December 31st marked the end of the Brexit transition period and whilst many took a sigh of relief, in reality, the Brexit effect had only just begun. The shockwaves presented by Brexit are now imminent. Many retailers are already experiencing increased tariffs and supply chain snags putting customer satisfaction at jeopardy. In fact, M&S has been named as the latest brand affected by Brexit red tape – with the shelves of its French stores recently left empty.
To overcome supply chain disruptions, many online retailers are already making changes to their existing fulfilment operations. Over a third (37%) are assessing and implementing new technologies solutions to increase supply chain efficiency, whilst 33% are splitting inventory to base fulfilment in existing UK and European facilities. Traditional fulfilment models, with limited flexibility, are no longer going to be effective. Now is the time to rethink fulfilment and adopt more flexible models, such as multi-node distribution, to ensure business continuity and customer satisfaction.
Removing the Brexit red tape
Whilst news of a trade deal came as a huge relief, consumer rights when shopping online have not come out unscathed at the hands of Brexit. For example, as of January 1st, EU consumers buying a product from a UK-based retailer now have to pay charges including import duties and courier or postal handling fees following Britain’s exit from the Customs Union and Single Market. Some of these costs and additional paperwork are also applicable to British customers buying products that have been shipped from the EU. For many purchases, this is adding a third to the cost of online orders and adding significant delays due to extra border checks. Whilst there are some brands who are avoiding this cost being transferred onto the customer, this is certainly not the case for all. Many brands will not have anticipated these costs meaning ultimately the responsibility falls with the individual receiving the goods.
To avoid damaging customer relationships and putting hard-earned customer loyalty at risk during this time, brands must act fast. Online retailers and brands must start by reviewing existing data to determine where their customers are located and determine how inventory should be effectively dispersed across the UK and EU. Making inventory provisions, such as splitting inventory across both regions will be crucial over the coming months. This solution, known as multi-node fulfilment, enables brands to provide in-region fulfilment in both locales, bypassing custom requirements at the border.
Avoiding reverse logistics chaos
Unsurprisingly, customers facing unexpected charges upon delivery are often refusing to accept deliveries of products and this is causing 30% of orders to be returned, according to Statista data. Reverse logistics can be costly and labour intensive for retailers at the best of times, let alone with the added complexities of border delays, VAT, import duties and associated paperwork. In addition, it can also negatively impact a brand’s sustainability initiatives and efforts to reduce carbon emissions. To avoid this, recent news reveals that high street retailers are threatening to burn products returned by EU shoppers, rather than bringing them back to the UK, comes as no surprise as brands desperately attempt to avoid the costs and red tape associated with Brexit.
By looking to a multi-node fulfilment model, and dispersing inventory across the UK and mainland Europe through multiple distribution points, brands can easily overcome this. An advanced Distributed Order Management (DOM) system will ensure your order management system (OMS) can divert orders to the appropriate inventory pool, depending on a number of factors, from delivery address to product type.
Alleviating pressure beyond Brexit
Although a key benefit to alleviate Brexit pain points, multi-node fulfilment offers additional benefits outside of this. For example, during periods of peak season volume, additional fulfilment and distribution points with an effective DOM system to route orders can help to alleviate pressure and spread resource. In addition, what and where inventory is placed will have a significant impact on your ability to keep orders moving to meet consumer demand. After all, it’s not just about capacity, the key is business continuity, during and beyond the pandemic.
As an alternative to setting up multiple distribution centres across regions, brands could also opt to utilise pop-up distribution centres (pop-up DCs) or micro-fulfilment centres, something often implemented for higher volume periods, such as a pre-Christmas peak or planned promotions throughout the year. Pop-up DCs can also be utilised to test new markets, which may prove beneficial in overcoming initial Brexit-related pressures. These temporary operations are often much cheaper to set up and operate, while providing relief to your primary distribution centre. An effective DOM system will ensure orders are directed to the appropriate fulfilment point. For one major alcohol brand with customers in both the UK and Europe, the use of a UK pop-up DC meant that it was able to become fully operational in just two weeks, just in time for Black Friday and the Christmas peak season.
Supporting an omnichannel future
If there has been one retail trend that has proliferated over the past year, it has been the surge in online shopping. PFS’ own research found that 53% of consumers had shopped more online since lockdown began. In fact, more than three quarters (77%) of these went on to say that they expect they will continue to purchase online more once the lockdown has lifted. As the UK continues to battle against the ongoing ramifications of the pandemic, many UK retailers have been forced to temporarily close their doors to the public, relying purely on online sales in order to survive. Even as physical stores begin to open, retailers are increasingly recognising the importance of an omnichannel approach and considering a variety of fulfilment options to support this will be an essential next step for retailers. Through combining pop-up distribution centres and brick-and-mortar stores (utilised as ‘dark stores’), brands and retailers can effectively spread-out inventory and get product closer to consumers for faster, cheaper and more sustainable delivery options with minimal investment.
As with the COVID response, navigating through the ‘Brexit effect’ will require brands to react with agility and flexibility in order to keep businesses going and customers satisfied. Keeping customers front and centre will be pivotal during this time, and brands can do this by ensuring they are not only aware of any potential kinks in the fulfilment chain but agile and responsive enough to handle the challenges with precision. Recent events have forced brands to think creatively about how best to reach the customer and with further turbulence ahead, multi-node fulfilment and other, alternative fulfilment options will be vital for success.
Christophe Pecoraro, Managing Director, PFS Europe