In this article, Whistl, the UK’s leading provider of delivery management services, details the UK’s and USA’s trade relationship and how retailers can best prepare their online operations to capitalise on the growing and important US e-commerce market.
The United Kingdom has historically been a major trade partner with the United States of America. While the USA is the UK's largest trading alliance, the European Union is the USA's biggest export market. Now that the UK has left the EU, all trade deals are now directly with the USA, rather than via the EU as a single market and customs union.
As the largest e-commerce market on the planet, the USA is always going to be right at the top of any UK online retailers’ priority lists. While the US’s main language is the same as ours, it could be tempting to oversimplify your trans-Atlantic export strategy. The United States’ 330 million residents are as diverse as the world itself, with some states containing a greater population than any single European countries. Furthermore, the country is vast, with four-time zones and cultural differences throughout. Therefore, your UK to USA export strategy should be very specific and tailored accordingly to the segments you are striving to acquire, as customers.
How big is the USA’s import market?
At $0.47 trillion USD, the US e-commerce market represents 11% of global e-commerce trade and is predicted to grow by 20% to $0.56 trillion by 2025. As of March 2021, the UK exported $12.9 billion USD's worth of goods to the USA, representing 2% of all US imports.
Where are the USA’s main imports from?
The UK is the USA’s 13th biggest trading partner in terms of imports into the USA, while China, Mexico and Canada are in the top 3, representing over 44% of all US imports.
What types of products does the USA import?
Given America’s population of 330 million people, its total of $2.41 trillion in imports in 2020 equates to roughly $7,300 in yearly product demand from each U.S. citizen.
In this 2021 report from World’sTopExports, the following product groups represent the highest dollar value in America’s import purchases during 2020. Also shown is the percentage share each product category represents in terms of overall imports into the US:
- Machinery including computers: US$361.6 billion (15% of total imports)
- Electrical machinery, equipment: $343.5 billion (14.3%)
- Vehicles: $254.4 billion (10.6%)
- Pharmaceuticals: $139.5 billion (5.8%)
- Mineral fuels including oil: $130.1 billion (5.4%)
- Gems, precious metals: $107 billion (4.4%)
- Optical, technical, medical apparatus: $90.9 billion (3.8%)
- Furniture, bedding, lighting , signs, prefab buildings: $65.5 billion (2.7%)
- Plastics, plastic articles: $62.5 billion (2.6%)
- Organic chemicals: $55.9 billion (2.3%)
The above product categories account for two-thirds (66.9%) of total US imports during 2020. Clearly, the opportunities for UK online retailers lie in the electronics, pharmaceutical and homewares categories, which US-based online shoppers clearly have an appetite for.
What types of products does the UK export?
Also from World’sTopExports, the following export product groups categorise the highest dollar value in UK global shipments during 2020. Shown here is the percentage share each export category represents in terms of overall exports from the United Kingdom:
- Machinery including computers: US$60.4 billion (15% of total exports)
- Gems, precious metals: $43.3 billion (10.8%)
- Vehicles: $36.4 billion (9.1%)
- Mineral fuels including oil: $26.4 billion (6.6%)
- Electrical machinery, equipment: $25 billion (6.2%)
- Pharmaceuticals: $24.8 billion (6.2%)
- Optical, technical, medical apparatus: $17.6 billion (4.4%)
- Aircraft, spacecraft: $13.2 billion (3.3%)
- Organic chemicals: $12.1 billion (3%)
- Plastics, plastic articles: $10.6 billion (2.6%)
The United Kingdom’s top 10 exports accounted for roughly two-thirds (67.1%) of the overall value of its global shipments.
Where are the UK’s main export markets currently?
According to the ONS, while the European Union remains a significant trading partner, exports outside of the EU and European Free Trade Zone make up 52% of all UK exports.
As above, many a visual for this so we can compare and contrast imports and exports to keep the flow more succinct.
Of these £284.1 billion in exports, the USA makes up a significant proportion, representing 35% of all exports to ‘Rest of World’ (excluding the EU and European Free Trade Association):
What proportion of the UK’s exports goes to the USA?
The USA is the UK’s biggest trading partner by a considerable margin, representing 14.3% of UK exports at a value of $57.5 billion. However, the UK is only the USA’s 13th biggest trading partner and so therefore there is a great deal of opportunity for UK-based retailers to capitalise on the US online retail sector. While British retail decision-makers consider the US e-commerce market the most important outside of the UK, they must carefully consider if their offering is competitive with the domestic competition, and tailor their delivery options to mirror the performance of US-based retailers.
What options do UK retailers have when exporting to the USA?
UK retailers have three methods they can utilise to ship into the USA:
What customs and border protection considerations do online retailers need to make?
The above is easy enough to set up, but the real challenge is preparing your retail operations for US customs. Depending on which product type you are shipping, your items' values and which parcel carriers you ship with, country of manufacture and origin these will all have an impact on the amount of customs duty your customers will need to pay. The United States Customs and Border Protection (CBP) enforces trading rules and the minimum threshold for import taxation from the UK is currently set at $800. Goods below that are not subject to duty, which means unless you are shipping very high-value items, trade between the UK and USA is cost-effective for USA-based online shoppers. Despite this high threshold, you will still need to know the correct HS codes for your products to ensure seamless customs clearance.
American consumers are some of the most demanding
In March 2020 Whistl conducted a research study into the American market (amongst others), to understand customers' changing international buying habits. We found American consumers demand better prices, the latest products and they are more than happy to buy from overseas. Switching brands at unprecedented rates, American consumers are some of the world’s most demanding and disloyal, with 75% trying a new shopping channel and 36% trying a new product brand during the pandemic, they expect the same levels of service from you as provided by domestic retailers.
Deciding whether to expand into the US market
While working with a logistics operator who is experienced in exporting to the USA is essential, your business may need to commit to the US market in terms of advertising investment, attending trade shows and forming alliances with distributors in the country. By carefully mapping out your fulfilment and delivery journeys into the USA, along with monitoring customer feedback, will help you calculate your landed cost and determine whether this market is scalable for your business.
How Whistl can help you expand into America
At Whistl we help thousands of UK businesses ship over 4 billion items annually domestically and internationally. Currently, our largest international shipping destination is the USA, representing around 30% of all of our international traffic. From small lightweight postal items to tracked and untracked parcel delivery options, Whistl also offers a fully managed returns service and can work continuously to minimise your return and non-delivery volumes thanks to our comprehensive USA address lookup solution.
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