How do UK domiciled brands and retailers sell on European marketplaces?

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Since 31st January 2020, the United Kingdom’s withdrawal from Europe has meant exporting goods to sell online through European marketplaces has become a whole lot more complicated. Brexit means extra paperwork, increased taxes and duties and requires an acute understanding of how the new regulations work.

The volume of red tape and hike in costs to sell to Europe has become a barrier for many retailers. Selling to the European market is no longer financially viable for several fashion brands such as Joules, who have recently reduced their number of European stockists and sales agents.

However, e-commerce is a growing market and those businesses that still want to expand into Europe have a distinct advantage when selling on marketplaces, which reduces the risk associated with direct selling.
So, how do UK brands and retailers maintain a presence on European marketplaces and still make a profit?

The post-Brexit changes

Much as free movement for British citizens in Europe has stopped, so has the movement of goods. Cross-border exports to Europe from the UK now require:

  • an EU Economic Operator Registration and Identification Number (EORI), which allows a business to move goods from the UK to Europe 
  • an export declaration 
  • tax and duty payments by the EU importer
  • VAT charges
  • transportation licences and permits
  • proof of compliance with European regulations

The additional costs mean either absorbing the charges or passing them on to the customer. This makes British brands more expensive than their European counterparts and, subsequently, less interesting to European consumers.

All this means many small fashion brands have found selling into Europe cost-prohibitive, but there are still options to make a profit selling on European marketplaces.

Why selling on European marketplaces can be successful

Whilst it may seem a logistical nightmare to sell in Europe, we’ve now lived with Brexit for two years, which is time enough to have got to grips with the associated challenges. Organisations with the determination to succeed and maintain sales in Europe have discovered marketplaces as a solution.

One of the benefits of marketplace selling is that the exit of the many brands leaving the European market due to the administration and transport challenges leaves a gap in the market for those that have decided to stay. People living in Europe still want to buy British brands, whether they’re British expats living in Europe and buying their M&S knickers from Zalando or Europeans shopping for Miss Selfridge on ASOS.

Marketplaces are expanding as customers do more online shopping and high street sales decline with platforms such as Zalando and YOOX extending their offering. This means more potential exposure and sales for UK brands and the opportunity to claw back those Brexit-induced costs.

Where to hold stock for marketplaces?

One of the disadvantages of Brexit for fashion brands is the cost to ship and hold stock in Europe. Previously, shipping quantities of stock to Europe and it being held in the marketplace warehouses was affordable. However, this has become cost-prohibitive for smaller suppliers.

One option is to share distribution and storage costs with another company to save costs. Using a third-party import company can also take care of the headache of the transportation and admin, but the cost of this must be factored in. There are also third-party warehousing companies that may store your goods for less than the marketplace.

Some larger UK businesses have chosen to set up a base in the EU to reduce the cost and bureaucracy involved in selling in Europe. In the long term, this can be cheaper than paying for increased tariffs and administration costs. It also means faster deliveries, which is a major USP as transport delays were a problem immediately after Brexit. 

Whilst not a traditional fashion marketplace in the past, Amazon is becoming a popular fashion marketplace, selling tops brands such as Adidas and Lacoste as well as offering smaller UK fashion brands the chance to gain exposure and market share. Amazon offers sellers the opportunity to store goods in a fulfilment centre, known as the European Fulfilment Network.

The importance of inventory

Offering a whole range of UK branded items on marketplaces to gain more sales may be tempting, but doing the numbers is essential to make this form of selling profitable. Clearly, selling the most profitable fashion brands is beneficial, but are these brands the ones that sell in Europe? The sales strategy for UK brands on European marketplaces should consider:

  • Do the top-selling items in the UK sell as well in Europe, or is market demand different?
  • Who are the target customers in Europe and what are their spending habits (e.g. EU immigrants missing the comfort of ‘home’ brands)?
  • Which items are most profitable, and will they sell in Europe?
  • Is there a market for your products?

Once these questions have been answered the operational side of things needs to be taken into account to get a tangible return on marketplace sales. Will the selected supply system be able to cope with customer demand, especially with the increased expectation of next day delivery? When products are out of stock the business has lost a potential sale. “We’ll email you when the item is back in stock” is often not good enough and the customer will buy from elsewhere.

Another issue successful fashion exporters to Europe are considering is the makeup of the product. It’s important to review details at the design stage to deem whether the product can be produced in the UK more cheaply whilst not compromising on quality. Can cheaper raw materials be sourced, can the design be changed and can packaging be reduced are all questions to be asked during product development. 

In summary, Europe is still a major opportunity to sell fashion brands on marketplaces provided the logistical and administrative challenges are taken into account in detail in order to ensure a profitable revenue stream. The companies that succeed are constantly analysing shipping and distribution costs, work with a reliable shipping agent and can meet customer demand.

Contact

Naomi Botting

Senior Communications Manager - UK, Northern Europe, China

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