LONDON — Neil Kuschel, chief executive officer of Global-e in Europe, believes British companies can reduce trade friction with the European Union if they are transparent with customers about what the final cost of products will be, and if they’re willing to absorb some of those costs.
Here, Kuschel offers advice on doing business post-Brexit, and said it’s similar to the way the U.K. trades with the U.S.
There is no reason why U.K. fashion brands, large or small, should not continue trading with Europe post-Brexit. The additional regulations may have thrown a few curveballs in the initial stages, but many brands that prepared in advance have adapted well to the changing market conditions and are continuing to trade successfully with EU markets.
The primary challenge for fashion and luxury brands and retailers moving forward — no matter what size — is friction across the online customer journey. EU shoppers are not used to seeing additional costs for tax and duties at the checkout when buying from a British website, let alone having unexpected charges for tax and customs clearance on delivery.
Providing EU customers with a guaranteed final cost of their purchase at checkout is therefore key to preserving conversion rates and customer satisfaction. This can be achieved by absorbing these costs into product prices and communicating with EU customers that no tax and duty fees will be added at checkout.
Brands can decide whether they pass on these fees to the consumer in full to preserve margins or they can subsidize some or all of the costs for consistency with local in-store pricing and to remain competitive.
Recent research we carried out with IMRG shows that there was an overall 57 percent year-on-year increase in outbound e-commerce sales from the U.K. in 2020. Moreover, there was a notable shift from September through to December 2020 with EU volumes exceeding non-EU figures, reaching a far more significant peak in the pre-holiday trading period. British brands are highly popular in international markets and this is not going to go away because of Brexit.
For the many fashion retailers that are already used to trading cross-border globally, selling to the EU post-Brexit is no different from selling into international markets outside of the EU, as long as they have adjusted their offering and operations for the new regulations.
This includes the ability to collect duties and taxes at checkout, submitting them on behalf of their customers and working with shippers that can support DDP (delivery duty paid) shipping to prevent customers being hit by unexpected charges upon delivery. Online retailers must also update their customer communication to reassure them and to reflect the changes in delivery times due to the customs clearance process.
Any new regulation presents challenges, but Brexit should by no means signal the end of European trade simply because there is a new set of hoops to jump through. The global e-commerce market is booming and if fashion and luxury brands keep abreast of the regulatory changes, then Brexit should not have any major negative impact on their online sales.
The situation is very similar to when a British consumer purchases from a U.S. retailer if that U.S. retailer does not include taxes and duties in the product prices. Having to pay these duties and taxes upon arrival is an unpleasant experience that puts a consumer off purchasing again.
However, if the U.S. retailer has all-inclusive pricing and advertises throughout the buying journey that there are no additional costs, then the experience is seamless. This demonstrates how important it is to manage the issue of taxes and duties for EU consumers.