As the UK leaves the EU on 31st December, according to Reuters’ article, both parties are rushing to settle on a deal that will govern nearly $1 trillion in trade. A trade deal on goods for the UK would protect nearly $1 trillion in annual trade, however, disruptions at the busiest EU and UK border points are imminent (Reuters, 30th November 2020).
The Covid-19 pandemic has introduced a new way of shopping for us all this year, with the majority of both food and goods shopping trips being moved to online. This has also taken its toll on big retailers such as Topshop, as Sir Phillip Green announced the shop will be going into administration. As well as stocking up for Christmas and any potential Covid-19 related lockdowns, Europe and the UK will soon have Brexit to deal with. The rise of e-commerce throughout this year as a consequence of the pandemic, has already pushed warehouse space to the limit. Now businesses struggle to find space to store products.
Now, retailers have never had more of a reason to fill warehouses up and keep stock closer to shoppers who continue to buy a record number of items online, especially since the pandemic. British organisations are bringing as much in as possible before any potential disruptions in January 2021, while Europe are piling up goods in pan-European distribution hubs in close proximity to ports such as Rotterdam and Hamburg.
E-commerce management platforms, such as ZigZag and Global-e who manage popular retail shops such as Forever 21, Boohoo, Selfridges, and Hugo Boss, stated that around 30-35% of UK retailers’ sales are to customers from continental Europe. International brands which are popular in the UK such as China’s retailer Shein or American sportswear retailer Under Armour are currently stocking exclusively in the EU as reported by ZigZag’s CEO Al Gerrie in Reuter’s article.
Additionally, the CFO of the European retailer Zalando, David Schroeder, stated in November that “most carriers already operated at Christmas volumes during the first wave. If you now add the Christmas effect on top, it’s just getting even more challenging”. The demand for storage spaces post-Brexit could rocket even further as retailers seek to avoid custom checks and potentially tariffs if we get a no deal Brexit. For example, warehouse owners GLP’s warehouses cover 3.3 million square meters in continental Europe and 700,000 in the UK leased to companies such as H&M, Amazon, and DHL, with 97% occupied warehouses (Reuter, 30th November 2020).
Even after the pandemic, demands for warehouse space is expected to remain high as customers now are used to ordering online and find it easier to do so, changing the way many of us shop. E-commerce generally requires around three times as much as warehouse capacity as physical retail, according to figures drawn from Prologis. According to Reuter’s article, Britain’s logistic industry estimates that 250 million customs declarations a year will be needed for EU trade. Amazon have already announced that from 28th December onwards, it would no longer distribute goods for merchants between the UK and the EU.
Other companies are beginning to consider options such as converting agricultural buildings, empty spaces on run-down high streets, or vacant basements to warehouse spaces, according to research by organisations such as JLL and Savills. Head of Prologis for the UK, Paul Weston, stated in Reuter’s article that, “If people want warehousing today, you’re looking at older, second-hand, more functionally awkward space, without the same height or loading doors of new builds”.
On the whole, e-commerce seems to be the new way that we shop since the Covid-19 pandemic. However, this comes at a cost, with decreasing warehouse space and the pending rules of Brexit which come into play from midnight on New Year’s Day, effecting shipping costs, tariffs, and trade. Full consequences are still unknown as a deal or no deal is still yet to be confirmed. Could the pandemic, and now Brexit, cause significant impacts on how retail runs in the long run? This could be as some retail branches, such as Topshop, have already struggled, and the UK may have to consider new suppliers as shipping could become costly.
By Emma