Although the impact of a potential Brexit looms large, it is perhaps a debate many retailers are unwilling to participate in
When recently asked, Associated British Foods and Primark boss George Weston commented that a Brexit would have little effect on business.
Meanwhile, the British Retail Consortium (BRC), a group that is not usually afraid to speak its mind on policies such as business rates and minimum wages, is claiming neutrality on the issue.
Only last week, in a panel discussion about international retail, I was asked to comment on the ‘B’ word – it seems Brexit in retail, like Macbeth in drama, is something that should not be said aloud.
Perhaps this is understandable. The collapse into administration of BHS and Austin Reed this week, coupled with the fact that there have been more than 350 profit warnings from UK businesses in the past 12 months – more than at any other time since the last financial crisis – highlights that British retail has enough on its plate without embroiling itself in a potentially damaging public debate about leaving the EU.
But it is a debate that needs to take place. One particularly significant topic for British retail to examine is the impact of Brexit on the EU’s proposed Digital Single Market.
With the dust settling on BHS’s administration earlier this week, many will be forgiven for missing the release of the latest online Retail Monitor from Google and the BRC, but (despite the BRC’s official neutrality) it outlined some fairly persuasive reasons for British retailers to want to stay in the EU.
The reported 52% increase in internet search volumes for UK retailers (including a 50% hike in searches made on mobile devices) has a distinctly continental flavour to it.
Helen Dickinson, chief executive of the BRC, climbed briefly off the fence to point out that in 14 EU countries searches for British retailers increased by 100% or more. In the Czech Republic the increase was 256%.
With online sales continuing to track double-digit growth, the British ecommerce sector is well developed and maturing, accounting for one of the highest proportions of overall retail in the world.
British ecommerce could bring significant cross-border retail benefits given a level European playing field, which is precisely one of the aims of the proposed Digital Single Market.
Steps taken in the EU’s digital policy have already helped to facilitate cross-border retail trade.
The elimination of excessive roaming charges has taken some of the fear out of using online services such as ecommerce when travelling abroad.
While this is only of marginal significance to retailers, the €415bn gains that the EU claims will come with a Digital Single Market are more tangible.
When launching its Digital Single Market initiative last year, the EU was quick to point out that only 15% of EU citizens engage in cross-border ecommerce, compared with 75% of Europeans who shop online in total.
Part of the obstacle to growing cross-border ecommerce comes in the form of regulation and consumer protection. Another pain-point comes in logistics, with a reported 62% of companies identifying high delivery costs as an obstacle to cross-border sales.
Ongoing efforts by the EU look likely to smooth these problems out between member states, which could open up new sales channels to UK retailers who have already developed complex online solutions to serve the maturing domestic market.
Of course, this works both ways, and bringing down barriers will also open up the UK to competition from ecommerce players that benefit from lower overheads in other member states.
But with recent Brexit conversations centring on Barack Obama’s claim that leaving the EU would push Britain to the back of the queue for the Transatlantic Trade and Investment Partnership, it seems about time that retailers started to consider the benefits and pitfalls associated with greater transparency between member states, rather than with the US.
- Jon Copestake is chief retail and consumer goods analyst at the Economist Intelligence Unit.