Practical Ecommerce

Will Brexit affect my U.K.-based ecommerce business?

To read the newspapers and listen to the television commentators, some would think that the surprise vote in the U.K. to leave the E.U. is a disaster, to change everything. This is an exaggeration.

The U.K. will not leave the E.U. until, at least, two more years. There will be a lot of noise and bluster until then. U.K. politicians and E.U. officials will make all kind of threats and counter threats. Uncertainty will continue. The markets will fluctuate as some will make a killing from this and others will lose. But the laws will not change for at least two years. It is as easy today to import and export from the U.K. as it was before the vote.

The real question, for me, is how will Brexit — the “British exit” from the E.U. — affect my ecommerce business here in England? What plans should I make to survive and grow?

Ecommerce businesses typically operate worldwide. All such businesses, regardless of their location, will be likely affected — some more than others. Since I am U.K. based, a significant amount of my sales are in the U.K., in British pounds. I also sell to customers in Europe in euros and to the rest of the world (mainly the U.S.) in dollars. Dollars are looking good to me at the moment as I can exchange them for relatively more British pounds, thanks to the fallout from Brexit.

I have revised my sales forecasts and thus my purchasing budgets. I am assuming a drop in sales to U.K. buyers, as uncertainty will inevitably reduce consumer confidence. I am also assuming an increase in U.S. and E.U. sales because I can lower my prices due to the drop in the pound. I get more for my goods when I sell in dollars or euros. My U.S. and E.U. competitors do not enjoy this savings and are doubly hit when selling to U.K. customers.

So, for the short term, it is business as usual whilst being careful to monitor prices and my competitors.

I have also considered my suppliers. They are larger companies, importing and exporting heavily. Brexit may adversely affect them.

One major U.K.-based supplier has a E.U.-wide distribution license for a popular U.S. manufacturer. This supplier also has a U.S. and E.U. distribution license for a U.K. manufacturer’s goods. Brexit will likely hurt this supplier. The U.S. manufacturer’s goods could, eventually, have trade restrictions to import to the U.K., and the U.K. manufacturer’s goods may have different restrictions to export to both the U.S. and the E.U. The supplier could potentially have to do meet regulations and restrictions for each country, where in the past it could freely sell goods in the E.U. and meet restrictions only for importing and exporting into the U.S. The supplier’s costs will increase and its freedom to move goods around will be restricted. I plan to reduce my dependence on this supplier.

Fortunately most of my other suppliers distribute only in the U.K. So they will be largely unaffected by changes to international trade laws.

My one remaining potential problem supplier is a German distributor with E.U.-wide rights. It is possible this supplier will not retain the right to sell in the U.K., or it may have additional costs to sell to me. I will therefore have to monitor the negotiations and change my business model so that in two years I could lose the supplier with no loss. This, incidentally, is a shame as the company is very good to us. Before I do anything I will certainly visit with the company’s staff, as they may well have plans that could help.

In general, however, I am lucky. All of my suppliers are in pounds and all my costs are in pounds. I will not be directly affected by the currency fluctuations. It is likely that many of my suppliers will be buying in goods in dollars, but this should represent a lower percentage on my retail margins.

For me, being based in England, selling goods within the U.K. will be unchanged. For U.S. retailers, however, it will presumably become harder to sell in the U.K. when we leave the E.U. It is too early to say. It is certainly not the time for to plan expanded sales into the U.K.

I intend to expand my sales in the U.S. and Canada, but not invest too much into E.U. sales. There will likely be an element of prejudice against U.K. retailers in the E.U. countries as we have disrupted their system. That could help U.S. retailers that sell into the E.U.

So on balance, as a U.K.-based business, if I don’t panic and if I plan carefully, Brexit could actually benefit my business by making it cheaper to sell outside of the U.K. and the E.U.

Regardless, Brexit is an incredibly stupid move.

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  1. Gareth June 29, 2016 Reply

    Richard, I agree almost all of your comments, although I am a bit more optimistic on the risk of trade barriers between the UK and north America (though you are right to mention those risks). I have also noticed since Thursday that my higher-value products are a much easier sell than previously when exporting, as they are now a bit more affordable in overseas markets. I’m working out how to capitalise on this now – the potential to get more of my higher-value higher-margin items out of the door is very attractive.
    Thanks for the positive and level-headed perspective.

    • richard stubbings June 29, 2016 Reply

      Thank you. As the day go by and the panic subsides hopefully the UK customers will come back.

  2. Carlos Rivera June 30, 2016 Reply

    Richard, thank you so much for this genuine perspective. I needed this. It was a fascinating read! Cheers!

  3. Elizabeth Hollingsworth July 1, 2016 Reply

    Richard, while I am sure they comprise only a tiny percentage of your international customer base, it might also be worth marketing to Aussies as the pound has dropped about 10% making it more attractive for us to buy from UK retailers at the moment.

    • richard stubbings July 1, 2016 Reply

      I am happy to sell to whoever wants to buy.

  4. Richard July 1, 2016 Reply

    Great read Richard. I spoke to a retailer recently who is a florist, they were very concerned because they can’t these products from the UK. Whilst importing will soon lead to tax, customers, red tape and delays. Some industries will be severely affected and might not be able to recover: http://blog.veeqo.com/brexit-now-means-uk-sellers/

    • richard stubbings July 2, 2016 Reply

      It is too early to say what products, if any, will be subject to tax, customs or delays. It will be at least two years and it will be known before it kicks in. It is better to remain positive and keep monitoring the situation and lobbying.