The British market 2 years after Brexit - how to sell on Amazon.co.uk?

Access to the Internet in the United Kingdom is almost universal. Over 90% of residents use the internet and shop online. For many years, this market has been one of the largest in Europe and in the world. According to estimates from the Electronic Economy Chamber, further growth is expected over the next 2 years, and by 2024, online sales will reach approximately 25% of total sales in this country. After the United Kingdom left the European Union, many entrepreneurs from the continent ceased supplies to the UK due to complicated legal regulations and new obligations. Does the e-commerce market in the United Kingdom still have potential for European entrepreneurs? How has Brexit affected offline and online sales in this country? In this new article, we examine whether it is worth investing in expansion into British marketplaces.

What does the British e-commerce market look like in 2022?

In terms of online sales, the United Kingdom is a wealthy and developed market, where only a small percentage of the population does not shop online. Since 2015, the turnover of companies in the e-commerce segment has increased from £42.6 billion to £129 billion. 

Fig. 1 Growth of turnover in the e-commerce sector from 2015 to 2021

Source: E-commerce revenue in the United Kingdom (UK) from 2015 to 2021, https://www.statista.com/statistics/282162/e-commerce-annual-sales-in-the-united-kingdom-uk/

The fashion category is the most developed. As a result, there is fierce competition in the fashion industry. The market leader is Amazon. In 2021, sales on amazon.co.uk reached $17.078 billion. The second major player, Tesco, recorded a turnover of $7.654 billion. Amazon's competitors, particularly supermarkets, have long offered fast home delivery services. As a result, the American giant decided to deliver food to Prime customers at no additional charge. Over a year ago, it partnered with Deliveroo, allowing customers to order groceries and meals with free delivery.

What product categories do the British prefer to buy?

The e-commerce market in the United Kingdom has enormous potential. British customers are affluent and have high expectations regarding quality. As many as 93% of them shop online regardless of age, gender, education, or place of residence. Thus, the marketplaces operating in the Islands are the most developed and competitive platforms in Europe. The most preferred product categories among the British are:

Fashion - 30%

Toys, hobby products, and DIY - 19%

Electronics and media - 19%

Food and cosmetics - 17%

Furniture and accessories - 15%.

Fig. 2 The most popular product categories in 2022

Source: https://payrow.com/blog/e-commerce-trends-to-keep-an-eye-out-for-in-2022-in-the-uk

These are very broad industries that face strong competition, but at the same time, there are significant opportunities for growth. Entrepreneurs offering high-quality products with unique features or attractive prices that allow them to stand out against rivals can consider expanding into the British market.

The specifics of the British consumer

In the UK, online shopping is dominated by Amazon (407 million monthly visits) and eBay (297.9 million). The former attracts 2/3 of all traffic from the 12 most popular e-commerce portals in this country. Given that the United Kingdom has a population of 67 million, this number is truly impressive! What is most important in the decision-making process when it comes to purchases? There are several factors worth noting when preparing an offer for the British market.

Fig. 3 What should you pay attention to when selling in the United Kingdom?

Source: own study.

Over half of the residents of the United Kingdom indicate that they prefer domestic products. In October 2022, inflation in the country reached 9.6%, leading an increasing number of customers to seek promotions and price deals in order to mitigate the impact of rising prices on their household budgets. Nearly half of the country’s residents pay attention to price increases for regularly purchased items. As many as 44% choose cheaper or discounted products. What does the high inflation rate mean for sellers? The need to keep prices stable to avoid losing loyal customers.

What formalities must be followed when selling online to the United Kingdom?

Sellers from EU member states, after the UK left the Community, must comply with several additional regulations:

Customs - customs duties on orders over £135

Export - tax obligations related to export and import to a third country

Additional regulations for specific industries - if you sell, for example, herbal or health products, check whether you need certificates.

These specific rules do not apply to Northern Ireland, as it is regarded as part of the EU customs area. Want to know how to start selling in the UK and what steps you need to take to commence sales? Apply for an EORI number (Economic Operators Registration and Identification number). Remember to report each export sale. For VAT purposes, exports to the United Kingdom do not count as intra-community supplies, so import tax must be paid in the UK. This obligation rests with the buyers, but it is worth thoroughly informing them in your offers to avoid disputes with consumers. Deliveries valued at £135 are exempt from customs duties and import taxes, so prices can be structured to stay within the limit. 

Opportunities and risks of entering the British market

The British have long been accustomed to fast deliveries, so concerns about Brexit were significant. Carriers and suppliers quickly adapted their logistics processes to the new reality. Some companies, for instance, use air freight to deliver orders to their customers in the UK within 2-3 days. However, this concerns only large players, as small firms cannot afford it. Therefore, they either ceased B2C sales or raised their product prices. The returns policy is much more complicated, as it often incurs high costs. Thus, some entrepreneurs condition the possibility of returns on the consumer covering the shipping costs. For buyers, Brexit means not only higher prices but also longer delivery times. How to take advantage of these changes? Focus on:

Fast delivery

High quality

Friendly returns policy

Untapped market niches.

By doing this, you will fill the market gaps that emerged after many businesses withdrew from the British market, and gain an opportunity for foreign sales growth.

Is selling online to the United Kingdom still worthwhile?

To answer this question, one must gather all the pros and cons of entering the British market. Let’s start with the barriers that may lead to a withdrawal from expansion. Starting to sell in the Islands currently involves numerous formalities and obligations that one must meet to launch and remember in the coming months and years. One attractive option is to take advantage of Amazon's platform program, which allows sellers without a VAT number in the UK to list their products on amazon.co.uk. If you are selling from your own online store, hire a professional accounting office that will handle customs and tax settlements. As mentioned earlier, the British market has enormous potential and many gaps that can be filled. There are niches where you can find a place for yourself and successfully develop foreign sales. Due to the strong competition investing in modern solutions, focus on flexibility and personalization to make your offer more attractive. Remember to offer several payment options and adapt the website’s layout for mobile devices.

Happy selling

Amata Borys-Chudek

Go2Market Crew