How Brexit Could Impact Amazon and Other Online Retailers

When the people of the UK turned out in unprecedented numbers to vote in a referendum on whether the country should remain in the EU, nobody could have predicted the outcome.

The vote to leave won by a narrow margin, plunging the UK into two years (and counting) of economic uncertainty and massive societal division.

In the two years following the vote, it's fair to say things have not gone well. The UK Prime Minister has survived two no-confidence votes, destroyed her parliamentary majority in an ill-advised snap general election, and failed to secure an exit deal which satisfies both the EU and the House of Commons.

One thing which is generally agreed upon across the spectrum of business and politics is that leaving the EU at the end of March 2019 without a deal in place would be disastrous for the British economy, and will negatively impact businesses in many industries, including ecommerce.

Amazon

When looking at how Brexit is likely to affect the world of online retail, it would seem prudent to use the biggest player in the game as an example. After all, if a giant such as Amazon will feel the effects of a no-deal Brexit, you can almost guarantee smaller retailers will, too.

"Like any business, we consider a wide range of scenarios in planning discussions so that we're prepared to continue serving customers and small businesses who count on Amazon, even if those scenarios are very unlikely," the UK arm of the company said in a press release. "This is not specific to any one issue - it's the way we plan for any number of issues around the world."

Up until now, Amazon has been able to keep the number of fulfilment centres it operates in Europe to a minimum, thereby offering its trademark streamlined and rapid delivery service to the entire continent. However, in the event of a no-deal Brexit, the free movement of goods and services across the English Channel will cease. This will necessitate the building of extra centres to facilitate the new status quo, under which it will take much longer to cross from mainland Europe to the UK and vice versa.

Amazon had planned to build two more warehouses in the UK, which would have created around 2,500 extra jobs for the British economy. However, while the right to continue living and working in the UK has been guaranteed for EU citizens already there, a no deal could complicate this promise. Amazon has traditionally relied heavily on an immigrant workforce in its warehouses, and with the uncertainty around Brexit causing many to leave and fewer to arrive, it could scupper the company's expansion plans.

Whatever the outcome of Brexit - deal or no-deal - it will almost certainly result in the British people have less disposable income in their pockets. The resultant tightening of the belts of a poorer population will likely reduce consumer spending, especially on the sorts of non-essential goods Amazon specialises in. However, all is not doom and gloom, as people will also likely be keener for bargains, which Amazon and its significant buying power are ideally placed to facilitate.

Final Thoughts

It's clear Brexit holds much reason for concern for any ecommerce business that wants to continue doing business either from the UK to the rest of Europe and the world, or with the UK from another country. If there's one thing economics cannot abide, it's uncertainty - and UK industry is rife with it right now.

Whether or not a deal is struck, come Brexit Day, it is highly likely that the UK will find itself in a weaker position in terms of global trade than it held as a decision-making power within the EU. The only way to truly maintain a position of strength would be to cancel Brexit and stay an active member of the Union - but that political hot potato may just be a little too volatile to countenance.

"When the British people voted in the EU referendum, they did not vote to become poorer," said the UK's Chancellor of the Exchequer, Phillip Hammond. "If you look at this purely from an economic point of view there will be a cost to leaving the European Union because there will be impediments to our trade."

You can hear Amazon's Director of Amazon Marketplace UK, Richard Marriott , speak at eTail Europe 2019 , taking place in June at the QEII Centre, Westminster, London.

Download the agenda today for more information and insights.