Call it a designer pothole, the Gucci gap or a Burberry bump in the road — whatever name you choose, the reality is that the post-Brexit fine print caused by the U.K. leaving the EU on Jan. 1 has emerged, and appears to be gumming up the importation and exportation of luxury goods.
Although the two sides spent four years negotiating their separation, and then another 12 months transitioning to the changes, it only took a few weeks for consumers and companies to be confronted with the costs and burdens involved in trading over borders that previously did not exist.
“I had no idea at all I was going to be charged any more for deliveries after Brexit. The extra costs were definitely a bit of a shock,” 26-year-old Londoner Ellie Huddleston told the BBC upon discovering that she owed about $100 in additional tax and duties on a $275 jacket.
Because of the way the rules are written, the courier services are tasked with the unenviable role of serving as the government’s collections agent — and, not surprisingly, are finding themselves coming face to face with a lot of surprised and angry consumers.
“I sent both [packages] back without paying the extra fees, and won’t be ordering anything from Europe again anytime soon,” Huddleston said.
If Only It Were That Simple…
In the era of next-day delivery and one-click eCommerce, returned items or declined packages are de rigueur — just another part of doing business without a store or ever seeing your customers.
However, that routine procedure has taken on a new level of complexity and cost that is so burdensome that renowned luxury designers in the U.K. and Europe are mulling the unthinkable to avoid the ridiculous.
“It’s cheaper for retailers to write off the cost of the goods [rather] than dealing with it all, either abandoning or potentially burning them,” noted Adam Mansell, head of the UK Fashion & Textile Association (UKFT), said in the report.
So far, the luxury retailers and designer houses have kept quiet about the burgeoning issue, presumably preferring to work quietly in the halls of Brussels and Westminster rather than dousing their silk blouses and leather shoes and bags in gasoline.
According to Mansell, once the rejected goods arrive back in Italy or Germany or wherever they came from, new customs paperwork must be completed and fees must be covered, including export clearance charges, import arrival charges, import VAT charges and, depending on what is inside the box, rules of origin documents as well.
“Lots of large businesses don’t have a handle on it, never mind smaller ones,” Mansell noted.
If Everybody Hates It….
With “progress” like this, and angry customers and companies popping up all over the U.K. and Europe, the economic case for unraveling the previous economic compact that had stood since 1973 becomes more difficult to defend.
However, like the torturous path of Brexit itself, the endless re-ordering of travel and trade rules in this part of the world is best viewed as a work in progress, where problems arise and businesses, individuals and governments react and adapt.
New Year, New Problems
Even before the New Year introduced the designer pothole problem, the region’s luxury goods players were dealing with inventory issues, as well as the potentially brand-diluting reality of their pricey products being marked down and re-sold.
Last March, for example, Vogue Business wrote about the inventory issues luxury retailers and manufacturers were facing as the pandemic triggered a wave of cancellations and store closures, and forced many to confront the dangers of discounting.
“Brands have become increasingly reticent over the past decade to show off any promotional activity on their products,” Vogue Business said, pointing to Louis Vuitton’s opposition to wholesale merchandise and Prada ending in-store markdowns in 2019.
Even so, the Vogue report cited research from Bain & Company that showed off-price sales have nearly doubled in the past five years, due in part to a rise in designer outlet malls that sell discounted products after the seasonal cycle has ended.
That said, if history is any guide, entrepreneurial innovation can be expected to find a way to break free of the new cost burdens and shipping delays that are currently bogging down commerce and reunite shoppers with the brands they want.
We’re always on the lookout for opportunities to partner with innovators and disruptors.
Learn More