International trade: How three toy retailers are navigating new rules for trading with the EU
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Posted: Thu 28th Jul 2022
Any business moving goods between the UK and EU will have encountered challenges since the start of 2022, when new customs rules were introduced.
Indeed, many small businesses have needed support during this period of immense change. Enterprise Nation responded by launching its International Trade Hub, in collaboration with professional services firm Deloitte.
The hub is just one part of the national effort to increase the number of small businesses in the UK reaping the benefits of cross-border trade.
In this blog, three UK-based toy retailers share their experiences of coping with the upheaval, overcoming barriers and making sure they have everything in place to secure a prosperous future.
Maria Bataller, Capikooa
Melissa Brannlund, Green Bean Studios
Keisha Shah, Teddo Play
Can you give us a potted history of your business and how it started?
Maria: My background is in engineering. But when I had my first child, it ignited a passion for child development. As a first-time mum, it was all new to me and I wanted to know if my baby was developing well and what to do to best support her development.
My 'Aha!' moment for starting Capikooa was when I found out that babies learn with their bodies before they can learn with their brains. In the early years, children need to move, be active, explore, create, build and so on.
Technology is brilliant and we can do so many amazing things with it, but children don't need much technology to use their bodies. So, combining our passion for child development and sustainability, we decided to start our business and design our first product, the Capikooa balance board.
Our aim is to support child development in the early years and help reduce waste in toys.
Melissa: Green Bean Studios was founded by Anita Frost, entrepreneur and multi-award-winning author. Anita harnessed over 16 years of experience in child development and business to develop her venture, and now collaborates with talent from the UK and beyond to produce creative and fun products and entertainment for families across the world.
The organisation seeks to tackle key issues that our society is facing, including childhood obesity, excessive screen time, climate change, and the decline in children reading for pleasure.
Through inspiring stories and characters, Green Bean Studios aims to encourage children to get active and spend more time outdoors, nurture the environment, and develop a love of reading and learning from a young age.
Keisha: Teddo Play is our children's educational brand and we create a variety of high-quality play-based learning products for children of all ages, all made in the UK.
My husband Amit and I are the team behind the brand – we're both very passionate about learning and education in a playful environment. It's all about giving children the time and space to absorb new information while having a great time, making them naturally wanting to learn.
When did you start trading with the EU, and how did you go about it?
Maria: In June 2019, we started trading in Europe via the Amazon PAN European scheme. That made it very easy for us as we'd send stock to one of the Amazon UK warehouses and Amazon would redistribute it to Europe as needed.
At the end of 2019, our sales in Europe outnumbered our sales in the UK. But then in January 2020, it all stopped as Amazon could not continue offering the PAN European scheme. It took us almost a year to get set up again to sell in Europe and we're nowhere near the number of sales we had before Brexit.
Melissa: We started trading in 2019, with our initial trade point being with an international broker to test the market for packaging, books and toys. We also generate strong business-to-consumer (B2C) sales in Ireland, which is a key area for direct sales from our online store.
Customers who buy from Ireland pay for shipping at Parcelforce real-time rates, but remain willing to order goods while shipping rates incur an overseas shipping charge. Despite that, we continue to receive glowing reviews from customers regardless of these extra costs.
Keisha: Our products are made entirely in the UK, so we don't import anything. But we do have customers in a number of EU countries. The costs for shipping and customs have certainly gone through the roof but, at the moment, we're doing our best to absorb as much as we can to retain our customers as well as find new ones.
This situation isn't viable, nor are we able to make any profit at all on orders from customers in Europe and the US. But our business is in its early stages and our focus right now is to spread the word about our products. So, we're taking the hit in the hopes of building a wider customer base.
What's been the single biggest barrier in your trade with the EU since January?
Maria: The lengthy custom clearance declaration process. Preparing the full customs declaration for import, making sure the commercial invoices have all the correct information: EORI, origin and so on. At Capikooa, we're currently only two people working full-time but it can take one of us a whole day to deal with an import.
Melissa: Price point has been the greatest challenge for us, affecting our whole distribution line. Increasing costs has affected the quality of products we're able to make, across our entire range. To continue to be viable and make profit as a business, we're forced to make significant adjustments to our product lines.
This presents problems for customers buying repeat products, as it's hard to deliver the same quality as before without increasing prices. With our business costs continuing to rise, economic changes, and the scarcity of materials or supply chain issues, we're having to make difficult decisions to maintain a good margin. Part of this is being profitable enough to make sure we're paying all of our workers and those in our distribution line fairly.
Keisha: Touch wood, the border control and customs process has been great for us. It's had bad publicity, and people have been getting confused and stressed from all the conflicting information they might be receiving. But all the information is out there on the government's website and there's plenty of support, information and advice available, to all businesses.
What would make trading with the EU (importing, exporting or both) easier for you?
Maria: Trading in the EU was very easy before Brexit. Now a faster customs clearance process would definitely help. Also, we find that having to pay tax and customs fees deters some European customers from buying products from the UK.
Melissa: Since the pandemic, the economy and the retail landscape has been in a state of flux. Before COVID, we'd have been able to easily acquire prices to put into the business and trade well in areas such as packaging, book deals, and supplies of toys. Now it's much more challenging as prices are two or three times higher than they were a year ago.
The main challenge we, and many other businesses, are facing is this continued uncertainty within the economy and business as we all navigate this ever-changing territory. One option that would support businesses to recover and rebuild would be to introduce fixed rates for shipping for one or two years as we rebalance the economy after COVID and Brexit.
Keisha: As far as possible, we don't intend to import. We want to continue to support the UK economy in our own small capacity by keeping production within the country.
However, it would be hugely helpful for small businesses if exporting could be more streamlined. There's quite a lot of paperwork for every overseas sale and the delivery costs are tremendous.
UK businesses like ours really do want to shout about their brilliant UK-made products and take them out to the world. But in the current scenario, with rising costs, this is proving challenging.
Simple solutions such as a straightforward export declaration at an individual parcel/shipment level through an intuitive app which can then aggregate for the yearly totals would make the process so much quicker and less daunting.
Support from the government through shipping vouchers which can be used with Royal Mail's international delivery services would not only encourage more small businesses to export from the UK but also help in making British products more accessible to the rest of the world.
What future plans do you have for your business? Does this still include shipping internationally?
Maria: Our future plans include designing and making more products to add to our range and continuing to trade and grow internationally. As we make our products in Spain, we're also exploring options for shipping to European countries directly from there.
Melissa: We'll continue to seek out partnerships and investment opportunities to support our ongoing growth and development. We aim to bring on board exceptional individuals and organisations who are able to deliver on both small and large scales, while maintaining our brand's existing quality and credibility.
We'll also continue to build relations in different markets, including the EU and internationally. Our international shipping remains in place, but we're also aware that the situation in Ukraine will affect it.
Keisha: We have plans to make our educational products and learning resources available in a number of EU languages. We've had good interest from our European customers to have our resources in their respective languages to use with their children in their day-to-day learning and activities, so this is definitely high up on our list.
Given the soaring delivery costs to ship internationally, we're also in the process of finding and partnering with local distributors in Europe as well as in the USA and Canada.
Advice and information on how small businesses can successfully import, export and expand overseas, provided by Enterprise Nation in collaboration with Deloitte. Visit the hub now
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