The world of business in the U.K. has been difficult over the past year. The COVID- 19 pandemic has resulted in lockdowns, closures and even bankruptcies of companies of all sizes in various industries. Worst hit are retailers and those in the hospitality industry.
As if struggling to battle through the pandemic wasn’t enough, the U.K. has also had the headache of Brexit to contend with, and this has been no easy task. From uncertainty over new regulations to the lack of guidance provided for businesses and the confusion over new tariffs and taxes, the importing and exporting side of things has been a bit of a mess after the transition period ended earlier this year.
It is now more important than ever to have a U.K. distributor as well as an E.U. distributor.
We should now be over the teething problems, but the effects of Brexit are still being felt and many companies are still nursing the bruises from the impacts of us leaving the European Union.
Postal services are feeling an immense amount of pressure at the moment. New customs procedures, fees and restrictions which have been imposed upon shipments from the E.U. are causing huge delays, sometimes resulting in parcels taking up to two months for delivery (whereas pre-Brexit, they used to take just two or three working days).
A major factor causing this has been courier companies that are not able to clear parcels through customs themselves. They usually have to send them to a U.K. government customs center to be cleared for entry into the U.K. and there has been an enormous increase in the number of parcels that now need to be cleared at these centers. (Before Brexit, clearance was never required from the E.U.) They then must queue, sometimes for weeks at a time, to be checked and scanned before they are completely cleared and allowed into the U.K.
So slow are these clearance procedures that companies are now boycotting some delivery couriers who aren’t geared up for handling parcels from the E.U., and many businesses are now sending other delivery companies that are known to be more reliable and much faster to collect parcels for them. These couriers use their own clearance procedures and can clear the parcels with minimal disruption, and in some cases, just as quickly as before Brexit.
Sending retail orders from the U.K. into the E.U. has become much trickier. Currently, E.U. customers should not pay any VAT when buying from a U.K. website, making their purchase 20 percent less than the standard price (although some retailers still charge the VAT regardless of where the customer is from). Once their parcel is ready to be delivered within the E.U., the courier or postal carrier will request payment of the import fees, VAT and any other charges from the customer. This can often cause upset and annoyance to the customer, especially if the retailer hasn’t taken off the VAT at checkout.
Recently, retailers such as Amazon, eBay and Etsy have introduced a policy whereby they collect the VAT upfront on purchases (IOSS). This is then indicated on the parcel and, in theory, the courier shouldn’t charge any VAT upon delivery. This is still in early stages, but may help to avoid the inconvenience of having to pay fees before the courier will deliver the parcel. Whether this will be adopted across online retail has yet to be seen, but it does streamline the process.
Importing from the E.U. has suddenly become hugely expensive for many, with some businesses being forced to pay upwards of 20 percent in increased fees. For some smaller dropshippers who were relying purely on E.U. distributors to fulfill their orders, the challenges of Brexit and increased costs have practically shut down their businesses overnight. They either had the choice of importing and stocking products in bulk from E.U. wholesalers (and having to increase their retail prices), switching their distributor to one based inside the U.K., or closing down completely. Sadly, many have had to opt for the latter.
For those that have switched to U.K. distributors, although this has been a lot of work, it has been fruitful, and many are discovering that they no longer have to source and import products from outside of the U.K. Many businesses are still thriving by implementing smart business moves and staying ahead of others in this way. Most U.K. wholesalers have also adapted to this and have widened their range to help retailers and make the sourcing process easier.
This is why it is now essential for brands to not only have an E.U. presence, but also a separate U.K. presence. The U.K. and E.U. markets are now two completely different markets and should be classed as such. If a manufacturer believes that they can survive with purely an E.U. presence, they may struggle to get sales from the U.K., especially to smaller retailers who have to place smaller orders. Gone are the days when a manufacturer could sign a distributor as their exclusive European wholesaler and leave it at that.
It is now more important than ever to have a U.K. distributor as well as an E.U. distributor. Without one, the current Brexit situation means that U.K. customers will be priced out of the market by import fees, delivery charges and sluggish delivery times, and product availability becomes scarce.
My advice to those looking to launch a brand into Europe? Ensure you have a presence in both markets by having a distributor in each. It’ll help retailers to avoid shipping issues and import fees and will allow your product to reach a much bigger audience.
Widen your scope by accessing both markets! Why wouldn’t you want to?
Daniel Miller has worked in the industry for over 10 years and specializes in adult retail and wholesale.
