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How Brexit Could Affect e-Commerce

Britain is fully immersed in e-commerce culture. 86% of the UK have shopped online during 2017, according to Eurostat, and this number will likely only increase over time. However. the impact of Brexit is currently unknown, and this has left things uncertain for European e-commerce as a whole

When it comes to Europe’s future in e-commerce, it’s important to look at EMOTA (European e-commerce and omni-channel trade association). They’re an umbrella foundation representing online trade across Europe through whatever channels are available with the main goal of promoting e-commerce and removing trade barriers.

According to their secretary general, Maurits Bruggnik, when asked about if European e-commerce businesses need to panic over the outcome of Brexit:

“In case of a hard-Brexit, which seems to me the most likely scenario, we will see serious disruptions in cross-channel trade since all products will have to pass customs, product conformity procedures and other disrupters. This means long waiting periods for consumers waiting for their parcels to be delivered. With some product categories having return rates of up to 50%, the issue of delays will be even more important. This will quickly lead to a serious downturn in e-commerce.”

 

First Impact – Value of the Pound

The UK has already felt some of the consequences of the decision to leave. The drop of the Great British pound’s value after the referendum has led to the proportion of orders leaving the UK to rise substantially since the referendum, according to the IMRG MetaPack UK Delivery Index. Alongside this, the cost has increased for merchandise coming from outside of the UK- making it a lot worse for Brits.

Bruggnik had this to say in regard to the problems our retailers are facing:

“The drop of the Pound Stirling will not off-set the tremendous loss in shoppers convenience with long parcel delivery times. If a shopper is willing to wait long for a parcel delivery because of the price difference, the UK will always lose to China. Moreover, shoppers will also have to pay customs duties, which can for some product categories be very important. The number 1 e-commerce product category is clothing and that is an area where high customs duties still occur.”

In the short term, the good news for the UK is that businesses solely focused inside the country will see a temporary boost. In the long term, however, the value of the pound is unclear, so there is a chance the online market will recover, although not guaranteed.

Most e-commerce professionals estimate this change in the market will lead to Germany and Switzerland taking Britain’s place as king of Europe’s e-commerce.

 

Second Impact – Regulations

Bruggnik went on to talk about what regulations would be affected by these changes:

“Many important pieces of EU legislation affect e-commerce. Some of the recent ones: Consumer Rights Directive (CRD), GDPR, Regulation on Cross-border Parcel Delivery, Directive banning geo-blocking, etc. The UK will not change all the EU laws it has transposed into national laws. Take for example CRD, which gives consumers a 14-day cooling off period. There is no benefit for the UK to change this. However, over time, I expect some legislation to become more business-friendly in the UK. Legislation that would restrict the web shop’s use of cookies may pass in the EU, but unlikely to be embraced in the UK.”

Brexit will lead to tariffs on goods coming to or from the UK, along with the regulations on the services providing the goods, along with the cost for shipping and merchandise. Whilst the current amount of the additional costs is still unknown, it’s obvious the regulations will negatively impact the UK in any case.

Another limiting regulation to consider is that of outsourcing jobs to foreign workers. Currently, e-commerce businesses can easily offer work or contracts to people in other EU countries. When Brexit takes effect, however, the Visa requirements for these overseas workers will become something difficult to deal with due to the time and effort with the process. This will cause some difficulty for employers in this space.

Cross-border e-commerce can gain a lot of advantages through employing foreign workers due to having a multi-lingual customer service that can help expand their businesses to a wider audience. The problem is this is a lot harder to do when looking inwards at primarily British people. Along with the EU workers regularly combating the UK’s skill shortage in general, Brexit will definitely impact customer service the most.

 

Third Impact – The change in priorities

Bruggnik closed his interview by then mentioning how marketplaces and e-retailers across the UK would be impacted by Brexit:

“UK marketplaces and retailers will find it difficult to trade with EU customers if they do not address the delivery and duty issues. I see the larger ones opening fulfilment centres in the continent and the smaller ones having a hard time.”

In order to remain relevant, British e-commerce businesses may have to focus on prioritising their market in other Commonwealth countries such as Australia, New Zealand, Canada and South Africa. This will be far from easy however, as the distance would mean huge shipping costs and large amounts of inconvenience for everyone involved. EU Tariffs would likely even be cheaper once you take that into account.

As for the customers, they will have to limit their habits when it comes to cross-border e-commerce. It’s only a matter of time before EU merchants become more expensive, so if we do end up with no deal, it’s important to look towards the Commonwealth or anyone we can strike up a trade agreement with.

All that said, Britain leaving the EU most likely provides nothing but trouble for the world of e-commerce, but c’est la vie. We’ll manage.

 

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