[2021] Brexit Guide for EU Businesses: Shipping Products to the UK

Exporting products from the EU to the UK – how much does the new trade deal and Brexit cost your business? What do you need to prepare? We break down the three most significant Brexit impacts, we walk you through all necessary considerations and compare shipping single parcels from Europe vs. bulk shipments to local UK warehouses. By doing so, we showcase how to save EUR 38,000.00 on shipping costs and how to increase delivery speed by 6 – 8 days when shipping 4,000 orders to the UK. 

Here’s the shortcut to our Guide for eCommerce, Retail & B2B Businesses from the EU exporting and shipping products to UK customers.

Brexit impact on eCommerce, Retail and B2B orders:

• Introduction: The new trade deal after Brexit: What has changed?
• Strategic considerations: To sell or not to sell products to the UK?
• Logistics set-up and Brexit impact for eCommerce sales:
  • Distribution logistics scenarios: Centralized vs decentralized fulfillment
  • Logistics cost comparison: International shipping vs local UK fulfillment
  • Fulfillment costs: Fulfillment in Germany vs local UK fulfillment
  • Shipping costs: International single parcel vs bulk shipment
  • Return costs: Accounting returns and other costs
  • Result: Choosing local fulfillment over centralized fulfillment
• Get started: Flexible warehousing and tech-driven fulfillment

On January 1st 2021, the UK left the single market and customs unions of the EEA. We now have a Free Trade and Cooperation Agreement. That’s great since this means the UK is not classified as a Third Country under World Trade Organisation (WTO) trade conditions. 

But, what does the Free Trade Deal truly mean for your EU business? Since January 1st 2021, there are new rules, custom checks and formalities for your exports. As a result, we see three significant impacts on your supply chains, eCommerce, and exports to UK customers.

Brexit Impact #1:

The way how goods are sold and shipped between the UK and EU has changed. 
Brexit Supply Chain Tips & Best Practices

Brexit Impact #2:

Higher custom controls lead to more administrative effort, time and costs when selling to retail, B2B and eCommerce customers from the UK. 
Brexit Supply Chain Tips & Best Practices

Brexit Impact #3:

The tendency and preference from UK-customers to buy local because of longer shipping times and increased costs for transportation. 
Example - Brexit Carrier Surcharge

This leaves us to the next very important consideration: To sell or not to sell to UK customers?

The average UK citizen spends €3,315 on eCommerce purchases per year. This is more than any other country in the world. This makes the UK a lucrative market for various products sold online, such as Cosmetics, Healthcare, and other FMCG goods. As a EU business targeting UK customers online, you need to consider a couple of variables first to draw your conclusion whether to distribute products to the UK market or not.

Therefore, ask yourself the following important questions to fully reflect your product distribution strategy.

• How important is the end-customer experience for your business? 

Besides the new trade rules and additional paperwork that affect your business operations, it’s always important to consider the customer experience. How long should customers wait for orders? And should your UK customers pay for shipping? This will determine their willingness to buy your products and affect sales conversions.

• What type of product are you selling or transporting? 

Clearly, your products should appeal to UK customers otherwise they won’t sell. But besides your buyers’ choice, your product category and the corresponding specifications that comes with it (price, weight, and packaging dimensions) will determine your logistics operations and shipping handling.

• How do you sell your products? Via your own online shop or a marketplace?

Depending on the way you sell and through which channel, this brings certain implications for local tax registration and again, your logistics operations. For example when selling your products only on Amazon, you don’t necessarily have to to register your EU business for local UK-VAT. If you’re uncertain what to do in terms of VAT-registration, smart tax experts like Taxdoo can help you out. 

• What’s your current order volume from UK-customers?

In case you already sell to the UK, you should critically review your current logistics set up for handling UK-orders. Do you ship orders per single parcel shipment internationally from the EU? Have you considered choosing a local fulfillment location within the UK to handle orders closer to where your customers are? Especially the last question leads us to a very essential part that impacts your profits per order: logistics costs. So, let’s have a closer look and run through some numbers to identify which logistics setup makes the most sense to increase your profits per order.

 International Single Parcel Shipping vs Local UK Fulfillment

In general, there are two distinct ways to handle distribution logistics when selling products to UK-customers if you have a EU-based business. Let’s quickly review these two fulfillment and shipping scenarios:

Scenario 01 – International single parcel shipping from the EU to eCommerce, Retail and B2B customers in the UK:

In this scenario you have a centralized warehouse in e.g. Germany in which you store your products, and fulfill and ship all international orders. There are two transport routes involved: A bulk shipment from your manufacturer to your warehouse in Germany and international single parcel shipments. When a UK customer buys a product through your online shop, the order will be fulfilled within Germany and sent via single parcel shipping to the UK.

Scenario 02 – bulk shipping from the EU to UK warehouses to fulfill your orders locally with parcel shipping

In this scenario you have an additional warehouse in the UK and make use of a flexible decentralized distribution strategy. There are two transport routes involved: A bulk shipment from your EU-manufacturer to your UK-warehouse and local single parcel shipments. Now, when you accept an order from a customer within the UK, your orders are being fulfilled by a professional fulfillment provider located in the UK. 

Based on the strategic reflections from the previous chapter in terms of customer experience, product category and amount of orders, we’ve created a concrete business case to better understand all logistics costs involved for these two scenarios. This will showcase how Brexit impacts your profitability and what other considerations you need to take when choosing your logistics set up. 

To make a valid comparison and to understand all costs, we assume the following business case. Let’s say you run a German business and sell FMCG products through your eCommerce shop. Currently, you receive 4,000 orders per month from UK customers. The average shopping card value is EUR 54.00 with around 3 articles per order.

Overview eCommerce Brexit Scenario

To make a full logistics cost comparison, we looked at fulfillment costs, shipping costs, potential return rates and also included the latest Brexit impact that most eCommerce businesses currently experience when shipping products to the UK.

Comparing both distribution logistics cases, you immediately see that Scenario 02 helps you save around EUR 9,57 per order and speeds up delivery time by 6-8 days. How? Here’s the full cost analysis:

Note: The shipping and logistics costs result from our eCommerce FMCG Case and are broken down per order. For your bsuiness case, these logistics costs could differ depending on the product type, amount of picks per order and the overall amount of orders that are being fulfilled and shipped.

Overview:
Brexit Logistics Costs

Fulfillment Costs after Brexit: EU vs UK

When you compare logistics prices between the UK and the EU, you will realise that fulfillment rates are similar in both countries. Within each country, however, these rates could differ across fulfillment providers.

On the one hand, the fulfillment cost difference results from the operational focus of your logistics service provider. On the other, your business case makes a difference. For example, the volume of the orders, the SKU picks per order, and the warehouse location impact prices. For example, if the warehouse is in a prime location close to an urban area, you can presume that the fulfillment rates will be high. Refer to our guide on average logistics costs to know more about warehousing and fulfillment costs. In case you are currently looking for a suitable logistics provider in the UK, we can help you find the best warehousing and fulfillment partners from our network.

In our eCommerce case, the fulfillment costs are the same as we have chosen identical geographic locations in both countries and 3PLs that have the same operational focus (eCommerce FMCG orders). Plus, it’s the same product type, number of orders fulfilled per month, and quantity of picks per order. The differences in logistics costs result from shipping costs, return rate costs, and additional impact of the Brexit situation.

Based on eCommerce Best Practices, your parcels are shipped via track and sign services. And your customer should receive free shipping above a certain order value. This would lead to your eCommerce business covering the transportation costs.

In both scenarios, there are two transport routes involved:

Transport Route #1 – The first transport route goes from your manufacturer to your warehouse.

Transport Route #2 – The second route goes from your warehouse to your end-customer.

Therefore we have in both scenarios one bulk shipment to either your warehouse in Germany or your warehouse in the UK. For the bulk shipment in Transport Route #1, the shipping costs are more or less the same (EUR 0.06 vs EUR 0.15) when breaking it down to each single order. The main difference in shipping costs occurs in Transport Route #2.

Evidently it costs you more to ship single parcels from Germany to the UK than to ship parcels within the UK. You save around EUR 4.30 per order for delivery costs in this case. What’s more, with the additional handling efforts due to Brexit, carriers like DHL often claim a Brexit surcharge for shipments.

Overall this leads to a shipping cost difference of EUR 8,69 per order. Clearly, in scenario 02 you save a significant amount of money and let’s not forget the delivery time. Despite the standard EU-UK shipping time, Brexit has also caused additional shipping delays due to the extra paperwork and custom controls. Therefore, fulfilling and shipping orders locally helps you save around 6 – 8 days per order. This is a clear competitive advantage that also impacts sales conversions.

Returns are experienced by all eCommerce merchants. In some cases, e.g. fresh produce and frozen items, returns are not possible. But, you might provide a money-back guarantee. In any case, you need to consider average return rate costs for each order.

In Scenario 02, returns are shipped to your local UK warehouse instead of international shipment to Germany. This is (A) more convenient for your UK customers and (B) less costly. In comparison to Scenario 01, you save EUR 0.88 on return costs per order. That’s another bump to your overall profits.

In our eCommerce FMCG case, local UK fulfillment will save your business a significant amount on logistic costs, resulting in more profitability. In Scenario 01, your profits per order are EUR 7.97 – which is still great. But, your profits increase to EUR 17.57 in Scenario 02 . This means you save up to EUR 9.57 per order. With 4,000 UK-orders per month, this leads to over EUR 38,000.00 in cost savings.

In other words, a decentralized logistics and flexible warehousing strategy helps you become even more profitable and provides a competitive edge that helps your business succeed in the long run.

Our eCommerce Brexit Guide showed you a way how to deal with Brexit, how to build and secure your supply chains to the UK and how to avoid logistics costs for your business. Our everstox team has helped many businesses and merchants to navigate through Brexit. One of our recent customers, VAAY (Sanity Group), is just one of many examples of how we’ve helped modern eCommerce businesses find a suitable logistics partner in the UK. 

If you’re looking for professional logistics providers to expand your product distribution to new markets, simply contact our team to get started with flexible warehousing and tech-driven fulfillment.

Was our Brexit Guide for your EU business helpful? We also have more Guides and How To’s for Retail, B2B and eCommerce logistics. Here are some tips:

• Guide 3PLs: How to find the best logistics provider (3PL)?
• Guide Logistics Costs: The 5 Main Cost Drivers of Distribution Logistics

Max and the marketing team at everstox take care of researching, evaluating and writing all logistics insights that we gather from our day-to-day operations. If you have any questions on our thought-led articles, guide’s or any other blog-related topic, feel free to get in touch with our team.

Maximilian Nenning

Head of Marketing