What would ‘Brexit’ mean for UK ecommerce?

We recently analysed the effects of austerity on digital marketing and ecommerce… but what happens if the UK decides to leave the EU?

If a referendum takes place soon (the Tories pledged to hold one by 2017), Britain could theoretically start cutting ties with the European Union as early as 2016. 

So where are the major risks to online businesses and digital marketers? 

  1. Trade. If you run a business, particularly if you run a cross-border ecommerce website, the main risk is that Brussels decides to make it difficult for British companies to operate across Europe. EU membership offers up handy frameworks for logistics and market access… and 50% of UK ecommerce exports come from Western European markets. As Paul Watson from Volo says: “Export is a critical part of the thriving and rapidly developing online retail sector in the UK and much of this growth and success depends on the UK staying within the EU.” If it becomes difficult to trade from the UK, large businesses may leave the UK and set up new headquarters elsewhere (and less businesses will establish themselves here). Even the uncertainty created by the referendum itself will be damaging to small businesses. According to Jane Walsh, Marketing Manager of designer sex toy brand Je Joue, "approximately 16% of our overseas engaged audience are based in the EU, we are closely monitoring the situation. Changes that makes it more expensive for these customers to shop with Je Joue could have significant implications on our online revenue."
  2. Legislative Agenda. The European Commission has, this year, proposed the notion of a digital single market, which would tackle cross-border parcel delivery, simplify VAT and change media rules to generally make life better for everyone. As Anand Menon (Professor of European Politics and Foreign Affairs at King’s College London) notes, “Britain is well ahead of other member states when it comes to the percentage of its population that engages in e-commerce (some 85 per cent as compared to an EU wide average of 50 per cent that have ever shopped online). Its consumers are therefore ideally placed to benefit from an opening of the digital market, while numerous businesses, both large and small, will profit from an expanded online consumer base – only 15 per cent of Europeans have purchased goods online from another member state.” The current legislative agenda, in other words, accords well with British interests. 
  3. Technical Resource. Another angle is tech talent. With Eastern Europeans comprising a growing number of London’s web developers and IT professionals, Brexit could present a problem if European coders are unable to remain here or move around freely. Other technology experts point to the problems with hosting data if Britain was to exit Europe.

As well as the more tangible outcomes, Brexit could have a symbolic significance, meaning that brands and marketers lose the feeling of being part of something bigger that operates together. The digital space is a great example of how the EU brings people and ideas together. The KKR institute claims that “the European digital industry - with its fluid, multi-lingual international labor force, its global business outlook and its emerging international funding chain - has already become a poster child for economic integration in Europe.”

Of course, many say that there are positives to be found from leaving Europe, and many of the arguments above simply don’t apply. 

  1. Trade. The chance to set new trading regulations, free from the restrictions of EU directives, means that the net effect on ecommerce businesses could be positive. Moreover, InternetRetailing’s research into the Top500 ecommerce retailers in Europe found that only 20 of the top 500 had stores in 10 or more countries… so there’s arguably no such thing as a ‘European customer’ or pan-European retailing. 
  2. Legislative Agenda. Again, while the EU might have some nice proposals up its sleeve, there’s a good chance the UK can come up with some new rules that help protect and grow online businesses. While it’s unlikely we can form part of a single digital market from outside the EU, there are risks that this project may struggle to get off the ground - it’s legally very complex
  3. Technical Resource. It’s a sensitive subject, but there are those who feel that hiring people from other countries is hindering not helping the UK and the UK economy. If Brexit causes issues with resourcing great staff (and it may not), there could be a greater push to train and find jobs for British people who are unemployed. 

Despite the fact that 3.8m people voted UKIP (who are strongly anti-EU-membership) in the last General Election, YouGov polling from February suggests that around 45% of people in the UK would vote to remain in the EU. With so many conflicting opinions and uncertainty around what will happen next, perhaps the focus for omnichannel retailers needs to be catering to differing audiences across Europe, rather than worrying about a loss of custom simply from not being part of the EU. 

Regardless of referendum outcomes, there are trends in consumer behaviour that smart brands can already capitalise on: French people tend to prefer click and collect; Germans are more concerned with privacy and security online than other nationalities, and tend to be less inclined to pay by credit card. Italians are most likely to use a mobile device (for travel bookings at least) while Nordic countries are all about music streaming

Whether Britain stays or goes, thinking about ‘Europe’ as a single market is about as sensible as suggesting there is a single European cheese.