Analysis of Brexit & Amazon Sellers in Europe
Last week, the UK voted to leave the European Union, causing a major stir among international sellers. But before we dive into the potential impact of Brexit on Amazon.co.uk and EU Amazon Sellers, let’s recap the announcement:
- On Thursday, June 23rd, more than 30 million people voted in the UK’s referendum.
- According to reports, it was the highest turnout in a UK-wide vote since the 1992 general election.
- England, voted in favor to leave the EU, (53.4% to 46.6%).
- Scotland and Northern Ireland both voted in favor to stay in the EU.
- The recent referendum was coined “Brexit” (merging the words Britain and exit) a term used to signify the UK leaving the EU.
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How Soon will Brexit Impact EU Amazon Sellers?
Either way, we don’t expect anything to happen quickly. For the UK to leave the EU it must enable Article 50 of the Lisbon Treaty, which is the process to exit the EU.
The British Prime Minister’s successor will decide when to formally begin the legal process of withdrawing from the EU.
The Article, created in 2009, allows the UK two years to complete the withdrawal process.
Unfortunately, because the Article has never been implemented before, many experts continue to speculate how “Brexit” will unfold.
“My reaction is that it’s too early to know what Brexit means for EU Sellers and the best step right now is to not panic,” Pat Petriello, Marketplace Channel Manager at CPC Strategy said.
The new prime minister should be in place by October, so we don’t expect any major impact from Brexit until at least 2019.
“The truth is, it’s difficult to predict what will happen and how this will affect US sellers doing business in the U.K. and E.U., Nick Sandberg, Marketplace Channel Analyst at CPC Strategy said.
“Much remains for the U.K. and E.U to negotiate over the coming years, but one possibly negative scenario could affect products sold through FBA out of a U.K. fulfillment center to customers in other countries could face additional taxes.”
“Obviously the best outcome is business as usual. Luckily, the process of leaving the E.U. will take two years so sellers will have time to prepare and adjust their strategies accordingly.”
According to an article by BBC News, “The referendum result is not legally binding – Parliament still has to pass the laws that will get Britain out of the 28 nation bloc, starting with the repeal of the 1972 European Communities Act.”
“The withdrawal agreement also has to be ratified by Parliament – the House of Lords and/or the Commons could vote against ratification, according to a House of Commons library report. In practice, Conservative MPs who voted to remain in the EU would be whipped to vote with the government. Any who defied the whip would have to face the wrath of voters at the next general election.”
The same article predicts, “One scenario that could see the referendum result overturned, is if MPs forced a general election and a party campaigned on a promise to keep Britain in the EU, got elected and then claimed that the election mandate topped the referendum one.”
Brexit Impact on Amazon Sellers in Europe
If Britain does follow through on an exit from the EU, this could restrict the passing of products, services, and materials – which would have a direct impact on Amazon’s international ecosystem.
Earlier this year, Amazon announced the expansion of their UK fulfillment centers – opening two new FBA centers and providing 2,500 jobs. According to CNBC reports, the completion of those two centers by the end of the 2016 will bring the company’s workforce to 14,500, with a total of 12 FBA centers.
Although we do not know how Brexit will impact FBA centers directly just yet, it’s safe to say the referendum will negatively impact Amazon’s overall business in Europe.
Brexit follows at an interested time – just after the recent launch of Amazon’s new Pan-European Fulfillment program.
Introduced in May, the program was designed to help sellers export across the EU more efficiently.
Pan-European FBA enables Amazon sellers to sell their products across Europe by helping to place inventory closer to their European customers, and by fulfilling and delivering orders at lower costs and in less time. Selling with Pan-European FBA also makes products eligible for Prime and visible to millions of customers across Amazon’s European marketplaces.
It was reported, by the end of the first quarter of 2016, more than 50 percent of EU sellers sold on more than one Amazon Marketplace in the EU.
Other reports, indicated by the European Union, Global Equities Research’ Trip Chowdhry note several negative impacts as a result of Brexit including:
- Rise in cost of goods and services
- Rise in labor costs
- Overall decline of businesses based in Britain
At this time, Amazon has not publicly released a statement on how Brexit would impact their operations in the UK but judging by the opinion of many other large tech companies – it’s evident Amazon could decide to take it’s business elsewhere.
According to Business Insider, companies in other industries have already said they’ll relocate jobs if there’s a Brexit. For example, HSBC, has said it could move 1,000 jobs to France if the UK leaves the EU and Google is currently at a stand still for development on a new large office in King’s Cross.
At the time, FBA expansion in the UK was an easy win-win given it’s prime location to ship and house products, tax laws, import laws, language and free trade benefits across the EU. Although the UK is still regarded as the fifth largest economy, the major benefits of leveraging FBA in the UK are under threat and everything could significantly change in the few years
Currently selling in Europe through FBA – How do you see your business changing in the next couple years?
For more on Brexit’s potential impact on Amazon sellers, email [email protected]