From January 1, 2021, business and trade between the UK and Europe will look very different. And the beauty industry, like all other industries, will have to adhere to a raft of new regulations and trade formalities as the Brexit transition period comes to an end in the coming days, including those operating online.
As industry prepped to turn the Brexit page, e-commerce specialist Global-e said there were some clear areas digital beauty retailers and brands had to consider: delays on deliveries; custom fees; and online user experience.
Neil Kuschel, CEO Europe at e-commerce specialist Global-e, said all of these considerations played into how consumers interacted with beauty retailers and brands.
Considering Brexit customs in the digital beauty world
“The biggest challenge that arises post-Brexit is friction across the EU online customer journey,” Kuschel told CosmeticsDesign-Europe.
“For EU shoppers, seeing additional costs for tax or duties at the checkout will be massively off-putting, and the delivery company asking for unexpected charges for custom clearance upon delivery will be even worse. Beauty retailers will need to make the call on whether they will pay for custom fees themselves or pass it on to the customer,” he said.
Kuschel said it would be vital to consider costs and pricing strategies accordingly, integrating new customs charges into final product prices or passing the charges onto consumers in a clear and concise way.
“Naturally, absorbing additional costs is going to be preferable for the consumer who won’t suffer an increase in prices for their favourite products. But can you afford to do it? UK beauty brands should keep in mind their EU customers are not accustomed to paying tax and duty when buying from them. Accordingly, presenting those additional costs at checkout will negatively impact conversions.”
No matter what route was taken, he said it would be vital UK beauty brands and retailers operating online were able to offer EU customers “the same seamless shopping experience that they are used to”.
Enabling shoppers to browse in their own currency, providing local ‘preferred payment’ methods, offering competitive and hassle-free returns, and avoiding unexpected costs upon delivery would all be very important post-Brexit, he said.
‘Flexibility and knowledge’ the most powerful business tool
Whilst Brexit might be “daunting and uncertain” for many beauty businesses, Kuschel said the ramifications were no different to trading with a non-EU market.
As of January 1, 2021, all shipments from the UK to the 27 EU Member States or vice versa would have to have a Customs Declaration to replace the current ‘distant selling regime’ and, unless a deal was reached, the UK would trade according to World Trade Organisation (WTO) rules – changing from a Member State to an international country when selling to EU customers. On top of the customs declarations, therefore, all goods would also be subject to import VAT and duty on arrival into the EU – due at the point of import into the EU where products were cleared by customs. Even if the UK government secured a trade agreement on duty tariffs with the EU, Kuschel said UK beauty merchants selling online to the EU still had to ensure they were prepared for customers paperwork and VAT post-Brexit.
Asked how online beauty retailers and brands could best prepare for all of the challenges ahead, Kuschel said: “Flexibility and knowledge. Prepare for any, and all, outcomes that are clear and apparent now and be agile enough to turn online strategy on a sixpence to rapidly adapt to the changing market conditions.”
“…Don’t succumb to the cup-half-empty brigade and understand that a no-deal Brexit by no means signals the end of European trade. There are definitely challenges but with the right strategy they can be overcome.”
Within all this, he said clear communication with beauty consumers would be key – providing transparency to them on any additional delays or fees that might be expected.
Online beauty to gain prominence in post-Brexit world
Kuschel said an independent survey commissioned by Global-e found 70% of online health and beauty retailers believed cross-border trading would be of greater importance in the future – “easy to understand why given the huge appetite from consumers”.
“…The global e-commerce market is booming, and with the right preparations Brexit should not have any major negative impact on growth.”
Importantly, this digital boom was being propelled by the ongoing COVID-19 pandemic that had already driven “consumers online in droves” and would continue into next year, Kuschel said. This meant the pros of continuing to trade with EU markets post-Brexit massively outweighed the cons, as beauty consumers continued to enjoy the benefits of shopping online, he said.
Whilst in-store trading would not disappear, he said e-commerce would remain “the most profitable channel with fewer overheads”.
“…Retailers really need to make [e-commerce] at least equal to their other top priorities. Online beauty brands are witnessing a significant uptake in e-commerce sales, which is driving profitable growth now, and will do well into the future.”
Kuschel said the concern was that many brands still put “far too much of their efforts into their store strategy, rather than realising the world has evolved”. “A balanced strategy which pays equal attention to the global e-commerce consumer is the approach needed,” he said.
For any beauty brands lacking online strategies or operating businesses that did not sell cross-border, he said now was the time to ramp up digital, global thinking and action. “The pandemic has shown that it is no longer feasible to rely solely on your domestic market for growth.”