Author: Luke Trayfoot, Head of Partnership Sales, World First
With the UK deciding to leave the EU a month ago, many online sellers have been left wondering the potential impact on their business. A lot of uncertainty remains about what happens next as Britain looks to redefine its relationship with the rest of Europe. This article looks at the potential implications for e-tailers and assesses how your business could be affected.
Importing and Exporting
UK-based merchants selling overseas will benefit in the short-term from a weakened pound making their products a lot more competitively-priced against overseas rivals. Many of our clients have already seen an increase in sales with a weak pound working in their favour.
On the other hand, eCommerce merchants with suppliers overseas have seen their costs increase which has made it difficult to maintain profit margins. Overall, the volatility in the currency markets has made it difficult for e-tailers to plan and budget effectively and now, more than ever, online sellers should look at fixing their currency strategies so as to minimise the impact of further volatility in the currency market.
Most of the uncertainty lies in what the UK’s relationship with the EU will look like in the future. What Brexit will look like is still unclear and will depend on the result of future negotiations of trade deals. Britain could join the European Economic Area (EEA), which means it could still get tariff-free access to the trading bloc or it could exit completely and then have to negotiate a whole new set of trade deals with the EU and beyond.
How trade negotiations go will ultimately affect online sellers in a number of different ways. These include: the implementation of tariffs, if you need an EU base to sell to one of the remaining member states and how businesses are treated when selling to member state countries.
Also, as the EU already has in place a number of trade deals with other nations like Japan and South Korea (both big markets for eCommerce), many online sellers may find they face a whole new set of regulations when selling overseas.
The European Digital Single Market
Depending on what the UK’s relationship with the EU will be, its ability to influence the development of the EU’s digital single market strategy will be severely weakened or completely lost and will have a significant impact on those who provide online goods and services.
Some of the initiatives in the strategy include simplified VAT measures and creating a more efficient and affordable parcel delivery service for EU member states. According to the European Commission, more than 60% of companies trying to sell online say that high parcel delivery costs are a barrier.
There is no doubt that the sharp fall of the pound in the days after the vote, volatility in the currency markets and negative economic sentiment has created a climate of uncertainty for many UK businesses. World First research also shows that almost half of UK SMEs do not believe that Brexit will be a positive thing for their business. Such negative economic sentiment could have a knock-on effect on consumer confidence and therefore spending.
Uncertainty and volatility is here to stay for the near future and as online sellers try to navigate the business environment following Brexit, preparing for the unexpected is the best strategy you could have.