Brexit-Related Frictions Drive Demand For eCommerce Fulfillment and Logistics

It’s been nearly two years since the United Kingdom (UK) officially left the European Union (EU) and all has not been well.

Businesses in Great Britain have had to pick up the pieces following the historic UK-EU divorce, trying to survive amid falling revenues, new additional tax and duties and supply chain disruptions, to name a few.

In an interview with PYMNTS, Huboo’s Co-founder and CEO, Martin Bysh, said Brexit has created challenges for their eCommerce clients in the UK shipping products within the European Union (EU), including rising costs. “If you’re shipping items over a certain price you have to pay value added tax (VAT),” he said. “That can result in someone receiving a gift in Europe and then being asked to pay VAT on it, which is obviously not the way to build a business.”

Founded in 2017, the venture capital-backed business has expanded from one warehouse in Bristol to operating four fulfillment centers across the UK, giving the company key insights into the day-to-day challenges eCommerce retailers face.

He said the EU had offered a one-stop shop for eCommerce sellers as a solution to the problem, but he said many small sellers have not signed up because of how complex it is and the red tape they need to cut through. As a result, revenues have dropped by about 12% since the UK left Europe last December, and “we haven’t really seen that pick up,” he said.

The best option for those in the UK wanting to sell in Europe is to ship their pallets directly to the country and sell domestically, Bysh recommended, adding that those in other European countries who want to expand in the UK must do the same. This will remove the red tape and help businesses wanting to expand to be more competitive in the local market.

“If you want to compete on an equal footing with domestic sellers, you can’t be shipping from miles away because it adds cost to the shipping process which you have to pass onto the client. It [also] adds two- or three-days shipping delay as compared to buying it from someone in the domestic market,” he explained.

Riding new waves

Aside from Brexit’s impact on their eCommerce retailers, Bysh said about 90% of the UK’s population has been plugged into the online shopping trend since the pandemic, indicating that there’s little growth potential in the country for the eCommerce fulfillment company.

“We can’t ride a wave of eCommerce incursion here [in the UK],” he said, explaining why the low growth potential in the country’s eCommerce space has led the company to push heavily into other European markets, using the £60 million (about $83 million) Series B financing it recently secured.

See also: Fulfillment Companies Expect eCommerce Boom To Stay Even As Consumers Return To Stores

And those plans are starting to take shape. “We opened a site in the Netherlands about three months ago and we’ve just signed off on Spain,” he noted. “Hopefully, we’ll roll out operations in Germany by the end of 2021 and up to 10 other countries next year.”

Their full-stack, software-driven eCommerce fulfillment platform currently has over 1,000 customers — ranging from small direct-to-consumer (D2C) merchants to larger eCommerce brands — and about 200,000 stock keeping units (SKU) across a wide range of products.

Time management techniques

Fulfillment companies typically store all the inventory they have for a client at the pick phase, which translates into tremendous amounts of walking, about 10 miles a day for pickers, according to data gathered by Amazon per Bysh.

The firm uses external locations for deep storage and replenishing facilities and has pioneered a hub methodology approach that involves the use of micro warehouses, about 300 to 500 square feet in size.

They’ve since managed to reduce the walking distance down to about half a mile without having to invest in extremely expensive automation, he said, and that speed of replenishment as well as the ability to control the amount of space utilized for a particular client, are some of the company’s key strengths.

To further solve the challenges of last-mile fulfillment, Huboo works with a collection of couriers, using “intelligent software” to decide in real time which couriers to use for an item that’s being shipped.

That approach has been particularly useful in the last 18 months, during which Covid created meltdown situations for some couriers, not to mention the restrictive lockdowns and UK’s exit from the EU, which together made it a challenging time for the business to operate.

As Bysh said: “Luckily we had systems in place that allowed us to nimbly move from one courier to the next and that helped us survive what was a very difficult period for couriers.”

Business Expansion Made Easy

Bysh said the goal is to move beyond a fulfillment company to a one-stop shop for D2C brands, offering clients an end-to-end suite of products that centralizes all the tools needed to run their eCommerce business.