For many SME retailers, the thought of scaling their businesses to enter new markets has many perceived barriers, particularly if you’re managing multiple roles within your business from stock procurement to marketing, quality control and customer services. Finding the capacity and headspace to research your options might not be at the top of your to-do list, but it’s not as challenging as you might think…
Chris White, head of delivery at international fulfilment services provider, fulfilmentcrowd, explains how SME retailers can overcome these challenges and capitalise on the opportunity of scaling into new markets, both across the EU and further afield.
For many independent retailers in the UK, 2020 hid a lot of the post-Brexit trading cracks as their domestic sales skyrocketed during periods of lockdown when consumers were forced to stay at home and took to shopping more online.
Fast forward to 2022 and IMRG’s latest Capgemini Online Retail Index shows e-commerce sales grew at the slowest rate on record in February, dropping -27% YoY compared to 2021 when the UK was still in lockdown.
Retailer confidence has certainly taken a hit, and with rising costs from energy to carrier charges, it’s understandable that many SME retailers already working within tight margins feel that the barriers to scaling internationally aren’t worth the squeeze. However, there are ways for independent retailers to navigate these challenges and return to trading internationally, or for SMEs considering new markets to scale operations and grow their business outside of the UK.
Simplifying the schemes available
Firstly, SME retailers need to decide whether they should or shouldn’t register for schemes available such as Import One Stop Shop (IOSS). While it comes with a somewhat grandiose title, it’s worthwhile considering, particularly for lower value goods. Some of our own customers have shared their concerns about appointing fiscal representation in other countries. However, all that’s required is to register with one of the 27 EU tax authorities and submit one monthly IOSS VAT return with the correct VAT payments made automatically by the IOSS Scheme across other EU tax authorities where your customers are based. There are also organisations such as Taxamo and Zonos dedicated to helping SME retailers get this process set up, which can alleviate some of the administrative pressure to support SME retailers going down this route.
Proof of origin and customs offsetting
There are rules in place as part of EU trade deals that allow you to recover customs costs – tariff free. For example, if you’re purchasing materials from an EU country and shipping them to the UK to make a product that will then be shipped back to an EU country for sale, then you should look at customs offsetting. These are designed elements of trade deals that can be utilised by SME retailers when your commodity is purchased in the EU in first place. This is where it’s worth taking some time to do your own research and to see if there’s an area you can exploit for your business.
Consider other international markets
If trading with the EU isn’t an option for your business, don’t neglect the rest of the world. People tend to get overwhelmed thinking other markets are hard to trade with, but this isn’t always the case. The US, for example, has a relatively high threshold for SME retailers importing goods. You won’t pay any import duties on goods up to the value of $800, so this is a market certainly worth considering if the value of your items sits below this threshold.
Moving your stock to an EU distribution centre
If absorbing the rising costs here in the UK isn’t sustainable for your business – work with a fulfilment partner that can help you split your inventory and move a proportion of your stock to an EU distribution centre. While there’s an initial cost to this, it’s not a huge outlay, and will allow you to replicate your business model from an EU location and get back to dealing with EU markets on preferential terms.
This is an option that many SME retailers are choosing; our own EU operations grew from 30,000 consignments to 150,000 consignments between 2019 – 2021 and we’re expecting that figure to double again in 2022. Choosing the right fulfilment partner will help fast-growing retailers navigate market uncertainty and scale operations sustainably. Businesses should look for a partner that can provide the technology to accurately manage stock inventory and provide real-time data that gives e-commerce retailers complete transparency and control over their business both here in the UK and overseas.
