GUEST COMMENT What does a Brexit vote mean for internet retailers?
The EU referendum is being touted as a decision that will decide the future direction of a generation of Britons. But what would a Brexit vote really mean for UK online retailers, especially those already doing business with the EU? I’m a British CEO of an international company, and I’m based in Berlin, which means that I have a slightly different take on this.
While British companies do seem to appreciate the trading opportunities with Europe, a recent Federation of Small Businesses (FSB) report found that only a slim majority of their members considered the UK's existing EU membership as good for the economy as a whole. This suggests that a lot of businesses are not taking advantage of the size of the EU market. It’s not just that the EU is a massive trading area, but that it allows European ecommerce businesses to compete with companies from other large markets such as the USA and China. And this is especially important if you’re an online retailer.
For me, leaving the EU would be a disaster for UK ecommerce and internet brands that want to compete in a global market. It would leave them isolated and in danger of being squashed by global players.
It’s not a coincidence that so many global internet market leaders come out of the US, and increasingly China. The large, single market they start in means gives them the opportunity to get big faster. This makes them more investable and scalable from day one; from there they can position for global dominance.
For example, an American company grows up in a market of 277m internet users
, a Chinese company 644m and a UK company 57m. This has to put a limit on how quickly a UK company can scale. However, if business wakes up and sees itself as a European company, as Spreadshirt did, it is looking at a market of 399m internet users. Larger than the USA. This change in perception, from being a German company to being an international one, meant that Spreadshirt was able to use its scale to break into the US market. On from there we find ourselves in Canada, Brazil, Australia and now looking at Asia. Without the change in perception and the large EU market, this would never have happened.
The open borders of the EU are particularly important for online retailers, which can benefit from three key things; freedom of movement, the size of the market and, perhaps surprisingly, less red tape.
The freedom of goods to cross borders is a must for online retailers; but so is the freedom for people to move. Our EU HQ in Leipzig has people from 15 nationalities and without them we would not be able to be so international, with the benefits that brings. For us and other ecommerce businesses, it means the freedom to employ the right person for the job.
Today Berlin is a major tech hub, a centre for new ideas, attracting talent from across Europe, and the home of exciting new retail start-ups and established businesses. As an Englishman here, I have benefitted from the EU’s freedom of movement, as have many people who now work in continental Europe permanently. Those of us old enough to remember are still slightly amazed how easy it is to travel for work into countries which were once behind the Iron Curtain.
For online retailers, this is a huge opportunity. A single market means that 399m Europeans are easily reachable with marketing and delivery services; with a similar legal basis and taxation system. Yes, we speak multiple languages but translation is easily managed and relatively cheap. And yes, there are different currencies, but the heartland of the EU is covered by the Euro and great services have evolved to help with currency and payment management. These problems are not hard to solve, given the opportunities on offer.
3 – Red tape
Contrary to popular belief, I think membership to the EU may have reduced red tape in many areas; particularly for retailers. We have perhaps forgotten how slow and difficult it could be to bring products into a country or export them. Data protection, consumer rights and even employment is getting easier in countries that treat the EU directives sensibly.
As we do almost 50% of our business outside the EU, Spreadshirt can see the difference the Union makes. We really notice the lack of restrictions within Europe when we have to go outside of it and deal with Swiss taxes or Norwegian customs, for example. Similarly, some of the laws we deal in the US vary from state to state and Brazil would take a whole book to describe the problems!
It may not currently be the most popular opinion, but I think UK companies and population could really benefit from being part of the EU. UK online retailers limit themselves unnecessarily if they don’t think European and global early on. Other internet companies across the continent are already taking advantage of this and positioning themselves for expansion outside of the EU, not just outside of their home nation.
As a loyal Royalist, Brit, proud England fan and early London internet entrepreneur, I am already questioning whether London can maintain its place as a top internet hub. Rather than isolate themselves, both start-ups and more established companies in the UK should make more of their opportunity to scale quickly and operate in a larger European market. The EU has a lot to offer business, and in particular online retailers looking to expand this year. It’s time to take advantage of the European connection!Philip Rooke is CEO of Spreadshirt