What Brexit Means for E-commerce

What Brexit Means for E-commerce

User Replay
28th July 2016

When the United Kingdom voted to leave the European Union on June 23, the effects of this monumental referendum reverberated across the world and individuals and businesses wondered what it would mean for them. The first few days after Brexit was declared the reality was a panic of sorts. Now the dust is settling and it is still not certain how the UK will deal with its impending departure from the EU.

With very little insight on future trading relationships, the e-commerce industry is navigating the next few months with trepidation and caution. With significant amounts of international trade being conducted on-line, Brexit will most likely have a significant influence on the future of e-commerce.

This leap into the unknown means retailers and experts don’t yet know the full impact. Exploring the potential ramifications of Brexit on e-commerce, both in the U.K. and the U.S. reveals what brands can do now to adjust to this new economic situation. However, one thing is certain. Brands should ensure their businesses remain as competitive as possible by continuing to invest in the customer experience. According to Gartner, 89% of businesses now expect to compete mostly on the basis of customer experience (CX) — up from 36% just four years ago.

U.K. Impact

The United Kingdom is the leading European country in terms of e-commerce. Online sales in the country reached £52 billion last year and made up 15% of all sales. Even if there is a reduction in trade due to uncertainty around Brexit, the trend towards an ever-increasing percentage being on-line is likely to continue.

Immediately after the referendum result was announced, the pound decreased in value by 7.5%. This instantly made many U.S. software solutions more expensive to purchase and maintain. It also impacted the price and performance of retail stocks. However, on a positive note, this has made U.K. retailers more attractive to international buyers and makes U.K. e-commerce technologies more competitive in the world market.

Withdrawal from the EU may also disrupt the e-commerce job market. It is an employees’ market at the moment, with multiple employers chasing every good candidate, if Brexit does cause an economic slowdown the supply and demand dynamic could change.

U.S. Impact

Across the pond, the United States is also going to experience specific effects in their e-commerce industry. Most notably, U.K. shoppers will have less reason to shop with U.S. retailers because of the rise of the dollar. For the top 500 Web merchants in the U.S. and Canada, the U.K. is the number one destination outside of North America. As Britain exits the EU, the free-trade zone may become more convoluted, potentially making cross-border sales more complicated for U.S. merchants. When many major U.S. retailers have centers in the EU for shipment to anywhere in the EU, a non-EU member could be more difficult to reach.

Manage the Shift Now

To mitigate some of the negative impact of Brexit, retailers everywhere can deploy some useful tactics. Companies with a digital focus may actually benefit from the disruption caused by Brexit because a strong foundation of the customer online experience can mitigate other factors.

As Forrester Research Group Director Laura Koetzle wrote , “While times of high-market volatility can tempt firms to panic and cut spending on customer-focused initiatives, now is the time to drive innovation in order to win, serve, and retain customers.” Her point is that companies who have to think more intently about importing and exporting goods through a new trade environment, could focus less time to dedicate to innovating better digital solutions for customers – and this would be a mistake.

Investing in identifying the strengths and weaknesses of an online experience now can narrow a strategy in the coming months as Brexit’s impact becomes more obvious. Creating seamless and innovative customer retail experiences can ensure businesses will continue to convert customers regardless of the current economic environment and surrounding controversy.

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