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BREXIT: what happens now for multichannel and ecommerce retailers?

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It’s official. The UK has voted to leave the European Union.

The news opens up a period of uncertainty. What will this news mean for multichannel and ecommerce retailers, up to now used to trading in a single market with free access to markets and with freedom of movement? We’ve taken some initial soundings on what happens now – and in the longer-term.

Justin Opie, managing director of UK etail trade association IMRG , says it’s too soon to say. “The actual impact of Brexit is very difficult to quantify,” he said. “At the moment we have no idea on timeline to officially leave the EU, what trade deals will be put in place or whether shopper confidence will take a hit (or indeed whether that could be short-term or long-term). One obvious area that will need to be addressed concerns the regulations governing cross-border trade into EU countries, which are currently covered by EU legislation such as the consumer rights directive and data protection directive. The fact is Brexit may have a deep impact for online retailers or it may end up just seeming like business as usual, with a few minor tweaks.

“The uncertainty generated has obviously led to sharp fluctuations in economic measures such as the currency, but again how short- or long-term these impacts will be remains to be seen. The most important thing now is that we accept the result, like it or not, and start debating how industry can move forward successfully within this new reality in a pragmatic way.”

Matt Hunt, chief executive of UK app developer Apadmi Enterprise, said: “The UK and EU are markets that have continued to offer tech businesses huge growth potential and the international business community has been overwhelmingly supportive of our industry. Technology does not observe boundaries and we have been lucky to enjoy an inspiring array of tech from the UK, Europe and even further afield, which we have been able to access and use for the benefit of our customers.

“The UK tech industry has been in a strong position and the only limitations we’ve faced to do business has been our own ability. With the impending Brexit, there is now a high level of risk and uncertainty over our future and questions are being asked as to how will we be able to build on our success and further grow without the support of the EU.”

International courier ParcelHero has called for the Government to negotiate strongly for access to the single market once Article 50 is triggered, and not seek to impose tariffs on EU imports into the UK.

Its head of consumer research David Jinks said: “Many of ParcelHero’s SME business customers voted for Brexit and we understand entirely why they have done so. However, we are concerned for our customers about the possibility of increased costs in sending parcels to the EU and also receiving items from the Union.”

He added: “ParcelHero regularly ships to those countries that are in Europe but not in the EU, such as Switzerland, Norway and Iceland. Parcels sent to these countries face customs delays, red tape and tariffs of between 5% to 9% on average. We hope that the UK will not find itself with similar customs charges and paperwork. It is our hope that negotiations between the UK Government and Brussels will ensure that the EU will not impose new tariffs on British good shipped into the EU; and that similarly the UK Government will not seek to impose tit-for-tat tariffs in return.”

He said ParcelHero would now be looking to do business as usual. “We trust that Britain will not face new trade tariffs and border delays following these negotiations, which would be very much against the interest of EU countries and businesses, as well as UK SMEs.”

Commenting following the referendum result, Helen Dickinson, chief executive of the British Retail Consortium , said: “Keeping the cost of goods down for consumers and providing certainty for businesses must be at the heart of the Government’s plans for life outside of the EU.”

The BRC said it would be important for the Government to move quickly to explain how the UK disengages from the EU. “Without clarity, retailers, other businesses and hence the economy will suffer from a prolonged period of uncertainty,” said the BRC in a statement.

“We are already seeing the commencement of a period of considerable volatility as financial markets react to any emerging information that might indicate how the new relationship to the EU might be shaped. Retailers should be prepared for the possibility of significant swings, particularly in the exchange rate and consumer confidence.

“In order to keep prices down and to deliver the best possible choice for consumers, retailers’ top priority in the short term will be to ensure the continued ease and minimum additional costs of importing EU goods into the UK for sale to customers. A prolonged fall in the value of the pound will impact import costs and ultimately consumer prices, but this will take time to feed through. In its exit negotiations the Government should aim to ensure that the trade benefits of the Single Market (i.e. the absence of customs duties) are replicated in the UK’s new relationship with the EU.

“However, it is important for us all to remember that, even if the government serves notice to leave the EU tomorrow, the process of leaving the EU will take a couple of years, during which time the UK remains a member and EU rules over free movement will continue to apply. Retailers will continue to focus on serving and delivering for their customers day in, day out in a highly competitive market as they do today.”

Jacyn Heavens, chief executive of tech business at payments systems business Epos Now, said: “The leave vote raises many questions for businesses across the UK. Many modern firms work within a network of European partners, suppliers and customers and rely on a pan-European workforce. How will this be impacted going forward? How will Brexit impact on our relationship with US businesses who have long seen the UK as a channel to the wider continental marketplace? Will it make the country less appealing to foreign investment? I’m confident that innovative, entrepreneurial businesses can continue to thrive in what are now unpredictable times but they will need clear answers to these questions in the coming months if they are to build a successful future both for themselves and the wider economy.”

Daniel Reilly, co-founder at marketing analytics and call tracking solution provider Ruler Analytics, said: “Here at Ruler Analytics we are disappointed in the vote to leave the EU. However, the digital marketing sector is one of the most resilient and growing sectors of recent times. Whilst there are a number of negatives to leaving the EU there are also many positives for an industry that has no borders.

“We certainly don’t think this change will affect the ability to recruit skilled labour from abroad, nor do we believe this will cause a shortage of jobs within a constantly developing and evolving market place. We are a serviced-based financial economy, which is driven by a great infrastructure of both education and training, and this has allowed us to be at the forefront of digital, and will continue to do so for many years to come.”

Jon Copestake, chief retail and consumer goods analyst, and lead analyst for data and research at the Economist Intelligence Unit, said: “Brexit has already caused a significant shock in retail markets with the share prices of retailers such as M&S, Tesco and Sainsbury’s initially falling by more than 10% before recovering slightly.

“While the market panic will be relatively short-lived there will follow a period of sustained uncertainty which has been exacerbated by David Cameron’s resignation. From a demand point of view this means that retail sales will decline in the short term. The sales growth already achieved in 2016 will be pegged back for the rest of the year as consumers retrench and consolidate their expenditure. A weaker pound will push up prices while uncertainty during the negotiating period will weigh on household spending and retailer balance sheets.

“Worse is likely to come in 2017 when retail sales volumes could decline by over 3% as the economy falls into recession and uncertainty mounts, especially as higher import prices also act to depress demand. A weak sales environment will only be one of a number of challenges for retailers though. As consumers rein in spending retailers will be scrambling to renegotiate agreements with suppliers and reassess the regulatory environment in which they operate. Other factors such as exclusion from the Common Agricultural Policy and Digital Single Market will have both ramifications for retail supply and for cross-border trade with EU markets.

“Finally there are workforce implications which may prove difficult for retailers to navigate. Oxford University’s Migration Observatory there are 442,000 EU citizens employed by the UK retail, hotel and restaurant sector making up almost 8% of its workforce. If visa requirements come into force then many may have to leave. Although the leave campaign can argue that this will create jobs for UK citizens the scale of switching staff would be costly and difficult to manage.

“For retailers all of these complications will add to their cost base, during a period when revenue streams are curtailed by weak consumer sentiment. Something will have to give, meaning a combination of rising prices, lower profitability, corporate austerity, job cuts and, in some cases, bankruptcy. While 52% of the British electorate will be jubilant today there are likely to be few in retail that share this view.”

We’ll update this piece during the course of the day with reaction from across the industry. Check back in for updates, or leave your own comment below.

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