New research by Retail Economics and Tradebyte reveals that British brands and retailers have experienced a significant downturn in international sales to the EU, with figures dropping by GBP £5.9 billion since Brexit. Despite a flourishing European e-commerce market, the additional trade frictions caused by Brexit-related complexities are dampening potential sales opportunities for UK-based brands and retailers.
Online retail is estimated to contribute GBP £323 billion annually to EU economies. Nevertheless, the value of non-food retail exports from the UK to the EU has decreased by almost 18% since 2019, with inflation only partially mitigating the decline.
The UK's non-food export sector, particularly in Clothing & Footwear, has encountered substantial challenges in the post-Brexit landscape. Exports in this category have plummeted from GBP £7.4 billion in 2019 to just GBP £2.7 billion in 2023, a drastic reduction that has pressured brands and retailers who lack the expertise, resources, or financial capacity to navigate the complexities of the new regulatory environment.
The reported difficulties include increased logistics costs, the complications of registering an EU entity for trading, and extended delays in an already fiercely competitive market characterised by tight profit margins and a requirement for rapid response to trend changes.
The redefined trading relationship with the EU has necessitated a shift in operations. Pre-Brexit, apparel was among the top three non-food export categories. However, the focus has shifted, with Health & Beauty, Electricals, and DIY & Gardening now occupying three-quarters of the UK's retail exports to the EU. Notably, Health & Beauty and DIY & Gardening have seen marginal increases in export values since 2019.
Amid these export challenges, opportunities in online marketplaces have risen significantly, especially following the pandemic. Marketplaces now play a crucial role for UK brands and retailers attempting to moderate Brexit's impacts. They now account for over two-fifths of the EU's GBP £322.6 billion annual online non-food sales, providing streamlined access to affluent and younger consumer demographics. Sales are concentrated in the largest EU markets, with the top ten online markets accounting for a significant portion of non-food online sales, including marketplace sales worth at least GBP £133 billion.
Richard Lim, CEO of Retail Economics, remarked, "The profound shift in the UK's trade relationship with the EU has hit British brands and retailers hard. Successive waves of disruption caused by Brexit and the pandemic have significantly disadvantaged UK exporters, who are having to navigate through increased friction and costs."
Lim added, "Marketplaces have emerged as a lifeline, allowing brands to tap into the EU market. They now account for over half of online sales among the most affluent EU consumers. As UK retailers search for expansion into new territories, marketplaces present a vital channel for growth, offering scalable market opportunities with low risk."
Alexander Otto, Head of Corporate Relations at Tradebyte, commented, "International retail is a complicated space for UK brands and retailers selling in Europe post-Brexit. From language barriers to taxation and customs issues, to warehousing and fulfilment, these are significant obstacles. In today's marketplace landscape, access to relevant customer data, an understanding of market nuances, relevant experience, and an effective fulfilment strategy are critical to success."
