May 16, 2021Ed. Note: A version of this article originally appeared at Retail TouchPoints.
Dec. 31, 2020, marked the end of the Brexit transition period, and while many took a sigh of relief, in reality the Brexit effect had only just begun. The shockwaves presented by Brexit are now imminent. Many retailers are already experiencing increased tariffs and supply chain snags, putting customer satisfaction at jeopardy. In fact, M&S has been named as the latest brand affected by Brexit red tape—with the shelves of its French stores recently left empty.
To overcome supply chain disruptions, many online retailers are already making changes to their existing fulfilment operations. More than one-third (37 percent) are assessing and implementing new technology solutions to increase supply chain efficiency, while 33 percent are splitting inventory to base fulfilment in existing U.K. and European facilities. Traditional fulfilment models, with limited flexibility, will no longer be effective. Now is the time to rethink fulfilment and adopt more flexible models, such as multi-node distribution, to ensure business continuity and customer satisfaction.
Removing the Brexit Red Tape
While news of a trade deal came as a huge relief, consumer rights when shopping online have not come out unscathed at the hands of Brexit. For example, as of Jan. 1, 2021, EU consumers buying a product from a U.K.-based retailer now have to pay charges, including import duties and courier or postal handling fees, following Britain's exit from the Customs Union and Single Market. Some of these costs and additional paperwork are also applicable to British customers buying products that have been shipped from the E.U.
For many purchases, this is adding a third to the cost of online orders and adding significant delays due to extra border checks. While there are some brands that are avoiding this cost being transferred onto the customer, this is certainly not the case for all. Many brands will not have anticipated these costs, meaning ultimately the responsibility falls with the individual receiving the goods.
To avoid damaging customer relationships and putting hard-earned customer loyalty at risk during this time, brands must act fast. Online retailers and brands must start by reviewing existing data to determine where their customers are located, and determine how inventory should be effectively dispersed across the U.K and E.U. Making inventory provisions, such as splitting inventory across both regions, will be crucial during the coming months. This solution, known as multi-node fulfilment, enables brands to provide in-region fulfilment in both locales, bypassing custom requirements at the border.
Avoiding Reverse Logistics Chaos
Unsurprisingly, customers facing unexpected charges upon delivery are often refusing to accept deliveries of products, and this is causing 30 percent of orders to be returned, according to Statista data. Reverse logistics can be costly and labor-intensive for retailers at the best of times, let alone with the added complexities of border delays, VAT, import duties and associated paperwork. In addition, it can negatively impact a brand's sustainability initiatives and efforts to reduce carbon emissions. To avoid this, recent news reveals that High Street retailers are threatening to burn products returned by E.U. shoppers rather than bringing them back to the U.K. This comes as no surprise as brands desperately attempt to avoid the costs and red tape associated with Brexit.
By looking to a multi-node fulfilment model and dispersing inventory across the U.K. and mainland Europe through multiple distribution points, brands can easily overcome this. An advanced distributed order-management system will ensure your order-management system can divert orders to the appropriate inventory pool, depending on a number of factors from delivery address to product type.
Alleviating Pressure Beyond Brexit
Multi-node fulfilment offers additional benefits. For example, during periods of peak season volume, additional fulfilment and distribution points, combined with an effective DOM system to route orders, can help to alleviate pressure and spread resources. In addition, what and where inventory is placed will have a significant impact on your ability to keep orders moving to meet consumer demand. After all, it's not just about capacity—the key is business continuity, during and beyond the pandemic.
As an alternative to setting up multiple distribution centers across regions, brands could also opt to utilize pop-up distribution centers or micro-fulfilment centers, something often implemented for higher-volume periods such as a pre-Christmas peak or planned promotions throughout the year. Pop-up DCs can also be utilized to test new markets, which may prove beneficial in overcoming initial Brexit-related pressures.
These temporary operations are often much cheaper to set up and operate, while providing relief to your primary distribution center. An effective DOM system will ensure orders are directed to the appropriate fulfilment point. For one major alcohol brand with customers in both the U.K. and Europe, the use of a U.K. pop-up DC meant that it was able to become fully operational in just two weeks, just in time for Black Friday and the Christmas peak season.
Supporting an Omnichannel Future
If there has been one retail trend that has proliferated throughout the past year, it has been the surge in online shopping. PFS's own research found that 53 percent of consumers had shopped more online since lockdown began. In fact, more than three-quarters (77 percent) of these went on to say that they expect they will continue to purchase online more once the lockdown has lifted.
As the U.K. continues to battle against the ongoing ramifications of the pandemic, many retailers have been forced to temporarily close their doors to the public, relying purely on online sales in order to survive. Even as physical stores begin to open, retailers are increasingly recognizing the importance of an omnichannel approach, and considering a variety of fulfilment options to support this will be an essential next step for retailers. Through combining pop-up distribution centers and brick-and-mortar stores (utilized as "dark stores"), brands and retailers can effectively spread-out inventory and get product closer to consumers for faster, cheaper and more sustainable delivery options, with minimal investment.
As with the COVID response, navigating through the "Brexit effect" will require brands to react with agility and flexibility in order to keep businesses going and customers satisfied. Keeping customers front and center will be pivotal during this time, and brands can do this by ensuring they are not only aware of any potential kinks in the fulfilment chain but agile and responsive enough to handle the challenges with precision. Recent events have forced brands to think creatively about how best to reach the customer, and with further turbulence ahead, multi-node fulfilment and other, alternative fulfilment options will be vital for success.
Christophe Pecoraro is the managing director of PFS Europe. He has extensive experience in the ecommerce industry, with more than 15 years serving in a variety of roles at PFS. He is also the founder and owner of the LinkedIn Supply Chain Management Group, which is brimming with more than 200,000 industry professionals. Pecoraro began his journey with PFS in implementation, then moved through client solutions and client services before his promotion to managing director in 2016. In this role, he oversees all PFS operations across Europe.
