Retail and Brexit: the challenging first six weeks

By Ben Sillitoe

The chairman of one of the UK’s most robust retailers of recent times was the latest to add his voice to concerns about Brexit’s impact on retail, during an interview with the BBC on Tuesday 9 February.

Peter Cowgill, the boss of JD Sports, a retailer that has continued to report sales growth in the midst of the global pandemic, told the BBC Radio 4 World at One programme Brexit has turned out to be "considerably worse" than he feared.

Red tape and delays in shipping goods to mainland Europe has resulted in "double-digit millions" in extra costs, he said, during the radio interview. It may mean opening a European Union (EU) distribution centre to ease the burden, remarked Cowgill, who added JD’s UK site in Rochdale wouldn’t close but some jobs could transfer to Europe.

The comments are the latest in a long line of industry concerns to arise in the wake of the Brexit transition period ending on 31 December. Although the government says it is providing organisations with support as they get used to new systems and regulations, seafood exporters from Scotland, meat exporters, and food suppliers shipping into Northern Ireland are among those encountering difficulties.

Concerns about double taxation when delivering across the Irish Sea due to new regulations meant some large UK retailers, including John Lewis Partnership, halted deliveries to Northern Ireland as new red tape was worked through.

Rory O’Connor, founder & CEO of Scurri, a delivery management software company, says: “It’s early days, but fashion brands and retailers on both sides of the Channel report additional costs and frustrations aplenty in the first month following Brexit.

“The initial impact the end of the Brexit transition period has had on retail and its customers is coming to light now that new restrictions have officially begun for the industry in the UK. The industry is still adjusting and like anything new, it takes time to get used to changes and a new way of doing business.”

In the Cowgill BBC interview, he spoke of no true free trade with the EU because goods that JD Sports imports from East Asia incur tariffs at the point they are sent to stores across Europe.

As O’Connor explains: “Brexit has largely been referred to as a free trade deal. For the retail sector however, it’s only tariff-free if the goods fulfil the complicated origin rules – and many retailers don’t sell any products which meet the conditions to be treated as UK origin.”

For balance, the Port of Dover reported this week it is welcoming over 90% of the freight traffic volumes typical of this time of year and described operations as resilient and flexible in the face of new processes, despite widespread fears of major delays.

But clearly there are significant challenges as a result of Brexit, so we’ve gathered advice from IMRG’s service and solution provider members to help retailers at this time.

As Alecxa Julia Cristobal of AsiaPay, a digital payments provider notes, retailers are realising they need to find “creative ways” to navigate the current situation.

Delivery and returns

Brexit woe stories appearing in mainstream media channels of late tend to relate to unexpected delivery costs incurred by UK shoppers when buying goods from abroad since Brexit. Retailers have generally been on top of this, avoiding hiccups either by being transparent that consumers will pick up extra import costs and tariffs or by covering these levies themselves through ‘delivery duty paid’ agreements.

It’s crucial this is kept in check because, as Christophe Pecoraro, managing director of eCommerce solutions provider PFS Europe says, consumers are “more cost-conscious now than ever before” due to the pandemic. Brexit-related fee rises won’t be welcomed.

With much attention placed here, it may be issues related to product returns have been overlooked, according to Sean Sherwin-Smith, general manager for post purchase at HelloDone, a conversational commerce company.

“For eCommerce companies, the cross-border returns headache is now even more complex, with a CN22 or CN23 customs declaration form required to accompany every order,” he explains.

“This is where AI technology can play a bigger role. Applied to cross-border returns, natural-language processing software can automate conversations, helping retailers to proactively communicate with customers to make them aware of their policies at the outset, and keep them fully updated until any issues are successfully resolved.”

Brad Houldsworth, head of product at Remarkable Commerce, an eCommerce platform provider, says Brexit uncertainty has meant the last few months have been “far from smooth” for regular importers and exporters of clothing.

“Our clients are being pro-active and planning their buying and merchandising further ahead, to avoid product or campaign launch delays,” he comments.

“If a retailer is lucky enough to have an agile warehouse management system platform where they can make quick updates and changes to their processes and operations, this would ensure there are minimal delays due to incorrect documentation or labelling.”

Delivery Box With Map

The marketplace opportunity?

Ciaran Bollard, CEO at Kooomo, an eCommerce platform provider, says continual monitoring of supply chains is required in the current environment, and advises the use of distributed order management to optimise fulfilment.

And although recognising these are difficult times for the industry, Bollard says Brexit brings opportunity to some in UK retail.

“If the pound weakens, foreign purchases are likely to increase,” he notes.

“Now is the time for merchants to register on international shopping channels, get online and look at marketplace selling.”

Indeed, Brendan Walsh, UK general manager for marketplace platform provider Mirakl, explains that running a marketplace – as a growing number of traditional retailers are starting to do – “reduces risk by widening the pool of sellers supplying products”.

Such an approach helps to reduce out of stocks and ensures more choice for customers, he adds.

Payment problems

Charges for retailer are coming from all angles, right now. Some were expected, some were not.

Alex Marsh, head of Klarna UK, a buy now, pay later service provider, says: “With Mastercard having revealed its plans to increase the fees EU businesses face to take payments from online shoppers from the UK, it’s clear that payments processes are also in the firing line – with the potential to push up prices for both retailers and customers.

“For retailers concerned about the impact of fees on credit or debit payments on their bottom line, innovative and, more flexible payment options provide a good alternative – offering merchants the option to circumvent increased card fees when trading internationally.”

Monica Eaton-Cardone, COO and co-founder of Chargebacks911, a chargeback management company, comments: “We foresee a sharp rise in chargebacks instigated by international customers due to Brexit-caused issues and delays at customs.

“Yes, consumers should always be completely protected when transacting, however, seeing the chargeback model as an easy fallback option while retailers try to get their heads around the extended red tape leaves it open to abuse.”

She cites delivery delays as an example of where this abuse could manifest itself.

“We’re in a time now when consumers are used to receiving orders near enough overnight – any delays on the predetermined delivery date and they often assume it’s gotten lost along the way,” Eaton-Cardone adds.

“Many will jump the gun by seeking a refund or instigating an unnecessary chargeback.”

Payment Online


Essentially, heightened communication is the key for retailers looking to stay on top of post-Brexit rules and regulations, and ensure service levels and consumer relationships are not negatively impacted.

Matthew Furneaux, director for location intelligence at GBG, an identity management, location intelligence and fraud prevention company, says “open and honest” customer dialogue is crucial.

“Shoppers are less likely to feel frustrated and more likely to return to your brand if they have full transparency of the situation,” he suggests.

Niall Sullivan, inbound marketing specialist at multi-carrier shipping software firm Consignor, adds: “Stay in close contact with your carriers to keep updated on what they will require from you as the situation changes – for example, extra data and/or product changes.”

Based on issues emerging in retail in the post-Brexit world over the last six weeks, including at JD Sports, it’s clear communication between retailer and supplier will be crucial across all operations in the months ahead. Together the sector is stronger, right?

By Ben Sillitoe

Published 12/02/2021

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