Regular readers of these posts will remember how we recently took a look at the problems that UK dropshippers could face following Brexit. Essentially, the abolishment of the low consignment relief has meant that UK sellers who use the dropshipping business model will now struggle to maintain profit margins as the price of importing small products has risen. Considering that the EU have also abolished their low-consignment relief, you would be forgiven for thinking that dropshipping would also be suffering in Europe. However, it seems that dropshipping may actually still be viable in Europe…
Why Are The New Regulations Affecting European Dropshipping?
The main thing affecting dropshipping is the increased price of importing goods from outside of Europe. As of July 1st 2021, all imported good are subject to VAT. Previously, goods that were less than €22 in value were not liable for import VAT so it was easy enough for sellers to ship a small product from outside of the EU and sell it on to an EU consumer for a profit. With the new rules this is now extremely difficult.
Dropshippers are then put into a tricky situation. Unless they increase the prices of their products, they are unlikely to be able to maintain profit margins. However, if they do this, they will probably lose customers and business. So, what can they do?
European Alternatives
Typically, European dropshippers have gotten their stock from Asia. Whilst this will obviously be much more expensive now, there is still the option of using dropshipping platforms based in Europe. These platforms will likely now represent a more attractive option when it comes to dropshipping in Europe since they hold stock in Europe. This means that sellers will obviously not have to pay extra fees to import their stock.
Furthermore, this might actually be better for consumers. It is likely that consumers will suffer less from issues that can arise from problems with paperwork or customs delays. Since EU countries can trade freely amongst themselves, EU based dropshippers who opt to use European platforms will be able to move products cheaply and quickly across Europe.
Does This Benefit UK Sellers In Any Way?
Unfortunately, this is unlikely to benefit small UK-based dropshippers. Of course, they can use the same tactic when it comes to selling in the UK, but since the UK is no longer in the EU, using European platforms will not really help them when it comes to selling to UK consumers.
However, UK sellers who are operating in Europe or those who wish to do so in the future could benefit from registering for VAT in a European country and then using the European platforms. However, to offset the cost of establishing themselves in Europe, these sellers would likely have to be confident of making sales on an extremely large scale.
Need Help With Dropshipping in Europe?
If you are a business who participates in cross border e-commerce, or importing of any kind, we would be more than happy to help you register for an EU and UK EORI number. We can also help you register for UK VAT, the UK VAT deferral scheme, file your UK and EU VAT returns, and help you comply with VAT in case your account faces any issues. At J&P, helping your business is our passion, and we understand that companies across the UK are at risk now more than ever. We are here to support you through this post-Brexit period, so please do not hesitate to give us a call on 07734 182821 or send an e-mail to enquiries@jpaccountant.com.
