Almost a third of retailers have seen their international online sales rise as the pound as weakened following the UK’s vote to leave the European Union, and more than half say they’ve seen an impact as a result of the 2016 referendum, according to new research.
The research findings, from cross-border ecommerce specialist Global-e, suggest that the effects of Brexit on UK retail may be less black and white than some commentators anticipated.
The impact of Brexit has seen mixed results, with just over half (51 per cent) of retail decision makers surveyed saying that they have seen an impact on sales in the UK since the EU referendum in 2016. At the same time, although Article 50 could be triggered any day, over two-thirds (68 per cent) of retailers have yet to start planning for Brexit, according to the survey of 250 British retail decision-makers commissioned by Global-e.
This is despite more than half (51 per cent) of retailers saying that the vote to leave the EU has already impacted UK sales.
Other key findings include:
• 32 per cent of UK retailers that sell internationally have seen increase in online orders from outside the UK
• Over half (51 per cent) of retailers that sell internationally expect cross-border trading to become more complex, when the UK leaves the EU
Global-e found that a fifth (21 per cent) of retailers have seen sales increase in the UK, while 30 per cent have seen sales fall and 47 per cent of retailers have seen no impact at all. Comparatively, almost a third (32 per cent) of UK retailers that sell internationally have seen online orders from outside the UK rise, as international shoppers take advantage of the weakened pound to bag a bargain.
The London-based business commissioned the research to better understand the potential impact of Brexit on the UK retail industry and selling internationally. Global-e found that retailers are overwhelming positive about the future, with three-fifths (62 per cent) of UK retailers surveyed stating that they feel confident or very confident that they can continue to flourish internationally once the government triggers Article 50.
Despite this confidence, almost half (48 per cent) of retailers expect the economy to weaken, making it more expensive to import goods. In turn, 63 per cent of retailers think consumer prices will increase in UK stores. However, with a weakened pound making it less expensive for international shoppers to buy from UK retailers, UK goods could appear more attractive to shoppers around the world.
“As the Brexit bill moves through Parliament, retailers are facing up to the reality of what Britain’s exit from the EU might mean. Although some retailers have revised their plans, our research suggests that most are taking a wait-and-see approach, before considering whether to change course,” said Nir Debbi, co-founder and CMO, at Global-e, which works with UK retailers including WoolOvers, Prezzybox, and Crabtree and Evelyn. “In the months since the EU referendum took place, most retailers have already felt some impact, with many of those that operate internationally seeing an increase in sales from online shoppers worldwide due to the weakened pound and growing trend for cross-border ecommerce.”
Half (51 per cent) of retailers that sell internationally expect the UK’s departure from the EU to make cross-border ecommerce more complex. However, 44 per cent of the retailers who are currently selling to shoppers internationally stated that they are continuing with their existing international operations and 23 per cent are planning to invest more in growing their business outside the UK.
“The UK leaving the EU will likely change the VAT compliance of UK retailers selling to EU and the distance-selling regulations related to duties and taxes. How exactly this will be changed depends on the negotiations, however it is likely to increase the complexity of selling cross border, hence the logistics work and costs. In order to avoid any negative impact on their cross-border sales and the customer experience offered to international clients, UK retailers selling internationally should be ready to react to this as legislation is agreed and be wary of the impact it could have on their EU customers,” added Nir Debbi.
Other findings uncovered by Global-e’s research include:
• Retailers divided on which ‘Brexit’ is best for business: Almost half (46 per cent) of UK retailers are in favour of a Soft Brexit, with some access to the single market, while over a third (36 per cent) think that a Hard Brexit, with no access to the single market, would be better for UK retailers.
• A ‘Brexodus’ of UK retailers appears unlikely: Despite concerns that businesses may move their headquarters outside the UK, Global-e found that just 16 per cent of UK retailers would consider moving all or part of their business to an EU country to retain access to the single market.
• Retailers expect consumer confidence to be affected: More than two-thirds (71 per cent) of retail decision makers think that consumer confidence will be impacted by Brexit. Three-fifths (63 per cent) of retail decision makers surveyed said they expect prices in UK stores to increase once the government triggers Article 50 and around two-fifths (43 per cent) expect consumers to reduce spending, while 28 per cent predict that spending will increase.
Nir Debbi added, “Our research suggests that the effects of Brexit on UK retail may be less black and white than some commentators anticipated. While many retailers that sell imported goods to UK shoppers have seen prices rise due to the weakened pound, those that sell to international shoppers on the web appear to be reaping the rewards of cross-border e-commerce, with 32 per cent seeing sales increase. However, relying on currency fluctuations will not be enough for long-term success.
“To make a success of cross-border ecommerce in Brexit Britain, retailers should review the experience they offer to shoppers in Europe and around the world. With the right preparation, technology and processes in place, retailers can seize new opportunities and tackle any challenges created by Brexit, to drive online sales internationally.”
Total sample size was 250 senior decision makers at retail businesses. Fieldwork was undertaken in February 2017. The survey was carried out online.