in mind that the UK has one of the most developed ecommerce markets and that the percentage of retail that ecommerce has is the highest in Europe. According to Ecommerce Europe and the Ecommerce Foundation’s joint 2016 European B2C e-commerce report, the UK is in the lead when it comes to market size (€157.1 billion) and the average spending per e-shopper (€3,625).

Market entry

The UK has been seen as the entry point of Europe for many businesses. When Brexit is complete UK based ecommerce merchants will have a competitive disadvantage in comparison to businesses based outside the UK. As the United Kingdom loses its market appeal I believe Germany and the Netherlands will become the defacto choice for market entry as they have a skilled workforce and are located centrally in Europe. Germany has a rich ecommerce heritage as Hybris, Intershop and Otto who are industry leaders are all founded in the country.

Cost disadvantage

UK merchants currently have access to European customers and are able to leverage the Eurozone for standardized costs. Brexit will mean that tariffs on goods and services will be increased and as such shipping and merchandise costs will be increased. Currently it is unknown what administrative costs will be added to merchant costs from a legislative point of view. The Single Market product from the European Union will negatively impact UK customers and merchants as cross border ecommerce in Europe will become better and more widely adopted.

UK based businesses will have recruiting challenges

Currently UK ecommerce businesses are able to freely contract with workers in other Eurozone countries. These employment contracts for roles such as development, customer service and other roles will require working visas when Brexit takes effect. Visa requirements will also be challenging as the process may be time consuming and cumbersome. Cross border ecommerce businesses have been able to use staff to deal with multi lingual customer service but in general these services are hard and expensive to outsource. Also keep in mind that the UK has a chronic skill shortage that has been partly solved via EU workers.

UK ecommerce will matter but less than currently

The United Kingdom based merchants will have to change their strategy and potentially consider enter Commonwealth nations (Australia, New Zealand, Canada and South Africa) however these markets pose other challenges in terms of location (they are thousands of miles away) and have market leaders who already service their markets.

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International based merchants merchants and companies will possibly leave the UK as the costs will negatively impact their businesses. Merchants only selling in the UK will likely see little change to their operations.

Service providers who assist UK merchants are going to have to ensure that they are aware of the pending changes as costs and uncertainty from their UK customers will lead to new challenges for these merchants.

Customers will also potentially have to change their consumption habits regarding cross border ecommerce. EU based merchants will become more expensive than their current situation and thus the purchasing from the East and Commonwealth nations will need to be explored.

The Europe Union is also a lot more complex than many realise, and is made up of multiple agreements working at different levels to create a more open market. For instance, there’s the European Free Trade Area (EFTA), the European Economic Area (EEA), the European Union Customs Union (CU), Association Agreements (AAs and SAAs), as well as country-specific treaties for trade.

Merchants are going to have to ensure that they keep abreast of latest legislative changes as UK merchants will have to comply with new regulations.

Consumer trust will drop

When the UK leaves the European Union it will lose the ability to leverage Eurozone digital programmes such as a pan-European certificate for online shops, such as the Ecommerce Europe Trustmark, which will certainly have a negative impact on consumer trust.

The one constant will be change

In conclusion, currency fluctuations will impact merchants, suppliers, manufacturers and customers. Buying from local based ecommerce businesses will ensure that your pounds will not vanish and cross border ecommerce is still available for customers and merchants. After the seperation of the UK and European Union businesses will need to change their pricing and target markets in order to remain sustainable.

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Compare the best ecommerce platformsHendrik Laubscher has a decade's worth experience in ecommerce. He contributes to a variety of publications and is fascinated by all things ecommerce (marketplaces, emerging markets and cross border global ecommerce). He lives in South Africa but travels globally to experience ecommerce in locations worldwide.This website uses cookies to ensure you get the best experience. Learn more OK

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