A major advantage of London as a base for a digital start-up is its role as a hub for international e-commerce, particularly into mainland Europe.
However, although e-commerce businesses operating in London have several advantages in terms of accessing resources and skills, they also must manage complex and varied sets of rules governing their products and how they operate in different European markets.
Managing the variety of rules that e-commerce businesses operating out of London must comply with therefore needs to be managed systematically, rather than being done on an ad-hoc basis.
London as a springboard for niche consumer brands
The UK capital is an important location for many niche consumer brands. Many small and medium-sized consumer brands use London as their main centre of operation because it has a well-developed agency, payment provider and fulfilment centre ecosystem that provides an ideal environment for testing product ideas and scaling successful ones. London’s ecosystem makes it easier for companies to establish themselves quickly in a competitive environment and grow rapidly.
Consumer brands often operate in a limited number of product categories but invest heavily in branding, storytelling and customer service. These strategies help companies differentiate themselves through perceived quality and consistency, rather than solely through low prices and a wide selection of products.
An example of this type of strategy is specialized online stores such as https://mamakana.co.uk/, which focuses on a single product category (wellness) and uses detailed product descriptions, transparent labelling and a recognizable brand image to stand out from larger, lower-cost online retailers. Specialized online stores, however, cannot rely solely on product variety and pricing strategies to remain competitive. They need to develop unique selling points based on aspects other than just price and product diversity, which will enable them to stay competitive against larger online retailers.
Regulatory complexity
For companies that offer their products in multiple European Union (EU) countries, navigating the regulatory complexities of each country poses a significant challenge. Although some EU-wide laws, such as General Product Safety Directive (GPSD) and Food Information Regulations (FIR) exist, EU member states can implement further national legislation and enforce national rules differently.
As a result, online retailers that sell their products in several EU countries typically conduct three levels of compliance work. In the first level, they implement the EU or UK baseline framework for compliance with laws such as general product safety, labelling and packaging. In the second level, they identify country-specific differences relevant to their product category and map out national guidelines on products derived from hemp, supplements and fortified foods.
Finally, they consider platform policies for online retailers and payment providers, which can be more restrictive than the legally required minimum standard and can be changed without prior notice.
Logistics, VAT and cross-border trade
Logistical models for e-commerce businesses targeting EU customers that operate from the UK must consider customs and VAT frameworks. Because the UK is classified as a third country by the EU, goods sent to EU-based customers typically require customs declarations and may incur import VAT, unless stock is pre-positioned in the EU.
There are two primary logistical models commonly used by e-commerce businesses that operate in the EU and target EU customers. One model involves shipping goods directly from a warehouse in the UK to individual EU customers using delivery providers that deal with customs clearance and collect duties and taxes on behalf of the customer upon delivery. Another model involves establishing a fulfilment centre in at least one EU member state located close to a major logistics hub and shipping goods in bulk across the border.
This model typically enables faster delivery and more predictable costs for customers compared to shipping individually.
Strategic implications for London-based e-commerce founders
E-commerce businesses founded in London and targeting customers across Europe do not see regulatory fragmentation as an obstacle but rather as a normal aspect of doing business that must be planned for and managed proactively from the outset. Therefore, e-commerce businesses should anticipate that product design, supply chain development, labelling and logistics will be influenced by EU regulations and plan accordingly.
E-commerce businesses will benefit from having access to experienced advisors, accelerators and service providers that specialize in areas such as customs and VAT, consumer law, and product standards. E-commerce businesses that proactively manage regulatory risks, adhere to established processes, and provide clear and consistent messaging to customers and stakeholders are more likely to build long-term relationships with customers and partners across both the UK and continental Europe.
As such, regulatory fragmentation can become a factor that influences business design rather than a barrier to entry or expansion.
Author Profile
- CEO - ClickDo™ & SeekaHost™ | Started as an SEO Consultant and helped over 400 UK business owners grow their business with online marketing and Google advertising. More details about Fernando Raymond are available at www.fernandoraymond.com.
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