Post-Brexit trade with the EU presents an opportunity for UK businesses to explore new options for low cost access to this key market.
Since January 1st 2021, trade between the UK and the EU has plummeted. Worse, many of the sales that have been made have incurred a loss. The cost of doing business has risen an estimated 30% – at least some of which has, in many cases, been presented directly to the end customer. Repeat business has been decimated and companies have been forced to destroy stock in Europe rather than incur the cost of repatriating it into the UK supply chain.
As a result, many UK businesses have – somewhat understandably – pulled out of Europe; but the EU remains a key market and demand is still strong.
So how can businesses reinvigorate trade? How can they achieve a cost effective business model that supports growth throughout Europe and provides the foundation for further international expansion?
Lack of Clarity
Companies’ inability to present customers with an accurate price up front has been a problem ‘ and that is due to confusion around both VAT and harmonised codes. Managing EU VAT de minimis has been a challenge ‘ with companies requiring a dedicated VAT number in each EU trading country, as well as the ability to account for different VAT rates and thresholds. While this problem should be reduced with the introduction of the Import One Stop Shop (IOSS), the thresholds are being removed, which will mean more goods are subject to VAT.
Lack of clarity surrounding harmonised commodity codes also continues ‘ and if a product’s paperwork does not include the correct description and/or commodity code, customs fees will be imposed, creating an unexpected bill for the end customer.
The good news is that once a company has the correct Harmonised Codes, registered for its IOSS VAT number and worked with carriers to understand the additional costs, an accurate price can be presented to the customer at the point of sale. While this will overcome the negative customer experience associated with additional fees, the total cost of sale remains higher than before Brexit, leaving UK businesses at a disadvantage compared with EU competition.
If UK companies are to meet the sustained demand from EU customers at a competitive and profitable price point, the best option is to set up in Europe. By shipping products either direct from source into a European distribution centre or exporting in bulk from the UK, businesses can overcome many of the Brexit induced barriers and costs.
In fact, there are a number of advantages: negating delays or costs associated with cross-border trade; faster delivery; and lower costs. Indeed, goods can be delivered up to three days sooner and some companies expect to cut costs by £100,000 a year on shipping alone.
However, competition for warehouse space in the key locations of France, Germany and the Netherlands is fierce as companies internationally look to access the growing eCommerce opportunities across Europe.
Flexible, Outsourced Fulfilment
One solution is to consider outsourcing your fulfilment. Outsourced fulfilment provides not only a foothold within the EU but also a number of commercial advantages. Working with a provider that has the weight to secure distribution centre space, negotiate discounts with the carriers and create relationships with local tax and legal advisers, gives companies immediate access to the EU market.
In addition, businesses will gain access to expertise around harmonised codes as well as fast track compliance with the new IOSS. And, with real-time access to the fulfilment process through cloud based software, companies gain the agility to enhance the customer experience ‘ from reprioritising picking activity to changing the shipping plans.
Good fulfilment business intelligence can also give companies the information needed to better manage the complexity of stock management. From rate of sales by SKU, to margin erosion and returns data, companies can use rapid insight into the entire fulfilment process to intelligently manage inventory throughout the supply chain and maximise sales opportunities in both geographies.
Post-Brexit trade with the EU will never be as simple as it was; but by outsourcing fulfilment, UK eCommerce businesses can gain low cost access to this key market. Companies have mothballed EU business for long enough.
It’s time to get back into Europe.