Read Time: 6 Minutes 30 Seconds
By Zuzana Hughes, Senior Audit and Quality Control Manager UK
On 31st of December 2020 the Brexit transition period came to an end and to the relief of many, a last minute Trade and Cooperation agreement (TCA) between the UK and the EU was reached. Actioned from the 1st of January 2021, the ultimate goal of the TCA was to protect a £668 billion trading relationship by maintaining tariff and quota free trade. To put numbers into perspective, in 2019, 52% of all UK imports came from the EU (£374 billion) and 43% of all UK exports went to the EU (£294 billion).
As we settle comfortably into the second week of February, a month and half on, we’re beginning to see the logistics of a post-Brexit world unfurl, with many questioning the impact it’ll have on the industry as we know it.
What We Know So Far
Reaching a TCA means that tariffs and quotas will no longer apply to all goods traded between the UK and EU with the “appropriate rules of origin”, which is the first time the EU has agreed to unprecedented 100% tariff liberalisation with any other trading partner. It is worth noting that the zero-tariff policy is not applicable unconditionally – according to TCA, origin rules apply, meaning a product will not qualify for zero tariffs if more than certain percentage of its pre-finished value is neither of British nor EU origin. In other words, a zero tariff will only continue to apply to items fully or predominantly made in the UK or EU. This proves problematic for resellers of products manufactured outside of Europe as they now have to adhere to a double tariff policy that could impose their bottom line. As a result, many resellers may slow down or halt their trades with the EU whilst they quantify the impact to their business.
As a result of leaving the EU, the UK has also separated from the 1968 Customs Union that allows custom-free trading. From the 1st of January the UK are being treated as any other non-EU country with new obligations and processes introduced, such as; filing import or export customs declarations, providing security and safety data, special licence requirements for certain goods (e.g. waste, chemicals etc) and complying with different VAT systems. This also means additional admin costs which will likely affect retail prices and could cause temporary logistics delays disrupting supply chain in both directions.
The UK is also now out of the EU-wide VAT electronic system, meaning any EU businesses that wish to continue selling goods – valued at less than £135 – to UK customers, are now legally required to register for a UK VAT number and start charging VAT on behalf of HM Revenue & Customs. As a result, businesses are now re-evaluating their approach to cross-border trading, pausing their international ecommerce websites until they get in grips with the new regulations.
We’d expect both UK consumers and retailers to shift temporarily from foreign e-commerce and wholesale websites to local businesses – if they have the option to do so – to avoid customs red tape and delays. Additionally, online shoppers will be paying closer attention to delivery/returns information and where their products are shipped from, to make sure they get them as fast as possible. They’ll also want to see the breakdown of end price including any applicable fees before the checkout to avoid later surprises. Resellers sourcing their products in the EU will likely squeeze their margins, or increase their retail prices slightly to accommodate the newly introduced Customs fees. While introducing (temporary) longer delivery times due to increased complexity in logistics.
As a result, consumers will be more conscientious of price fluctuations, asking questions pre-purchase that concern product source, delivery implications and post-Brexit impact to unit costs. Businesses need to communicate any new or relevant updates to their customer base not withholding pertinent or important information that could impact product price or delivery time. Price or delivery fluctuations could impact purchasing decisions, therefore it is crucial to maintain an open and honest conversation with customers throughout their user journey. Providing certainty and transparency in uncertain times is essential for both a seamless shopping experience and building affinity and customer loyalty.
Post-Brexit Top Tips
To help you navigate the post-Brexit landscape, we’ve compiled a list of top tips to optimize your strategy.
Communicating proactively and openly with your customer base is invaluable. Businesses should be clarifying the impact of Brexit on price, delivery & returns, either directly, via a dedicated “Brexit” page on the website, or via paid media. Brands should also consider introducing live “chat” functionality on their site – enabling users to reach out to sellers directly at any point on the path to conversion. This tool can help build brand and consumer confidence as they are both on the same page pre-purchase.
It’s crucial that brands take a consistent approach across all assets, communication and advertising channels to prevent confusion, updating order confirmation emails to contain price breakdown, expected shipping, delivery dates and return options, outlining any potential return costs. In case of any unexpected shipping delays, it is important to notify consumers immediately – highlighting updated delivery dates if possible. Maintaining a constant level of communication and honesty fosters a positive and harmonious relationship between yourself and your customers.
Inform your Campaigns
Advertisers should update the targeting and content of all international paid campaigns to reflect any business trading decisions. It is likely we’ll be seeing changes in trends so it is important advertisers inform their paid media in a smart way – making the maximum use of automated bidding solutions available.
Retailers need to ensure their product and checkout web-pages have been updated, delivery information is easy to allocate and price/fee/VAT breakdowns are transparent early in the checkout process. The product price shouldn’t increase at checkout as this could result in users abandoning their carts prior to payment. Advertisers should be aware of any price changes and update any manually optimized messaging in their paid campaigns accordingly.
Competitor awareness is more important than ever before. It is essential for both retailers and advertisers to stay on the top of their competitor’s efforts and changes – utilising the market insights and competitor benchmarking tools available. Being on the top of your market industry and key competitor efforts can serve as an inspiration for building a post-Brexit strategy, but it can also provide a competitive advantage if brands use the information they gather strategically.
For some brands it will be important to keep pricing or delivery speed competitive to maintain their market share. In the case of sudden price fluctuations, brands should consider performing market research, reaching out to their loyal customers and identifying how price changes might influence future buying decisions. Brands need to understand customer expectations and identify the most effective USPs that can help shape strategy and deliver expected results. Streamline processes, cut back any silos, reduce unnecessary costs to minimum, automate wherever possible and use data to inform any strategic decisions.
Regulate Your Feed Management
Retailers or advertisers using feeds to manage and advertise their inventory should update their Merchant center data to account for any additional fees or taxes. Depending on how retailers operate, any import or export duties can be added into either the “shipping” or the “price” feed attribute. VAT or Goods and services tax are generally being added into the “price” attribute. Either way, product prices indicated in the feed and on the website need to be identical to prevent product disapprovals due to a price mismatch. Advertisers should be closely monitoring feed diagnostics and any feed-based campaign performance post updates to troubleshoot arising issues immediately.
For more information on how to operate in a post-Brexit world, and to get external insights on your campaign performance, get in touch with the team today.