Brexit and its long-awaited impact have once again been the talk of the nation in recent weeks. This time, however, time is well and truly running out. With just weeks left for final Brexit negotiations to take place, and EU representatives insisting there will be ‘no more deadlines’, fears of a no-deal scenario continue to grow.
Retailers have faced a myriad of challenges this year – from local lockdowns and a reduction in high street footfall, to heightened competition online. Now, as we near the end of the year – Brexit chaos, which has been mounting in the background, is set to cause even more disruption to UK supply chains. Just recently, retailers shipping from Felixstowe Port in Suffolk, witnessed “unacceptable delays” due to pre-Brexit stockpiling in the lead up to Christmas. This provided just a glimmer of the future challenges the UK could face over the coming months.
Not only are current eCommerce operations going to be impacted, but future plans for cross-border growth are likely to have been quashed amid current Brexit uncertainty. Despite the opportunity for online expansion, which has become increasingly evident following the pandemic, expanding across borders – in times of such economic and political uncertainty – can be extremely daunting. In fact, earlier this year business leaders warned that Brexit uncertainty was already hitting their ability to invest and plan for the future.
Growth in the face of uncertainty
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 significant opportunity for retailers who are brave and agile enough to pursue it. In fact, according to recent PFS Covid-19 consumer research, 53 percent of consumers had shopped more online during the pandemic than they had previously, with more than 77 percent agreeing that they expect to continue purchasing online more once lockdown is over. Even more interestingly, a quarter of shoppers said they had tried new online retailers due to lockdown – 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?
Preparing for the unknown
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 less than six weeks away, little more than half (54 percent) 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 percent) of retailers believing Brexit could cause an order backlog in the first quarter of 2021, nearly a third (29 percent) 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 utilizing a mixture of distribution centers, micro-fulfilment centers 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.
Expansion is still an option
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.
This year has been full of both challenge and opportunity for retail. And, whilst many brands have battered financially by the constraints brought on by Covid-19, there is a glimmer of hope on the horizon for growth. Whilst we are already seeing the potential impact of Brexit on our supply chains, full border controls on goods entering the UK has been delayed until July 2021 – providing retailers some relief from the full force of Brexit. Retailers should be using this time to build resilience into their supply chains, ensuring all options are evaluated and no stone left unturned. Whilst 2021 is set to bring further challenge, those who do prepare now, will be ready to reap the online growth opportunities on offer.
Joe Farrell, Vice President of International Operations, PFS