![Fashion brands and retail businesses tell Drapers that they still face a toxic cocktail of post-Brexit tariffs, VAT payments and complex paperwork when importing and exporting goods from and to the EU. And EU customers, fed up with a lack of clarity around cost increases and shipping delays, are turning their backs on British brands as a result.<br /><br />Meanwhile, inflexible visa rules for EU nationals continue to exacerbate labour shortages in both the retail and logistics sectors.<br /><br />British brand Joules was forced to cut ties with EU wholesalers in February 2022 amid steep export tariffs. While in 2021, M&S closed 11 of its French franchise stores amid supply disruption caused by Brexit. Premium womenswear designer Alice Temperley told Drapers her business opened a warehouse in Italy to avoid paying double duties on product shipped into, and out of, the UK from Europe, eventually calling the bonded warehouse a "nightmare", closing it in 2022 and focusing on a London based space.<br /><br />By far, the biggest challenge is navigating the flow of trade out to the EU, Andrew Opie, food and sustainability director at the British Retail Consortium (BRC), who oversees the impact of Brexit for the trade body: “The main problem is for retailers selling to customers in Europe, whether online or supplying [their EU] stores from the UK.” As of 1 January 2021, the EU reintroduced customs controls for imports from the UK, putting in place full duties and VAT rules on goods moving across the border.<br /><br />“For those delivering online there are additional controls on customs for their businesses and customers, adding complexity and cost to the system.<br /><br />"For those with stores in the EU, there are customs checks at the borders.” Costs include EU tariffs on imports of 4%-5% for yarns, 8% for fabrics and 12% for clothes, custom-clearance fees and VAT.<br /><br />At Perry Ellis International, a distributor and licensee of brands including eponymous menswear brand Perry Ellis and golf brand Callaway, “the implication of [these customs tariffs and paperwork] has been cost and lost opportunity", says managing director Carl Davies. Operating predominantly out of its bonded Essex warehouse until recently, “we have been slower to market, slower to supply our retailers and doing so at far bigger cost". Not only has supplying its EU retailers and direct consumers meant paying duties and VAT that “takes 12% of [our] margin straight away" – costs it has passed on to customers – but the additional administrative burden has added significant delays.<br /><br />Davies says that before Brexit, it took around two weeks from a retail customer submitting an order to garments being on shelves: "Post-Brexit we could barely do it in a month. It definitely took a chunk out of our growth." To combat this impact the company opened a larger bonded warehouse in the Netherlands in January to hold inventory, reduce customs costs and speed up deliveries. From that site, it is now reaching customers within mainland Europe 24 to 48 hours, he adds, but with added operational costs.<br /><br />The impact has been even greater for many smaller businesses, some of which had only recently begun operating in the EU. For London-based, direct-to-consumer online lingerie brand The Underargument, the additional costs obliterated what had been a “massively growing” European export market, says founder Maina Cisse. At the end of 2020, half of the brand's sales came from the EU – this now stands at just 15%.<br /><br />“We lost 95% of our European customers almost overnight,” says Cisse. Furthermore, tariffs and VAT added up to 50% on to the price of products, when taken into account alongside courier surcharges of £5-£10 per item to handle Brexit-related paperwork.<br /><br />To mitigate the impact, the business opened a second warehouse in France at the start of 2022. Its stock is manufactured in Romania, so storing inventory at the site, rather than shipping to its UK warehouse, avoids export customs duties and VAT when selling to EU customers. From December it has hired a cross-border logistics partner to streamline processes and moved to a DDP (delivered duty paid) model to prevent EU customers being faced with additional unexpected charges. This has added further costs as the agent charges a commission on EU sales of around 10%, which the brand is having to absorb, although in the longer term, the additional expense of using the platform will be factored into end prices for consumers.<br /><br />The additional cost and processing time of selling has “dramatically reduced demand” for UK footwear sales to the EU, says Lucy Reece-Raybould, CEO of the British Footwear Association (BFA). “European consumers and retailers alike are refusing to pay the additional costs, requiring instead UK brands and wholesalers to fully shoulder the burden.”<br /><br />#fashion #brexit](https://melanatenow.com/wp-content/plugins/youtube-feed-pro/img/placeholder.png)
Fashion brands and retail businesses tell Drapers that they still face a toxic cocktail of post-Brexit tariffs, VAT payments and complex paperwork when importing and exporting goods from and to the EU. And EU customers, fed up with a lack of clarity around cost increases and shipping delays, are turning their backs on British brands as a result.
Meanwhile, inflexible visa rules for EU nationals continue to exacerbate labour shortages in both the retail and logistics sectors.
British brand Joules was forced to cut ties with EU wholesalers in February 2022 amid steep export tariffs. While in 2021, M&S closed 11 of its French franchise stores amid supply disruption caused by Brexit. Premium womenswear designer Alice Temperley told Drapers her business opened a warehouse in Italy to avoid paying double duties on product shipped into, and out of, the UK from Europe, eventually calling the bonded warehouse a “nightmare”, closing it in 2022 and focusing on a London based space.
By far, the biggest challenge is navigating the flow of trade out to the EU, Andrew Opie, food and sustainability director at the British Retail Consortium (BRC), who oversees the impact of Brexit for the trade body: “The main problem is for retailers selling to customers in Europe, whether online or supplying [their EU] stores from the UK.” As of 1 January 2021, the EU reintroduced customs controls for imports from the UK, putting in place full duties and VAT rules on goods moving across the border.
“For those delivering online there are additional controls on customs for their businesses and customers, adding complexity and cost to the system.
“For those with stores in the EU, there are customs checks at the borders.” Costs include EU tariffs on imports of 4%-5% for yarns, 8% for fabrics and 12% for clothes, custom-clearance fees and VAT.
At Perry Ellis International, a distributor and licensee of brands including eponymous menswear brand Perry Ellis and golf brand Callaway, “the implication of [these customs tariffs and paperwork] has been cost and lost opportunity”, says managing director Carl Davies. Operating predominantly out of its bonded Essex warehouse until recently, “we have been slower to market, slower to supply our retailers and doing so at far bigger cost”. Not only has supplying its EU retailers and direct consumers meant paying duties and VAT that “takes 12% of [our] margin straight away” – costs it has passed on to customers – but the additional administrative burden has added significant delays.
Davies says that before Brexit, it took around two weeks from a retail customer submitting an order to garments being on shelves: “Post-Brexit we could barely do it in a month. It definitely took a chunk out of our growth.” To combat this impact the company opened a larger bonded warehouse in the Netherlands in January to hold inventory, reduce customs costs and speed up deliveries. From that site, it is now reaching customers within mainland Europe 24 to 48 hours, he adds, but with added operational costs.
The impact has been even greater for many smaller businesses, some of which had only recently begun operating in the EU. For London-based, direct-to-consumer online lingerie brand The Underargument, the additional costs obliterated what had been a “massively growing” European export market, says founder Maina Cisse. At the end of 2020, half of the brand’s sales came from the EU – this now stands at just 15%.
“We lost 95% of our European customers almost overnight,” says Cisse. Furthermore, tariffs and VAT added up to 50% on to the price of products, when taken into account alongside courier surcharges of £5-£10 per item to handle Brexit-related paperwork.
To mitigate the impact, the business opened a second warehouse in France at the start of 2022. Its stock is manufactured in Romania, so storing inventory at the site, rather than shipping to its UK warehouse, avoids export customs duties and VAT when selling to EU customers. From December it has hired a cross-border logistics partner to streamline processes and moved to a DDP (delivered duty paid) model to prevent EU customers being faced with additional unexpected charges. This has added further costs as the agent charges a commission on EU sales of around 10%, which the brand is having to absorb, although in the longer term, the additional expense of using the platform will be factored into end prices for consumers.
The additional cost and processing time of selling has “dramatically reduced demand” for UK footwear sales to the EU, says Lucy Reece-Raybould, CEO of the British Footwear Association (BFA). “European consumers and retailers alike are refusing to pay the additional costs, requiring instead UK brands and wholesalers to fully shoulder the burden.”
#fashion #brexit