As 2021 gets going, one has to use “happy” advisably when welcoming in the new year. Crazy New Year? Let’s hope it turns out OK New Year? Choose your soubriquet. One thing is for sure, it is going to be a challenging New Year for retailers – but not necessarily a bad one.
So, what are we up against? Without being too obvious, there are two challenges facing etailers looking to drive growth in 2021: how Brexit will actually impact trade and, of course, the pandemic. Both create challenges – separately and together – but both are creating opportunities.
The Brexit effect
From a minute past midnight on 1 January 2021, the hastily finalised Free trade, ‘zero tariff, zero quota’ Brexit deal came into force and UK businesses and their compatriots across the continent breathed a collective sigh of relief – even the fishermen. The deal looks, in principle at least, to be one that allows most trade to continue as is with minimal interruption. For now.
Helen Dickinson, chief executive of the BRC, says: “After years of campaigning for zero-tariff trade, we welcome the announcement of a free-trade agreement between the UK and EU. This protects consumers on both sides of the Channel from billions in import tariffs on everyday goods. Given that four-fifths of UK food imports come from the EU, today’s announcement should afford households around the UK a collective sigh of relief.
And Logistics UK group policy director Elizabeth de Jong says the zero-tariff deal removed the risk of tariffs being applied to almost every item imported from the EU – and the knock-on effect of price rises – and appeared also to avert threats to the supply chain.
The biggest impact that is likely to be seen by UK etailers selling into Europe is that they have to collect VAT at the country they sell into, so sellers need to be on top of all the different VAT rates and rules in each individual country that they sell into.
Goods that are made in the UK and wider EU from materials from the UK or EU are also free to enter the EU without any declaration of country of origin. If you are selling goods from China into the EU, you do.
Customs declarations also need to be made on goods being sent – even individual parcels sent from a merchant to a customer. According to the new rules everyone in England, Scotland or Wales sending parcels to the EU whose contents are worth up to £270 will have to fill in a CN22 customs declaration form (guidance here). Those sending items worth £270 or more have to fill in a longerCN23 customs declaration. Neither are required for retailers in Northern Ireland sending a parcel to the EU.
TO LEARN MORE ABOUT HOW TO SELL INTO THE EU POST-BREXIT
The impact of Coronavirus in 2021
The impact of COVID-19 and its restrictions and disruptions are already well understood. As I write this, we are starting our third lockdown in the UK and its lockdown business as usual… everything is shut and consumers are once again shopping online in droves.
2021 – at least the first quarter, possibly more – is set to continue in this vein, cementing the new consumer shopping habits seen over the past year and changing the face of retail.
These changes can be broken into three key shifts that have taken place: the shift to online, the shift to local and the shift to home living and its attendant lifestyle – and therefore purchasing – changes.
The move to online shopping has been rapid in 2020 and has stayed at a high level even when lockdowns ended. December saw some up-tick in physical retail as Christmas shoppers took to the streets briefly, but the new, third, lockdown has all but shut that down.
The use of ecommerce will only increase across 2021, with the already burgeoning grocery and other food home delivery services continuing to lead the charge.
Non-food retailers will also see rapid and sustained increase in ecommerce and more stores will join the likes of Dunelm in offering a range of ecommerce options such as deliver to car and other click and collect options, as well as home delivery.
There will also be a continued shift towards shopping more locally when shops do start to reopen. One of the telling trends during the first two lockdowns has been the move to out-of-town retail parks and the use of local shops for physical retail – largely driven by the need to avoid crowds and public transport.
This trend is also likely to continue into 2021 and will collide with the ecommerce trend, seeing more local stores acting as click and collect hubs for other retailers and online pureplays.
Shoppers will also be buying more home related goods: from casual leisure wear to homewares.
The opportunities for growth
While Brexit and COVID-19 are both having an impact on retail, this doesn’t mean that there aren’t growth opportunities in 2021.
The pandemic in particular has accelerated an already large shift in retail, ushering in in a matter of months a new omni-channel way of selling. It has also hastened the closure of many retail brands that were already struggling to fit into this shifting scene.
The biggest opportunity that this has created is that it has left gaps in the market across most vertical sectors. While TopShop, say, may have gone under, that doesn’t mean teens and 20-somethings don’t still want fast fashion. Retailers that can identify the gaps and plug them – ideally with offerings that chime with the new omni-channel ethos of consumers are going to be winners.
Many new partnerships between brands and between retailers are also likely to take shape, as will an increasing use of marketplaces and social media sites to act as the store front for many retailers and brands.
Brexit too is set to offer some opportunities. While the EU is likely to remain the UK’s biggest market for exports, new trade deals with other countries on perhaps more favourable terms than were to be had under EU membership could open up yet more export markets to UK sellers.
It can also offer new supply chain routes and access to new supplies, workforces and more.