With the ink more than dry on the TCA (Trade and Cooperation Agreement), UK-based retailers and brands with DTC channels still find themselves struggling to justify the expense and difficulty of selling into the Eurozone. Brexit upended nearly everything for merchants in the UK. In fact, surveys indicate that merchant sentiment is trending negative with businesses reporting increasing frustration with regulations, supply chain costs, red tape and increased costs.
Business owners and logistics managers have been forced to become international trade experts nearly overnight. Even those merchants that decided to continue exporting to the continent in spite of Brexit were soon faced with a global pandemic and cost of living crisis that further complicated matters.
Brands and retailers face a decision: continue to invest in doing business in the EU and hope to see a positive return or be content with UK-only sales and hope to survive.
Retailers and brands are well aware of the headaches that Brexit has caused.
Increased bureaucracy
Massive red tape and the cost in time and money to navigate it
High shipping costs
Complex import requirements
Ever-changing customs regulations
Port delays and long shipping times
“The challenges facing UK brands are immense,” said Martim Avillez Oliveira, CEO, ESW Europe. “The complexities of meeting new regulations essentially require an entire team dedicated to getting products into the Eurozone. It’s simply not sustainable for many brands.”
All of these challenges ultimately lead to reduced margins, poor customer experience and loss of business. To grow globally, brands must provide an excellent customer experience. Customers have high expectations and slow, expensive shipping as well as surprise taxes and duties put those customers off at a time when brands cannot afford to lose them.
Third-Party Solutions
To meet customer demands and achieve business growth, retailers and brands with a DTC channel often engage third-party service providers to fill knowledge and experience gaps and streamline business. Some brands turn to wholesalers or in-country warehousing, but even those arrangements are resource intensive and still leave brands holding the bag and risking revenue.
Engaging with Experts to Overcome Brexit Challenges
Juggling multiple vendor relationships, regulations, requirements and paperwork has left merchants frustrated and evaluating if doing business on the continent is even worth it. Instead of piecing together individual solutions to solve an immediate problem, UK-based retailers and brands with a DTC channel should also consider partnering with a Merchant of Record (MOR).
What does an MOR do?
An MOR takes on the brand’s legal and regulatory responsibilities. It deals with customs, shipping, storage, delivery, fraud and compliance in each individual market.
How does that help with shipping and logistics?
Merchants of Record have vetted third-party logistics (3PLs) partners that, in most cases, the MOR has been working with for years. That means that brands do not need to research, validate and negotiate contracts with 3PLs in different markets. Instead, the MOR can plug into its existing slate of vendors to identify and work with the 3PL that best serves the brand’s needs.
What about high shipping costs from the UK to the Eurozone?
By partnering with an MOR, brands benefit from economies of scale. For example, brands do not necessarily need to meet minimum pallet quantities or delay shipments until those minimums are met. Rather, orders are fulfilled in a timely manner and brands maintain tighter inventory control and achieve better inventory forecasting.
Does an MOR handle customs for shipments into Europe?
Yes. The MOR is responsible for complying with all applicable customs regulations and costs (VAT, duties, declarations, taxes, etc.). No matter when or how import and export rules and paperwork change, the MOR assumes compliance responsibility.
In short, Merchants of Record leverage established networks and vendors to ensure business success. And by having a vested interest in a brand’s success, an MOR is a true business partner.
How to Choose the Right Merchant of Record
Because business success hinges on the strength of partners, the importance of selecting the right partner cannot be overstated.
“The stakes have never been higher,” said Oliveira. “The right partner brings expertise, established relationships and economies of scale to the table. This enables brands to start realising revenue almost immediately.”
When looking to engage an MOR to eliminate Brexit-induced headaches and grow the brand, merchants should ask:
Can the MOR meet unique business needs? Brands with complex catalogues – like those that sell liquids, dangerous goods like perfume, physical and digital goods, etc. – need to look for an MOR with existing capabilities to offer an entire catalogue in multiple markets.
Is redundancy built in? From an ecommerce platform to warehousing and logistics, the right MOR will have redundancies that can quickly and efficiently handle unforeseen circumstances without disrupting commerce.
How robust is the logistics network? Merchants of Record should work with reputable, vetted logistics vendors that can properly and economically warehouse and deliver product. In addition, an MOR’s reverse logistics network should be just as sophisticated.
What is the level of support? Global ecommerce success requires ongoing support and communication. A partner that establishes a brand in a market and then leaves the brand unattended is no partner at all. A good MOR has a roadmap for success and shows commitment to brand growth.
Which markets are immediately available? Establishing a business presence in a new market is time-consuming and costly. Brands should select an MOR with existing business relationships in the desired market.
The Takeaway
Retailers and brands with a DTC channel are tired of the costs and headaches that Brexit has brought. Yet pulling out of the Eurozone is not an option for brands that want to grow. Merchants of Record assume responsibility for logistics, customs, taxes, duties, fulfilment and more to ensure an exceptional customer experience that grows revenue and creates exceptional customer experiences that improve loyalty and customer lifetime value.
