Long before Amazon popularized the concept of marketplace – or market place – commerce was already organized around trusted third parties: markets and places of exchange whose reputation was a guarantee of trust for the various stakeholders. This role is still part of the missions of the various commerce players today: retailers, marketplaces or other intermediaries.
Because we are building a shared stock network serving e-commerce players, at Stockly we are in contact with them every day. Our mission is to help e-retailers deal with stock shortages by providing them with our shared inventory network. We are thus confronted with their various problems. The goal of this article is to share the lessons learnt over the last few months, particularly with regard to the changes linked to Brexit.
International trade in Europe has been largely disrupted by the United Kingdom's exit from the European free trade area, forcing all stakeholders in this trade to quickly adapt.
Firstly, it is a question of understanding what Brexit actually changes for trade, so as to react urgently in the short term, and then adapt to the new rules in the medium term.
What’s new about Brexit for trade?
The United Kingdom left the European VAT regime on January the 1st, 2021, so exports between the United Kingdom and the EU are now subject to new international agreements. There is therefore a double implication for sales from the European Union to the United Kingdom and vice versa.
General
- All goods imported into the UK are now subject to local VAT, without exception.
- Marketplaces selling in the UK are now responsible for collecting VAT for the UK authorities and must therefore be registered there. They are also responsible for writing an invoice with VAT for the end customer.
Sales from the European Union to the United Kingdom
- For goods worth less than £135 (including postage and insurance):
- VAT is charged at the point of sale, rather than the point of importation.
- For a B2B sale, the buyer is responsible for collecting VAT rather than the seller.
- For goods worth over £135 (including postage and insurance):
- These goods are subject to customs duties, calculated according to the value of the goods, and UK VAT.
- It is then necessary to complete a declaration of exchange of goods to customs.
Sales from the United Kingdom to the European Union
- Products shipped from the UK to the EU are treated as exports and are therefore exempt from UK VAT.
- VAT is paid at the local rate of the country importing the product.
- Two possibilities during a transaction:
- DDP (Delivery Duty Paid): the customer pays VAT when placing an order.
- DAP (Delivery At Place): the delivery person pays VAT, which will then be reimbursed by the customer.
- There are no customs duties or taxes on product returns to the UK.
To conclude, the main issue is therefore to be properly registered with the British authorities in order to be able to sell products there.
For British players wishing to export to the EU, the most direct way to comply with the tax constraints of each country is to implement the DDP on sales.
Here are some useful references which cover the many questions relating to VAT and customs duties for trade between the EU and the UK.
These changes have had direct business consequences on the e-retailers of Stockly's network, mainly because of the vagueness on accounting and taxes.
In the short term: managing the crisis
To quickly manage the crisis we had to take emergency actions to bring our network into compliance.
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 European Union. This temporary suspension had a direct business impact.
While we had also planned to expand our network with a British e-commerce player, we were forced to delay discussions. As the tax terms of such a partnership are still too uncertain, Stockly has chosen to temporarily focus on partnerships in the European Union.
The next step to ensure that these measures remained ephemeral was to adapt quickly to the new context.
In the medium term: adapt
The first work that we carried out, and not the least, was to seek to understand the new constraints of Brexit. Thus, the clarifications provided by this research work and the documentation that we have constructed have allowed us to better understand the problem. We are now looking to better support e-retailers joining our network to trade with the United Kingdom.
This raised two issues for continuing to work with the UK in the future: a technological issue and a tax issue.
On the tech side, the challenge is to update our accounting processes, that is to say transcribe the new standards electronically.
On the tax side, we support our distributors in updating their system. The European single window for its collection is one of the subjects on which we are, for example, working.
It is thus by being in contact with e-retailers that we seek to face the new challenges of adaptation. Our common objective is then to quickly take note of the new measures, modify our various partnerships and adjust our technology so that it remains up to date on all points!
These are ultimately minimal efforts to ensure that our partners can continue to distribute their products under the best conditions.
We believe that the situation will evolve like this: e-retailers will comply in the coming semesters to remain competitive. Without this process update, UK e-retailers will be unable to ship products to the EU without seriously degrading their customer experience. The same goes for European players wishing to export to the United Kingdom while maintaining a satisfactory customer experience.
For e-commerce as a whole, we see two impacts on the sector.
As flows become more and more global, it is now even more critical for an e-retailer to manage international issues. Customers can indeed access foreign online stores more and more easily, particularly via marketplaces or comparison sites such as Google Shopping, which forces the latter to manage cross-border issues.
Secondly, we are seeing more and more regulations being applied to the Internet as a whole, and trickling down to e-commerce. The web is in fact in a phase of institutionalization which must be taken into account if we wish to evolve successfully.
