The Impact of Brexit on UK Ecommerce

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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. Britainโ€™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 Foundationโ€™s joint 2016 European B2C e-commerce report, the UK is in the lead when it comes to market size (โ‚ฌ157.1 billion) and the average spending per e-shopper (โ‚ฌ3,625).

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.

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, thereโ€™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.

Hendrik Laubscher

Hendrik 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.

Comments 1 Response

  1. Other countries will leave, or the EU and euro will collapse, and then what? The world won’t come to an end and developers will gladly fill the need for a means to handle the changes.

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