Long before Amazon popularised the marketplace concept, commerce was already organised around trusted third parties: markets and trading venues whose reputation was a guarantee of trust for the various stakeholders. Today, this role is still part of the missions of the various players in commerce: retailers, marketplaces or other intermediaries.

Because we are building a network of shared inventory to serve e-commerce players, we at Stockly are in daily contact with them. Our mission is to help e-merchants deal with out of stock by opening our shared inventory network to them. We are thus confronted with their various problems. The aim of this article is to share the lessons learnt over the last few months, particularly in the light of the changes linked to Brexit.

International trade in Europe has been largely disrupted by the UK’s exit from the European free trade area, forcing all involved parties to adapt quickly.

The first step is to understand what the Brexit changes in substance for trade, in order to react in the short term urgency, and then adapt to the new rules in the medium term.

What’s new after Brexit for trade

The United Kingdom has now left the European Union VAT regime as of January 1^st, exports between the UK and the EU are now subject to new international agreements. This has a double implication for sales from the EU to the UK and vice versa.

General

• All goods imported in the UK will be subject to local VAT.
• Online marketplaces will be responsible for collecting and accounting for the UK VAT. They must supply the customer with a full VAT invoice at the point of sale.

Shipping from the EU to the UK

• For goods with a value below £135 (including transport and insurance costs):
  • VAT will now be charged at point of sale rather than point of import.
  • For a B2B sale, the buyer is responsible for the VAT rather than the seller.
• For goods with a value of more than £135 (including transport and insurance costs):
  • These items are liable to both Custom fees, calculated according to the value of the good, and British VAT.
  • It is necessary to complete a trade goods declaration for the customs.

Shipping from the UK to the EU

• Items shipped from the UK to the EU will be treated as exports, and will therefore be exempt from UK VAT.
• VAT will have to be charged at the local rate of VAT of the country of import.
• Two possibilities exist for a transaction:
  • DDP (Delivery Duty Paid): the customer pays the VAT (of the country the item is being shipped to) at the time of order.
  • DAP (Delivery At Place): the courier pays the VAT, then the customer is liable to repay the VAT payments after the item has been shipped
• There will not be any customs or taxes charged upon returns.

In conclusion, the main issue is therefore to be properly registered with the UK authorities in order to sell products there.

For UK players wishing to export to the EU, the most direct way to comply with each country’s tax constraints is to implement the DDP on sales.

These are some useful references covering the wide range of VAT and customs issues for trade between the EU and the UK.

• News concerning VAT: uk
• Customs guidebook: gouv.fr

These changes have had direct business consequences for online sellers in the Stockly network, mainly because of the uncertainty about accounting and taxes.

In the short term: managing the crisis

To quickly manage the crisis we had to take emergency actions to make our network compliant.

The first emergency measure was to temporarily suspend certain UK suppliers who were unable to comply with the new tax obligations, in particular the DDP on sales to the EU. This temporary suspension had a direct business impact.

While we had also planned to extend our network in the UK with a local e-commerce player, we were forced to postpone our discussions. As the fiscal terms of such a partnership are still too uncertain, Stockly has made the decision to temporarily focus on partnerships in the European Union.

The next step in keeping the previously mentioned measures transitory was to adapt quickly to the new context.

In the medium term: adapting

The first, and not least, work we did was to investigate the new constraints from Brexit. Thus, the clarifications brought by this research work and the documentation we have built have enabled us to better understand the problem. We are now aiming to better support e-retailers joining our network to trade with the UK.

This led to two challenges for continuing to work with the UK in the future: a technological challenge and a tax challenge.

On the tech side, the challenge is to update our accounting processes, i.e. to transcribe the newly defined standards into IT.

On the tax side, we support our distributors in updating their systems. The European one-stop shop for tax collection is one of the subjects we are working on.

It is thus by being in contact with online merchants that we seek to meet the new challenges of adaptation. Our common objective is to quickly acknowledge the new measures, modify our various partnerships and adjust our technology so that it remains up to date on all points!

In the end, these are minimal efforts to ensure that our partners can continue to distribute their products under the best conditions.

We believe that the situation will evolve in such a way that e-retailers will become compliant over the next few half-years to remain competitive. Without updating their processes, UK online shops will be unable to ship products to the EU without severely degrading their customer experience. The same applies to European players wishing to export to the UK while maintaining a satisfactory customer experience.

For e-commerce as a whole, we see two impacts on the sector.

As trade flows are increasingly global, it is now even more critical for an e-retailer to manage international issues. Customers can increasingly easily access foreign online shops, especially via marketplaces or comparison services such as Google Shopping, which forces them to manage cross-border issues.

Secondly, we are seeing more and more regulations being applied to the Internet as a whole, with a spillover effect on e-commerce. The web is indeed in a phase of institutionalization that needs to be taken into account if one wants to be successful.

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