Brexit has finally become a reality, but that doesn’t mean Irish companies with a significant presence in the UK have overcome all hurdles.
Many, however, identified the hurdles at an early stage and now have great advice to pass onto other companies in similar situations. Eurostyle is a Cork-based company with roots in the city’s apparel industry since 1820; now predominantly a branded golf/lifestyle company, Eurostyle found itself very vulnerable to the threats of Brexit as 85% of their business was with the UK.
“We have a global licence for Calvin Klein Golf and we own two golf brands, Green Lamb, which is the No.1 ladies golf brand in UK and Ireland, and Dwyers & Co, a golf trouser brand that dates back to 1820,” explains Alan Dwyer, managing director at Eurostyle. “We also own MissDesignerGolf.com, which sells discounted ladies branded golf apparel online throughout Europe. When Brexit first came up, five years ago about 85% of our business was with the UK, but we identified the issues associated with Brexit and put a plan in place.”
With the support of Enterprise Ireland to find a key stakeholder within the organisation to deal with Brexit, the company identified three major issues with Brexit: duty costs making their products less competitive with fellow UK suppliers, the possibility of economic issues in the UK following Brexit and the subsequent hit on the sterling exchange rate.
“Our first strategy was to look outside of the UK for business, building up relationships with online companies such as Amazon in the US and Zalando in Germany,” says Alan.
“We sell to 18 countries in Europe, but we also now sell to the USA, Canada, Malaysia and Australia. Currently we’ve reduced our exposure to the UK to 70% of our business, and we’ll be at 50% in two years’ time.”
The second hurdle was customs. “The fact that we do business outside of Europe means we have experience in dealing with customs,” says Alan. “We would know a lot about the paperwork required. Our plan to overcome this hurdle is to bring the products directly into the UK to our bigger clients, so we avoid having to pay a duty on goods moving from Ireland to England. We’re VAT registered for the UK, and we have a warehouse and a logistics company set up there already.”
Despite putting in a system whereby the company can supply directly to their UK clients, Alan believes that diversifying their client countries as key. “We’ll continue to build relationships with clients outside the UK, as we think their economy will take a hit from Brexit, and the demand mightn’t be there for us to grow our business. Also, as we sell in sterling to our UK clients, if sterling gets weak and moves towards the euro, our margins could be hit very badly.”
And that’s not the end of the Brexit planning. “There will also naturally be some delay with shipping with Brexit. About 50% of our MissDesignerGolf business is with the UK and we can’t take returns without a duty having to be paid – so we’ve also had to partner with a UK company to deal with our returns. There’s a lot to think about.”
The effects of Covid
Eurostyle sees Brexit as a hurdle they must overcome – this same practical approach came in useful when Covid hit Ireland in early March. “Covid affected us hugely,” says Alan. “We were basically told on a Friday night that we were closing down at midnight, and we had €7/€8 million worth of goods to deliver over the next 12 weeks. It became a bit chaotic as we had a lot of cancellations from our customers and then we had to deal with our factories and suppliers.
“Our business works through pre-orders, so our customers might place an order in August/September for delivery the following March for spring – when Covid hit, we lost 25% of our pre-orders. In the middle of all this, we had a huge cash flow issue as we had goods coming in from Asia that we had to pay for, but we couldn’t send them out during Covid. Enterprise Ireland gave us a support loan from the Sustaining Enterprise Fund, which meant we didn’t let any of our big suppliers down – and we think that will be key for our success in the next year. A lot of American companies basically told their factories tough luck, we can’t pay you, whereas we honoured every order from every supplier and built a strong relationship with them on the back of this.”
But Covid, in a way, simply sped up an inevitable shift in Eurostyle’s business model, as Alan explains. “All the bricks and mortar shops closed and didn’t want any goods, but our online clients got busier and busier – so our business went from being a 70% bricks and mortar/30% online split three years ago to being the opposite now. Most of our online clients have doubled their business during Covid and therefore now want double the product from us. As a result, our business will grow strongly over this year and next. To be honest, we had been working towards this change for a few years and in a way, Covid played into our hands a little.”
As a result, despite the hurdles of Brexit and Covid, the future is bright at Eurostyle. “We’re about to take on a licence for DKNY Sport in Europe, a fairly major American brand, so we think over the next few years our business can double. This will help us venture beyond golf and into the general sports market. Calvin Klein Golf has grown considerably and MissDesignerGolf.com has nearly doubled in sales this year. Obviously we lost out on the bricks and mortar shops, but those losses haven’t been as significant as the gains, so we’re very positive going forward. We thought that Covid could close our business but it’s actually grown it, and we see Brexit as another hurdle that we need to carefully navigate in order to move forward – not something to panic over.”