Tamebay goes to 10 Downing Street
I was pleased to pop along to the heart of the British Government on Tuesday, with my Tamebay hat on, for a discussion at 10 Downing Street with one of the Prime Minister’s key advisors, Daniel Korski.
Enterprise Nation svengali and avid Tamebay reader (that’s what she says!) Emma Jones took a small delegation of SMEs and online traders for an informal discussion about the opportunities and difficulties for businesses marketing and selling online.
Needless to say the discussion ranged more widely than that and considered other small business issues. And I was pleasantly surprised by how receptive Daniel was to lots of the suggestions and ideas presented. It is worth noting that he was both knowledgeable on the issues and genuinely enthusiastic about small business. We expect nothing more from a graduate of the LSE. (Ahem.)
Some of the points raised by the small business people who attended included:
– The difficulties of establishing, marketing and getting traffic to business websites.
– Some of difficulties of dealing with HMRC. Although one business owner, says she found them always friendly and helpful. (?!?)
– Concern that High Street retail is held in higher esteem than online.
– Discussion about international trading and the challenges there. Praise for UKTI.
In such a packed meeting, I knew we wouldn’t get everything said so I prepared some notes before the meeting which I have emailed over to Daniel Korski. I’m glad I made the notes because we didn’t much discuss marketplaces. I include some choice cuts below. Of course, Tamebay isn’t a lobbying group so it’s best to consider my notes as personal. But I’d be very happy to hear your comments on them. You’ve never held back before. ;)
Overall, it was a valuable experience. I don’t suppose we’ll change the world or indeed achieve much at all. But I must say it is reassuring that some SME voices are being heard in the corridors of power and that online traders are, at very least, on the radar at Number 10.
Some of my notes:
Don’t confuse the multi-national marketplaces with the UK SMEs
It’s vital to be clear that SMEs trading online are different from the marketplaces they trade on. 100% of goods sold on eBay UK are from individuals, SMEs and retailers. The sellers range from consumer clear-out sellers, sole traders and home-based micro-businesses right through to High Street chains.
The SMEs range from sole traders to multi-million pound turnover Ltd companies. The nature of the spread is not known. Ecommerce sellers will often be multi-channel and sell on eBay, Amazon, their own websites and on other marketplaces.
Many are Bricks & Clicks businesses who have similar overheads to a Bricks & Mortar High Street operations. Before profits, that will include Business Rates, Employer NI contributions and VAT at 20% (largely an issue regarding cashflow).
Claims by organisations like the BRC that online sellers have a tax advantage are largely untrue. Sure, the old school don’t like Amazon much. But their ire shouldn’t be directed at the estimated 40% of Amazon sales that are made by SMEs and other retailers. An online sales tax, which BRC members have called for, would be punitive to ecommerce SMEs.
It is also worth noting that a great many of the smaller ecommerce SMEs are not VAT registered. Their turnover doesn’t require it. 20% UK VAT is a big pain point for them.
Cross Border Trading
For any ecommerce SME, growing their CBT is the biggest opportunity. Both eBay and Amazon are encouraging their sellers to trade more internationally. But there are numerous barriers:
Fear – there is a lot to worry about. Payment, insurance, returns. Most are surmountable but it can be bewildering. Recent experience suggests UKTI aren’t giving particularly focused, useful advice.
Within the EU – Even in the EU with free movement of goods there are headaches. VAT for bigger traders is complex and requires the services of specialist accountants. Some nations have poor postal services (partic. Greece and Italy). Guaranteeing returns can be patchy. Language is a problem for all international traders.
Outside the EU – Tariffs and duties vary widely. As do carriage costs and returns. Canada has fantastically complex import duties. Australia and US are better.
Emerging markets – Russia and China are touted as huge opportunities. Alas, seller trust (not without reason) is low. Not least because of theft and fraud concerns.
Possible policy steps:
Win – Raising the personal income tax threshold to +10k is the single biggest boon that the Coalition has given to ecommerce SMEs. With so many sole traders, husband and wife teams and micro-businesses trading in the ecommerce space, it means so much more than lowering corporation tax. Consider raising the personal income tax threshold further for sole traders/self-employed to encourage micro-enterprise.
Business rates – Not just an issue for Bricks & Mortar firms but Bricks and Clicks too. Plenty of firms trading online keep business premises. Business rates are not a tax on trading success or profit but a tax on just operating. 50% of rent (over £1k pcm) is too high a rate and a disincentive to expand, especially for firms in the boot-strapping phase. It stifles investment in nascent businesses. Unlike tech start-ups, ecommerce traders need warehousing and storage space. Not just a few desks at Silicon Roundabout.
Nudge the off-shored marketplaces – If the big boys Amazon, eBay/Paypal and Google are allowed and want to keep their off-shore status, can’t they be nudged quid pro quo? They should do more to help SMEs use their services. Not least because their dominance does, in a sense, make them quasi-utilities that have duties to the nations they operate within, beyond CSR.
Royal Mail: maintain the universal service at all costs.
I think someone should give a nudge to the Government to invest in backing a British based alternative to amazon and ebay . If they put there full weight behind it it could be branded as a British co supporting British companies. I am sure all of the dissafected UK sellers sick of towing the American company line would sign up and the Gov could run workshops for young entrepeneurs and encourage young school leavers to set up small business and all of the established UK High street would have another channel as well . All profits could go back in to the country and to expand the job creation opportunitys that would go in running the site etc.Surely they could get someone on board such as Richard Branson to create such a thing? V Bay , ?
Fantastic Dan – some great points raised.
Business Rates and the low VAT threshold are probably the two most constrictive things for enterprise. Many small businesses on ebay probably make less money than they pay in fees. A vat threshold of £150,000 would allow modest expansion and the ability to employ help. Imagine if every small business just employed one member of statf. The effect on unemployment benefit payments would far outweigh the loss of revenue from vat. Business Rates should be a percentage of profit per square foot.
I’d rather see VAT applied regardless of turnover. If you’re a business, you charge VAT. That way all businesses would be competing at the same level.
Great article Dan and agree, was pleasantly surprised at how receptive he was.
Very much hope you do get to be an accredited growth voucher advisor – seems ridiculous otherwise!
Great to hear from you Esther and welcome to Tamebay. :o)
Did you raise the issue of VAT fraud that is committed by many Chinese and other EU and non-EU sellers selling into the UK, who exceed the VAT thresholds on eBay and Amazon.
This is really hurting many sellers including myself, as well as costing the UK billions in lost taxes, and tens of thousands of jobs?
So easy to stop, but nothing seems to be done about it!
I didn’t JD-Hog,
Pressure of time and prioritization of issues meant I couldn’t mention about everything.Alas.
Dan, would be great if you could do some research and a write up on this issue, for my on-line business, its the number one issue facing us at the moment!
Completely agree. We’ve had to sit back and watch our sales drop by half because our main competitor on ebay isn’t registered for VAT. He’s turned over more than £300,000 in the past year and is apparently “looking at registering for VAT”. As far as I’m aware once you know you’re going to hit the threshold, do you not have 30 days to register? Clearly this seller should have registered last year, but clearly didn’t give a GRR. Anyway… if eBay/Amazon/Play etc were forced to report turnover over the threshold, this would help HMRC surely? I mean, this guys bill alone would pay for at least two other wages at HMRC! Suffice to say we’ve sent the documentation to HMRC as we feel it’s unfair to be legally running a business at a disadvantage because others are avoiding/evading paying legally required “fees”. We’d be rolling in it if we were as underhanded. It’s extremely easy to see someones turnover for the past year if you have their username and a subscription to the service we use for competitor research.