The potential impact of Brexit on online retail

The election results have been announced; the United Kingdom will be leaving the European Union. A decision, taken by the British public, that came as much of a surprise and is likely to have far-reaching consequences. But what will this mean to eCommerce at large and online retailers like you?

Undoubtedly, Brexit will have substantial consequences for the European economy, but even more so for the British economy. Even former prime minister David Cameron said that Britain leaving the EU would lead to a “decade of uncertainty”. Since the results of this historic election were revealed, the British pound has seen the biggest drop in value in its history. Brexit has also triggered the beginning of a long period of negotiations and change, as well as wild public and political speculation about the effects of a decision taken based on such a small majority of votes.

How might Brexit impact the eCommerce market?

In case you weren’t aware, the UK is Europe’s undisputed eCommerce giant. With an annual revenue of more than 150 billion euros, the UK has been Europe’s eCommerce leader for years. This is partly down to the fact that, unlike many of its European counterparts, British retailers embraced, rather than fought against, going online. They also did this much earlier than other European countries. Online food shopping, click-and-collect orders and same-day deliveries — these are just some of the many significant eCommerce innovations that have stemmed from the UK. However, in many cases, these innovations are either poorly developed or are yet to exist at all in most continental European countries.

The UK has the second largest economy in the European Union, after Germany. Germany and the UK have a thriving trade relationship and Britain is now Germany’s third largest EU trading partner. Brexit will decrease British exports and increase the price of imports into the UK and potentially decrease British companies’ market reach and revenue.

But what does this mean for other countries in the EU? Wouldn’t it create new opportunities for the smaller countries to fill these emerging gaps in the market? Should the UK choose not to (or not be able to) uphold the free trade agreement with other EU nations, some gaps that could be filled by new or existing smaller players on the market may emerge.

What could Brexit mean to you as an online retailer outside of the UK?

If you don’t import or export goods to or from the UK, you may not be directly affected. You may even be able to benefit by taking the place left by UK-based online retailers who may no longer sell in your country. However, if your target market is the UK, it’s a different story. The barrier-free trade among EU member states may cease to include the UK, meaning that online retailers outside of the UK, like yourself, may be impacted by higher taxes and tariffs. Unfortunately, cost increases often affect small and medium online retailers more than eCommerce giants.

All that being said, there’s no need for online retailers to panic right now. The situation is unfolding and for now, it’s not yet clear to what extent the UK will be able to uphold the free trade agreement. Only once such fundamental decisions are taken will we know the full effect of Brexit on online retailers.