New post-Brexit vote survey data showed the most sudden drop in UK consumer confidence since just before the 1991 recession, according to The Guardian. Many analysts suggest that the longer the uncertainty persists over the timing and terms of the UK’s EU exit, the more vigilant consumers will be on both sides of the Channel. This is a major consideration for U.S. ecommerce merchants due to what the Paypers describes as “intense trade flow” between the two countries.
If your business depends heavily on sales into the UK and EU, you will need to focus on providing additional value, reducing costs and selling into other markets to compensate for the likely decline in spending. Samsung and LG have indicated they expect EU consumers to spend less on electronics due to the uncertainty around Brexit and its consequences, and it’s reasonable to expect that EU consumers will be extra cautious about other purchases as well.
Court Price-Sensitive Consumers with Special Deals
Ecommerce sellers must demonstrate the value they offer to UK and EU consumers to retain their loyalty. Businesses that don’t already offer a free shipping option as part of a tiered menu will be at a disadvantage. In fact, many online shoppers already expect free shipping as a matter of course. For consumers who focus on finding the best deals, this can be the final factor that influences their decision to purchase.
Package discounts on items commonly purchased together, bulk-order discounts and flash sales on items popular among UK and EU customers are also ways you can provide extra value to price-sensitive customers.
Reduce Operating Costs to Offset Sales Declines
If you’ve delayed seeking out less costly service providers and partners for your business operations, now is the time to start shopping around. In addition to shipping options, pay special attention to payment processing and fraud protection, as these are often relatively high costs for ecommerce operators. Your business may be able to pass along some of these reduced costs to customers to stimulate more spending.
Examine the payment options you offer to cross-border customers and consider adding additional low-cost options. For example, you may wish to add Bitcoin and electronic bank transfers as checkout options, as they carry lower processing fees than credit cards and have a much lower (some as low as zero) chargeback risk. Many Britons converted pounds to Bitcoin before the UK referendum and may choose to spend the e-currency, depending on the relative value when they shop.
Now is also a good time to review your payment fraud protection to ensure your business is receiving the best value for money. The potential costs of fraud are simply too high to compromise in this area, especially given the upward trend in this activity. If your PSP provides fraud screening, review its features to ensure they keep pace with industry standards and it’s fully PCI-DSS compliant. Quality fraud protection can help keep your payment processing costs low while reducing the frequency and cost of chargebacks and their associated fees.
Consider Other Markets or Product Offerings
Cross-border ecommerce merchants with strong customer bases in the UK and EU may wish to expand into other ecommerce markets. For example, Australia and New Zealand are strong options for English-speaking ecommerce sellers. They should also consider making adjustments to product offerings to reflect changing UK and EU consumer spending habits. Merchants who sell large-ticket items such as electronics, furniture and appliances into the UK and EU could consider adding lower-cost products that will appeal to consumers delaying larger purchases.
Until Brexit is finalised, ecommerce sellers with customers in the UK and EU will have to contend with market uncertainty and consumer caution. Whether spending stays weak or bounces back quickly, now is an opportune moment to evaluate your costs, value, markets and product offerings.
Kirsty Tull is Director of Marketing and Communications for BillPro