How will Brexit impact Amazon sellers?
It has been more than a month since Britons made the decision that will forever change the future of Great Britain to leave the European Union. The next steps for the UK include invoking Article 50 of the Lisbon Treaty and thereafter starting negotiations with the rest of the 27 EU member states on its withdrawal and agreeing on trade deals within a two-year deadline [1]. With the result of Brexit, the burning question every Amazon UK marketplace seller must be wondering is: How will Brexit influence us? Although the details of the agreements are still uncertain, let’s take a look at the potential impact in terms of selling on Amazon UK.
The impact of currency rate
After the outcome of the EU Referendum was revealed on June 23th, GBP depreciated by over 9% in comparison to the US Dollar, which was the lowest level in over 30 years [2]. What this means for British sellers who import products from China, US or anywhere outside of the UK is that the cost of purchasing new inventory will increase. As for shoppers outside of the UK, the devaluation of the Pound Sterling also means that this is a good time to buy UK products! In other words, British sellers should see this as a great opportunity to boost their sales [3].
On the other hand, overseas merchants selling in the UK might not profit from the result of this Referendum. As almost half of the top 500 online retailers in the US and Canada offer delivery to the UK, the UK is one of the most important markets for these online retailers. According to Payvision research, the possibility that British consumers purchase from an overseas website is higher compared to shoppers in other countries. The research also shows that 54% of them have shopped at least once from an overseas website. However, as GBP has fallen in value against the Dollar, the likelihood for Britons to shop online on foreign websites might dwindle [4].
Cross border trade becomes more complex
Although the UK government has not yet invoked Article 50 of the Lisbon Treaty, which triggers the start of the formal exit process of the UK from the European Union, and has a two years period to negotiate new trade deals with the EU after this is done, it’s speculated that cross-border trade will inevitably become more complicated when the UK finally leaves the EU free-trade zone [5]. It might be increasingly difficult for UK Amazon sellers to sell to other EU marketplaces likewise other EU sellers who want to sell on Amazon UK. Needless to say, US Amazon sellers who usually ship their inventory to Amazon fulfillment centers in the UK and utilize Amazon’s European Fulfillment Network will be influenced as well [6].
Increasing cost of VAT
As trade deals with the EU will be re-negotiated, Brexit may also cause the UK to stop complying with the EU’s VAT regulations. Fortunately, as the process is likely to take at least two years, nothing will change for the moment and business owners will have time to adjust to new policies.
However, once the UK leaves the EU’s VAT regime, small businesses that are based in the UK and sell to other EU states will no longer have the right to be under the EU distance selling threshold, which allows them to only register their VAT number to the UK government while selling in other EU states unless their sales reach the threshold. Once the rule is changed, small business owners, including Amazon sellers, will have to register for VAT numbers in different EU states if they continue to sell in multiple EU markets. The implication is that not only will VAT registration become more complicated and burdensome for business, but also that sellers will have to pay more VAT [7].
Although Brexit has lead to the massive depreciation of GBP and generated much uncertainty for ecommerce sellers, fortunately, it has yet to influence sales, according to Amazon UK [8]! As nothing is going to change for over two years, Amazon UK sellers will still have time to modify their selling strategies. Check out BQool’s EU integration plan and new Feedback feature — EU VAT invoice generator to see how we can help you sell across EU marketplaces!
Learn more about:
How to Sell Globally on Amazon Across European Marketplaces
How to Sell Internationally on Amazon with FBA Global Export
Reference
[1] How to leave the European Union http://www.economist.com/blogs/economist-explains/2016/06/economist-explains-24?fsrc=scn/fb/te/bl/ed/howtoleavetheeuropeanunion
[2] EU referendum 2016: How has Brexit affected the pound? http://www.express.co.uk/finance/city/658338/Brexit-EU-Exit-How-Affect-Pound-UK-Economy
[3] BREXIT: How does it affect European E-commerce sellers. A Fact-Check. https://medium.com/@christophproke/brexit-how-does-it-affect-european-e-commerce-sellers-f4199f23aae#.tjo3ygkpt
[4] How will Brexit impact U.S. e-retailers? https://www.internetretailer.com/2016/06/24/how-will-brexit-impact-us-e-retailers
[5] What will Brexit mean for ecommerce in Europe? http://ecommercenews.eu/will-brexit-mean-ecommerce-europe/
[6] The Impact of Brexit on Amazon Sellers http://www.cpcstrategy.com/blog/2016/06/brexit-amazon-sellers/
[7] BREXIT UK to leave EU VAT regime 2020 http://www.vatlive.com/2015-moss/uk-leave-eu-vat-regime-brexit/
[8] Amazon UK says no Brexit hit to sales so far http://www.reuters.com/article/us-britain-eu-amazon-idUSKCN0ZM1VN
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