Brexit: The perfect storm for UK guitar buyers?

Andertons, PRS and more react to the first weeks of trading.

As if the trials of coping with the pandemic weren’t enough to cause a deep depression, the opening months of 2021 saw a gathering storm for UK musicians as the country exited the European Union, thus opening the doors to a whirlwind of confusion, delays, unexpected price hikes and the promise of worse to come.

The first hints of the chaos came when buyers purchasing from European online retailers such as Thomann and Bax began complaining on social media that the instead of their new gear arriving with a cheery wave from the delivery courier (okay, more likely getting home and finding it hidden behind the dustbins) they were suddenly being asked to pay extra charges for VAT, import duty and a ‘handling fee’, the latter being charged by the courier for collecting these extras and handing them over to the government.

Musicians used to buying from outside the EU (typically from the USA and Canada) will immediately have spotted what was happening. Whereas for the past 40 years the UK had been in a free trade area with the other EU members, buying from Thomann was now just like buying from Sweetwater in the USA – suddenly the playing field was level in a way many had not been expecting.

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To its credit, Thomann was quick to explain what was going on. In a post on the company’s blog it explained that orders under £135 include VAT and will incur an £8 shipping charge. Orders over £135 will be shown ex-VAT and the buyer will be responsible for paying VAT, handling and any other charges directly to the courier.

But this was just the visible manifestation of what was beginning to resemble a major cock-up (or a deliberate scheme – take your pick) that was starting to reveal itself to manufacturers, retailers and instrument distributors.

Going Dutch

Early in January, retailers who had been able to open their stores under COVID regulations (i.e. mostly those trading online) began reporting that products they had on order were simply not arriving as expected – especially from major brands who warehouse their products on the continent, usually in the Netherlands, and distributed them by road throughout the EU. Centrally warehousing products enables some of the biggest brands in the industry to minimise warehousing costs and take advantage of modern logistics operations that make it feasible to deliver a guitar from the Netherlands to a store in, say, Italy, not much more expensively and not much more slowly than they could get it to a shop situated just 100 miles away. Among the manufacturers choosing to distribute this way are Fender, Gibson, Roland/Boss and Taylor.

Suddenly, the model of pan-European distribution that had looked like an ace up the corporate sleeve for the past decade or so, was starting to look shaky. To make matters worse, panicked by what they saw as a potentially bewildering process of form filling, uncertain customs clearance procedures and collecting the money owed, some delivery firms (even some of the very biggest) simply threw up their hands at the prospect, announced that nothing was going anywhere until the correct procedures had been clarified and everyone knew what the process was and how it was going to work.

On the face of it, this might seem get like the perfect opportunity for smaller brands to helpfully offer their products as gap fillers, but they too were finding it difficult to move gear around – and not due to Brexit alone because true to the nature of a perfect storm, other factors had come into play.

One was COVID, which has severely inhibited production in the West. Manufacturers report that regulations governing safe working safe conditions across Europe and North America (including Mexico – now the source of many of the less expensive nominally American guitars) meant that production was half or even less than half of what would normally be expected. Could the brands suffering shortages switch to Asian imports from Chinese and Indonesian plants? Here they ran into yet another unexpected storm front – a worldwide shortage of shipping containers, resulting in a hike in shipping costs and yet more unexpected delays.

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Apparently, most of Asia was either less affected by the pandemic than the West, or had recovered far quicker. They could manufacture, but they couldn’t deliver. Demand for manufactured goods was high in the West but the traffic was mostly one-way, so empty shipping containers had been piling up in the West, leaving few available back in Asia for a repeat journey.

The result? A shortage of products in many shops, customers facing demands for extra money from couriers and general frustration all round.

Red tape

For a relatively small upmarket European manufacturer, such as the German bass and guitar maker Sandberg, the chaos in the early months of this year has proved difficult – as it has for Synergy Distribution, which distributes Sandberg in the UK. Synergy’s Alan Greensall says he has yet to receive any shipments from Sandberg this year, though he was anticipating the first one around 10th February.

However, he is quick to point out that the delay has not been not due to Brexit alone. “Restrictions due to COVID are very strict in Germany, for example anyone who possibly can work at home must do so. It isn’t optional. And of course there are strict rules in place in the workplace where the guitars are made. Then there have been transport delays since January. The couriers didn’t seem to know what they were doing.

“One shipment was sent to us but got sent back to Germany and they had to ship them to us again. It might be they didn’t have some basic information on the invoices that customs and excise demanded – I just don’t know, but it looks like we have rectified that and that they are just about to be delivered now – we hope.”

Sandberg and Synergy are not alone in having goods tuned back at customs posts and the cause, as Greensall says, is almost always some small error in the paperwork.

“Still, at least we’re not affected by the container shortage,” he adds. “I was speaking with a US amp-maker the other day who imports a lot from Asia and he has a major problem. The factory can make his products but he can’t get them shipped to him. Brexit isn’t the only factor in all this – it’s become quite complex.”

As Greensall says, a player who has ordered an individual instrument to their exact specifications six months ago (Sandberg are perpetually back-ordered for specials, apparently) probably won’t worry too much if an extra week or two is added to the delivery date – but there are other complications to be borne in mind.

“One effect I think this might have is that it may benefit local retailers as customers realise that buying something from a retailer in another country can come with problems – maybe extra charges they weren’t expecting or hassles if something goes wrong and they need to return the product for some reason. People may decide it just isn’t worth the hassle and shop in their own country. I think it could actually turn out to be great news for UK shops.”

That would certainly some as welcome news to those UK retailers who have been battered by both lockdowns and intense competition from online European retailers who have utilised their huge buying power and logistics to offer prices UK retailers cannot match.

Sandberg
Sandberg’s UK distributor hopes the current situation will benefit local UK retailers

Online boom

Not at all UK retailers have suffered in the online wars, of course. Surrey-based Andertons has not only received international awards from the US-based NAMM trade association for being one of the most sophisticated online retailers in the world, but has seen business booming in recent years. We asked Lee Anderton for his views on the recent situation and how he felt it could impact on his customers.

“It’s been a car crash! Whatever your opinions are about whether the UK should have remained in the EU or left it, as we have, if you just look at how unprepared the supply chain was for the new regulations, it was joke. It was not clear on 1 January what hauliers needed to do to bring products from Europe into the UK and vice versa.

“It took DHL, who are the courier we use for parcels from the UK to our overseas customers, about 10 days to start collecting products from us and they were the best ones. Others lagged behind them and that meant we had in some instances a month before the supply chain started working properly which meant we were short of some products and even now we are still getting instances where a shipment doesn’t happen because they don’t have all the information they need to fill in the forms required.

“Guitars seem to have suffered the most and I suspect that is because the complexity of them which even includes the types of wood they are made from, which dictates the codes that have to be filled in on the paperwork. Keyboards and the like don’t have that problem.”

Lee Anderton’s irritation at the way the process had not been thought out properly beforehand has strong echoes of the frustration felt over touring musicians’ potential visa problems, the complex situation in Northern Ireland and stories about fish and shellfish shipments destined for export being left to rot, either due to incorrect paperwork, disagreements about what the new rules are or, as some maintain, deliberate bloody mindedness designed to ‘teach Britain a lesson’. Or was it just that negotiators on both sides made a complete hash of the practical details? Whatever the truth, the underlying problems are undeniable and, as yet, nowhere near resolved.

“It has surprised me how many UK customers haven’t realised that the prices they see on some European websites do not include 20 per cent VAT, or the duty which, even though it is relatively low on musical instruments, still has to be paid,” Lee Anderton adds. “The handling charges can be significant on small orders too. If you’ve bought £10,000  of gear it’s probably neither here nor there, but if you’ve just ordered a £50 item and find there is another £15 on top of that, it can be quite a shock.

“I expect in six months time a lot of this will be sorted out and there will be technological solutions to everything but yes, you have to say that the first five weeks post-Brexit have been somewhat shambolic. Everybody was unprepared, right through the supply chain.”

Lee Andertons
Lee Anderton describes the first few weeks of dealing with Brexit as “a car crash”

Part of the service

One of the few major guitar brands that doesn’t operate a continental warehouse is PRS, but Gavin Mortimer, who runs PRS Europe, faces a different problem. Every PRS guitar is setup by hand in the UK before delivery, which means he has been battling not to import guitars but to export them.

“The courier companies, UPS in our case, are completely swamped and cannot cope, so we’ve got guitars that are taking two or three weeks to get to say, Germany, where previously they took two or three days. The real issue commercially is the delay due to shipping, but there is also added cost because the couriers have taken advantage of the situation and are adding storage charges and all sorts of things.

“To be fair to them, nobody knew what was going to happen after 1 January and they were caught out, but if you consider that in an average day we might ship out, say, 100 boxes to 100 different places across Europe, suddenly instead of 100 parcels just going through the system with no customs issues, those 100 parcels have now all got to be customs-cleared so there are customs fees, duties and VAT to be paid in the various countries, and all sorts of unnecessary taxes and intergovernmental issues that need to be dealt with.

“From the customer’s point of view this have not yet come through in pricing and our view is that we do not want the European customer to pay for Brexit.”

Which, though he doesn’t say it, makes one wonder if retailers may not feel quite so generous once they have worked out the increased costs.

“I would say to UK customers now that one thing they need to consider is to imagine what would happen if they had a problem with a product – any product they happen to buy. Imagine the complexity of sending that product back to the retailer and them having to send it back to you. There are huge costs on both sides and the service time involved is going to jump considerably.

“I’ve just set up two service centres in Germany to prevent that being a problem for PRS but we can do that because we are a manufacturer. What happens when the products are being sold by different distributors in every country could be very different. What that means to the consumer is that they should probably consider very carefully where they are buying from. The service quality from the major online retailers is usually excellent but this is suddenly out of their control – it could mean a two week wait before they get your product back and then a similar delay on its way back to you.”

PRS
PRS Europe has recently set up two service centres in Germany

Bass lines

Specialists, of course, tend to do things differently and few are more specialised than UK retailer Bass Direct, run by Mark Stickley. Unusually, Stickley is not just a retailer but often the only UK source of sometimes esoteric products which he imports directly. He also sells bass products right around the world.

“It’s early days yet but we’ve not really run into any problems getting stock,” he says. “We’ve had products coming in from Poland and from Italy and so far apart from the fact that my guy in Poland says anything over £1,000 his courier won’t handle, no one has had a problem.

“From the point of view of our customers, though, it has slowed things down, there’s no doubt about that. That has been down to the ineptitude of customs, who don’t seem to have enough manpower to get things through. For the first few weeks we sent everything by air because they seem to have the airports properly staffed and there have been no problems doing that. Send things by road, though, and it can be a nightmare. For the first two or three weeks after Christmas things just sat there. It’s a learning process for all of us but we’re still getting plenty of orders.

“As to how it will affect customers, I think the difference is going to be really telling on less expensive products. If I’m buying a £3,000 bass and I know there’s my local VAT to pay plus some duty and handling fee of perhaps £30, that’s not so bad. But if I am buying something for £150 then those charges and fees mount up and mean it would now probably be cheaper buying it from a retailer in my own country.”

In name only

Finally, we spoke with Tom Harrison whose 440 Distribution handles a mix of products from the wide range of Cort guitars and basses, the Canadian-produced Godin family of brands and the prestigious Larrivée guitars, produced in the USA.

“Though it sounds as if it only affects the trade, the real truth for guitar buyers is that they will notice the effects of it having damaged the pan-European model for distribution,” Harrison says. He feels that some of the technicalities of the change in the way instruments are distributed will impact particularly on those handled by the large pan-European warehouse model. His view is that this could actually favour some of the smaller makers who tend to work on a country-by-country basis, with different distributors in each. Without going into the minutiae of how it works, this could, he hopes, result in retailers beginning to stock a wider range of products than they have in recent years, in which the big brands were tending to crowd the smaller brands out of the stores.

“My importation process hasn’t really changed at all as my guitars come from Asia, Canada and the USA, not from Europe. The downside has been that we distribute for the UK and Ireland and that has been a problem. In the second week of December, DHL who I use stopped shipping to Northern Ireland altogether because there was a backlog of products. Then there was confusion over the rules relating to the movement of goods between the rest of the UK and Northern Ireland and it has now become extremely complicated and political.

“In practical terms it’s going to cause long delays and it will cause price rises eventually because this is a FRETINO – Free Trade In Name Only. It is not a deal that permits the free movement of goods. So what will ultimately happen is that manufacturers will have to have a distributor each country as they used to have, or they will have to hold their own stocks in the UK separately from the rest for the EU and that will add to the cost and that will end up being passed on to the customer in the end.

Godin
Godin’s UK distributor Tom Harrison describes the Brexit deal as “free trade in name only”

“We’ll also see products shortages but that’s less to do with Brexit than the shipping container problem where they can be four or five times the price they were a year ago, if you can find one at all. That’s also ultimately due to COVID so these things all come together – lower production in the USA and Europe, difficulty in shipping from Asia, even if they have different causes, they are all going to mean a shortage of products and probably higher prices.

“What’s ironic is  that all this has happened at the same time as a completely unexpected and unforeseen boom in guitar sales, which happened when everyone was locked down and lots of people decided either to treat themselves to a better guitar, or even to learn guitar for the first time. Any one of those three circumstances would affect supply but all three together is just a triple whammy – add to that that shipping from mainland Europe becoming complicated, difficult and slow. I don’t know if there is such a thing as a quadruple whammy but if there is, this is it!”

Inevitably ways will be found around most of these problems and, as Lee Anderton asks, is it really the end of the world if we have to wait a few weeks longer for the guitar of our dreams? The gaps on guitar shop walls will be filled, ways will be found to get products cleared through customs with greater speed, quite probably online retailers from the EU will find ways of showing the full price on their websites and may even sort out how to handle returns and repairs without lengthy delays.

Prices may rise a little but competition will tend to keep them down (especially once furlough ends and jobs start to be lost). Eventually sense might even prevail when it comes to the protocols regarding Northern Ireland. All the same, one can’t help wishing that, whatever one’s views about the rights or wrongs of Brexit, once the decision had been taken, it seems a shame that the politicians and civil servants who are paid to make things work properly couldn’t have made sure the processes and rules they dreamed up were fit for purpose.

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