Posted: Thu 1st Nov 2018
In the absence of a trade deal with the European Union, some UK exporters are moving their businesses onto the major e-commerce platforms to mitigate risk. But is this a wise strategy? Rebecca Burn-Callander, author of The Daily Telegraph Business Guide to Brexit (to be published in summer 2019), investigates.
Brexit throws up a number of unknowns for British exporters selling goods into the European Union. There are fears that once we leave the single market, there may be export taxes or other levies to pay, and that shipments may be delayed at UK or EU borders.
To mitigate these risks, some e-commerce companies are moving all or some of their export business onto the major online shopping platforms, such as Amazon and eBay. Both of these retail giants offer fulfilment solutions, which promise to take care of the shipping and customs part of the product's journey.
By outsourcing fulfilment to these giants, some entrepreneurs feel confident their parcels will arrive safely post-Brexit. "We are already working with Amazon for that reason," says Dessi Bell, founder of London-based fashion brand Zaggora. "The uncertainty around Brexit can be really impactful towards businesses like ours."
Amazon and eBay both seem to have the global trading clout and technical knowhow to navigate whatever deal is struck between the UK and EU. eBay's Global Shopping program is ramping up to deal with a surge in post-Brexit enquiries, it is understood.
Amazon operates its Fulfilment by Amazon (FBA) centres across Europe, so it is possible for UK vendors to send and store products at these centres in advance of Brexit, to prevent paying any extra charges later.
However, this may not be a solution that works for every e-commerce player. Dhruvin Patel is an optometrist turned founder of OcuShield, which makes medically-proven screen protectors to protect users' eyes from harmful blue light. At the moment, the majority of sales are direct from the company website: 60% of turnover comes from outside the UK.
Patel is now looking to list his products on Amazon because of the opportunity to mitigate risk and tap into a new sales channel but warns that this is not the right route for everyone. "I'm confident we can do that because we have a strong USP," he says.
"Our screens are used by the medical profession, and the company was launched by a team of clinicians. If we sold a commodity product then listing on Amazon may not be a good idea. You could end up in a race to the bottom, being undercut by many other sellers."
Amazon also takes a fee - around 30% - for taking care of the fulfilment process and allowing the listing in its marketplace. While this may be cheaper than the cut taken by offline retailers (which can charge as much as 60%), the cost may eat into the seller's margin.
Listing on a major platform may not be enough to insulate small businesses from every Brexit-related shock. "With Brexit impending, we have already seen an impact to our UK sales," says Simon Shenker, founder of fashion brand Lost in Summer, which launches new collections from the Ibiza party scene in partnership with DJs and well-known club nights.
"To survive, we are launching on Amazon and eBay marketplaces abroad in order to attract foreign customers. We are starting to sell very well on Amazon Germany and eBay USA. However, we are worried that if there is a hard Brexit, these sales may be hit by tariffs and delays."
According to Patel, UK exporters should prepare for Brexit by listing their products on as many platforms as possible. "It's worth having a multi-channel strategy in place," he says.
"Some 50% of all product searches start on Amazon, so even if Brexit wasn't happening, we would be taking the platform seriously. We don't want to be missing out on those searches.
"But don't give up your direct sales," he adds. "When you talk to customers direct, you're in charge of that relationship. If you moved your whole e-commerce business on to Amazon, you lose all control. What if they suddenly shut down your listing? Your business would be over. Never put all your eggs in one basket."
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