How will Brexit affect the fashion e-commerce industry?
It’s no secret the fashion industry was staunchly against Brexit. Not only is fashion design and production an international collaboration, but 80% of UK clothing exports are sent to the EU – making the decision to leave an expensive one.
Unfortunately, trade negotiations are still ongoing, making the future unclear for the sector.
To help you make sense of it all and to prepare your fashion e-commerce business for whatever lies ahead, we’ve asked e-commerce fulfilment experts Huboo to bring you up-to-speed and give you tips and tricks for surviving a Brexit future.
Brexit & e-commerce – the story so far
Four years ago, on a beautiful summer’s day (ok, it was raining), the UK voted to leave the European Union. The official separation happened on 1 January 2020; however, both sides have until January 2021 to agree to the rules of their new relationship and how their decoupling affects UK trade.
Currently, negotiations are ongoing, and if we reach no agreement by 31 December 2020, the UK automatically drops out of the single market and customs union.
What does this mean?
The customs union removes all taxes and tariffs on each country’s goods, while the single market unifies all rules and product standards across countries. These make it easier, cheaper and quicker to trade with EU countries.
Dropping out of the customs union and single market means the UK must operate under World Trade Organisations rules, tariffs and border checks – something that would cost the UK fashion industry between £850 and £900 million.
Dropping out of the customs union and single market means the UK must operate under World Trade Organisations rules, tariffs and border checks - something that would cost the UK fashion industry between £850 and £900 million.
How could Brexit affect the online fashion industry?
The World Trade Organisation (WTO) rules are just one of many outcomes of a deal or no-deal Brexit. Other consequences to the fashion industry include:
1. Manufacturing and imports
Fashion components cross borders many times before becoming a complete product. Post-Brexit tariffs, rules and border checks could increase the cost and time for products to cross borders — making it more expensive and time-consuming to manufacture or import products for UK sale.
2. Product pricing
Post-Brexit tariffs may also make it more expensive to ship fashion products to EU customers, especially with the abolishment of the Low-Value Consignment Relief for consignments under £15. Fashion retailer Next has estimated the cost of a no-deal Brexit as more than £150,000 per year for its business – a cost likely to be reflected in product prices.
3. Fluctuations in demand
While the UK online clothing market has seen steady growth over the past few years, experts predict fluctuations in product demand over the coming years. A wave of international panic buying is expected in December, followed by a lull in orders next year. However, it’s not all doom and gloom. Trade deals could make it easier and cheaper for customers in countries such as Japan to buy products – placing new and different demands on your fulfilment operation.
It’s not all doom and gloom. Trade deals could make it easier and cheaper for customers in countries such as Japan to buy products — placing new and different demands on your fulfilment operation.
And let’s not forget fulfilment. Not only will tariffs and border checks make EU shipments more expensive and lengthy, but Amazon FBA’s recent Brexit announcement means you might not be able to ship products internationally at all. From 1 January 2021, FBA UK warehouses will no longer send products into the EU – either to customers or other FBA warehouses.
Brexit could impact your ability to ship orders within the UK too. The proposed Australian-style immigration points system could make it challenging finding fulfilment staff, especially during peak periods such as Christmas and the summer sales.
How to prepare your fashion e-commerce business for Brexit
Whether you love or hate it, Brexit is happening. The best thing to do is prepare for it as follows.
1. Implement a Brexit strategy
Your e-commerce fashion business must have a Brexit strategy. This strategy should analyse your risk and outline a business continuity plan that enables you to trade and profit whatever the outcome.
2. Reduce your risks
Once you’ve analysed your risks, begin reducing them as much as possible. For example, if WTO tariffs would adversely affect your product costs, can you diversify your supply chain to use suppliers based outside the EU? Or, can you reduce costs by bulk ordering products and storing them in a third-party warehouse until you need them?
3. Increase resilience
Where you can’t reduce risk, can you increase business resilience to overcome the consequences of Brexit on your business? For example, if your in-house fulfilment team will become easily overwhelmed by an increase in orders, or under-funded by a decrease, can you work with an outsourced multi-channel fulfilment service to access scalable warehousing and shipping resources that adapt to your needs?
Once you’ve analysed your risks, begin reducing them as much as possible. For example, if WTO tariffs would adversely affect your product costs, can you diversify your supply chain to use suppliers based outside the EU?
4. Speak with a UK-EU fulfilment partner
If your business relies on EU trade and is adversely affected by the Amazon FBA announcement, speak to a UK-EU fulfilment partner who can split your stock across warehouses in the UK and EU. This will reduce European shipping costs and increase delivery speeds for EU customers.
Psst – keep an eye out on the Huboo e-commerce blog for a relevant upcoming announcement.
5. Strengthen your UK brand
Your UK brand will become more important following Brexit, so it’s essential to stand out among your competitors to attract the most customers possible. Increase your UK conversions by optimising your prices, refining product quality and offering customers a seamless shopping experience.
Your UK brand will become more important following Brexit, so it’s essential to stand out among your competitors to attract the most customers possible.
Brexit may or may not have been the best outcome for the UK fashion industry, but that doesn’t mean your online business must suffer.
Think of Brexit as an opportunity to refresh your business, streamline operations, increase resilience, optimise your fulfilment and increase sales across the world to show the EU what you’re made of.
Huboo is a multi-channel fulfilment service delivering fast, reliable and cost-effective fulfilment for fashion retailers in the UK and EU. They use integrated technology to create a one-stop dashboard where you can offer customers fast shipping speeds they can confidently rely on. Read more about our partnership with Huboo.