As we approach the end of the year, final Brexit negotiations are now just days away. And, despite fears of what a no-deal Brexit could mean for the UK and its supply chains, a trade deal is still far from certain.
As we approach the end of the year, final Brexit negotiations are now just days away. And, despite fears of what a no-deal Brexit could mean for the UK and its supply chains, a trade deal is still far from certain. The pandemic, and its subsequent lockdowns, have already exposed the brittleness of UK supply chains for many industries, and the retail sector is one that has already faced a whole raft of challenges this year. From empty shelves and the need to stockpile goods – to a growing need for additional distribution infrastructure to keep up with a spike in online demand. Now, as a no-deal Brexit becomes increasingly likely, Brexit could be the final straw, causing further chaos for retailers in 2021. In fact, retailers shipping from Felixstowe Port in Suffolk, witnessed “unacceptable delays” due to pre-Brexit stockpiling in the lead up to Christmas. This is just a snapshot of some of the challenges that the UK will have to overcome over the next few months.
Amid such uncertainty, retailers would be forgiven for putting any future plans for cross-border growth on hold. Expanding across borders and investing in the future, can be a challenge at the best of times, let alone those of such economic and political uncertainty. However, if retailers have learnt one thing from this year, it is that the opportunities online are growing at a rapid pace. Those who are brave enough to venture into cross-border expansion – if adequately prepared – could have a very bright future indeed.
The opportunity for global expansion
As we near the end of 2020, many brands will be feeling conflicted between a vision for growth and the need to batten down the hatches whilst waiting for the imminent storm to pass. The closure of physical stores amid local and national lockdowns has seen the global eCommerce market boom in recent months – highlighting a significant opportunity for retailers who are agile enough to pursue it. In fact, according to recent PFS COVID-19 consumer research, 53% of consumers had shopped more online during the pandemic than they had previously, with more than 77% agreeing that they expect to continue purchasing online more once lockdown is over. Interestingly, a quarter of shoppers have tried new online retailers due to the lockdowns – indicating the potential for new and emerging players.
That said, a number of challenges lay in wait for brands with operations across the UK and EU, many of which have the power to crumble a business if not accurately assessed and prepared for. So, as we enter the final Brexit countdown, just how prepared are brands for the months ahead? And, with growth online a key strategy for many brands next year, how can retailers overcome the logistics of upscaling their online offering beyond the UK?
Preparation will be key for success
Despite a twelve-month transition period, preparing for the unknown has by no means been an easy task. In fact, PFS’ latest Brexit research indicates that despite the end of the EU Exit transition period being just weeks away, little more than half (54%) of UK retailers believe they are either fully prepared, or will be for Brexit by the end of 2020. And, surprisingly, despite two-thirds (67%) of retailers believing Brexit could cause an order backlog in the first quarter of 2021, nearly a third (29%) of UK online or omnichannel retailers have admitted that they are still yet to make any preparations at all.
When it comes to managing any successful omnichannel retail operation, business continuity is essential. Being aware of any kinks that could form in the supply chain, such as delays at customs and unknown taxes and tariffs, is therefore vital to ensure the business can continue to run smoothly. If those kinks aren’t ironed out, customers will soon feel the impact.
The retailers that are putting measures in place now, such as using multiple distribution points across the UK and the EU to get goods to customers on time, will be those that not only survive, but thrive post-Brexit. By utilising a mixture of distribution centres, micro-fulfilment centres and even brick-and-mortar locations, brands can effectively bring the product closer to consumers and diversify their inventory pull – something many retailers are already seeking to do in the wake of COVID. Reviewing where customers are located and determining how inventory should be dispersed across regions can vastly improve retailers’ chances to get products where they are most needed and maintaining vital customer satisfaction levels.
Don’t hesitate to expand
Whilst multinode fulfilment options can enable effective expansion across Europe, extensive VAT reporting requirements involved in processing international orders will be another roadblock faced by brands looking for international growth. In this instance, implementing a third-party Merchant of Record (MoR) can be a useful solution – relieving the retailer of upcoming VAT challenges. By enlisting a third-party MoR, products are then sold in the MoR’s name on the retailer’s behalf.
Essentially, once the customer presses the ‘buy now’ button, the MoR instantly buys the product from the retailer meaning the sale is managed through them, in a way that is transparent to the customer. By taking ownership of the product at this stage, tax responsibilities fall to the MoR rather than the brand, eliminating the need to the retailer to be VAT registered in multiple countries and removing the potential headache associated with VAT administration.
Though the year has provided both challenges and opportunities for retailers across the globe, there is now huge potential for growth on the horizon. Whilst full border controls on goods entering the UK has been delayed until July 2021, brands must not rest on their laurels. In this time, retailers must build resilience into their supply chains, ensure all options have been evaluated and all potential hurdles prepared for. Though 2021 is set to bring further challenge, those who make sure they prepare now, will be ready to reap the online growth opportunities on offer.