The global covid-19 pandemic has accelerated the development of e-commerce. Some players (merchants, VSEs, SMEs, etc.) who were still selling in the traditional way had to make a rapid switch to e-commerce to reduce the losses associated with the closure of shops as much as possible. E-commerce became their “lifeline”. However, in the rush, there was no plan or strategy put in place before launching.
Why do E-commerce internationally?
Selling abroad through e-commerce is much easier than deploying a network of physical distributors. Moreover, a French e-tailer, even without taking proactive steps to export, will spontaneously receive purchase requests from abroad, primarily from countries where many French speakers are located, such as Belgium and Switzerland. It therefore seems wise to anticipate these requests by preparing to welcome foreign consumers.
Where to sell online internationally?
For a French e-shop, it is interesting to export its products to geographically close European countries such as Belgium, Luxembourg, Germany, Switzerland, Italy and Spain. It is also wise to export to the UK and the US (the average baskets in these countries are well above the average baskets in European countries).
Now that you know why to sell online abroad and in which country(ies) to develop your e-commerce business internationally, it is imperative that you discover the main challenges that will face you.
In fact, there are several challenges for an e-merchant wishing to export their webshop internationally.
Challenge 1: Adapting communication
When opening an e-commerce business internationally, it is absolutely necessary to pay attention to the linguistic and cultural particularities of the destination country. Several points should be taken into account:
- Translate the site to the national language of the target country
- Adapt to cultures and traditions
- Think about the use of terms that may vary from one country to another (for example, in Belgium, to designate an endive, the word chicon is used – a word not used in France)
- Modify the arguments present in the product sheets so that it fits the target audience
- Think about marketing methods which are different in different countries
- Check the meaning of colours carefully (for example the colour green can be a sign of youth and luck for some countries while for others it is a sign of illness and death)
Challenge 2: Adapting the organisation
The payment methods are not the same from one country to another. For example, in the Netherlands, the IDEAL method is the main payment method, while in Germany, payment by SEPA direct debit is very popular.
Selling internationally also increases the risk of online payment fraud: around one in thirty international transactions is attempted, which can have an impact on profitability if the e-retailer is not vigilant enough to thwart as many of these attempts as possible.
Delivery patterns and logistics
You also need to pay attention to delivery habits, which are not the same in every country. The most important thing is to find out and understand the habits of foreign consumers, do they prefer collection from a relay point, home delivery or delivery to their place of work?
Finally, it is mandatory to take care of your logistics to best serve the European market. There are several possible approaches:
- Either a single-site approach, i.e. a single point of storage with therefore longer delivery times abroad
- Or a multi-site approach with shorter delivery times and cheaper unit shipping, but higher fixed costs and more cash tied up in inventory
- Or a “dropshipping” approach where shipping is managed directly by the manufacturer
Along with the logistics choice, is it wise to favour in-house management of logistics or to use a subcontractor? These are all questions to consider in order to get off to a good start selling online abroad.
Challenge 3: Adapt to international regulations and taxation
It is also important to look at the regulations and taxation in force in the countries targeted by the expansion strategy.
In fact, even though there are no longer any physical borders between the Member States of the European Union, certain laws remain national and differ from one State to another. For several years, the European Union has wanted to smooth out the tax differences between countries by implementing:
- European harmonisation of consumer protection legislation in distance selling (since June 2014)
- European harmonisation of personal data protection regulations (RGPD)
- Persistent national limitations
- Importers or even manufacturers still set contractual rules according to geographical area
- Difference persists, depending on the country, in access to certain professions (liberal, pro…), in the approval of certain products (e.g. parapharmacy) or even in the labelling of products (different from one country to another)
- Taxations are different from one country to another (example: packaging, ecotaxes…)
- Excise duties, and the VAT rate, are not identical in the 27 EU countries since countries are free to set the rates
Changes from 1 July 2021
Initially, the application of the new VAT regime known as the e-commerce package was scheduled for 1 January 2021, but due to the current health context, it has been postponed to 1 July 2021. The changes are as follows:
Use of the VAT window – OSS (One-Stop-Shop)
A change will take place on 01 July 2021 regarding the VAT shop. Previously called MOSS (Mini-One-Stop-Shop), it will become OSS (One-Stop-Shop) with the addition of certain e-commerce activities:
- Remote sales of goods within the EU where they exceed the €10,000 turnover threshold
- Remote sales of goods imported from outside the EU, up to a limit of €150
- Certain deliveries from marketplaces, electronic platforms…
The main objective of centralising VAT at the mini-window is to centralise tax registration in a single platform. This facilitates the management and reporting of VAT for companies with e-commerce activities in several countries.
VAT thresholds and exemptions
The new regulations also provide for a lowering of the annual turnover threshold to €10,000 for total distance sales in other Member States. At present, this threshold is set at €35,000 or €100,000 depending on the state.
The new thresholds:
- Below €10,000, e-traders will not be obliged to use the OSS (One-Stop-Shop) window, and they will apply the VAT and invoicing rules of their country of establishment (21% VAT for a Belgian company for example).
- For companies with a distance selling turnover of more than €10,000, they will be obliged to apply the VAT of the country of destination / of their customers. (For example, a Belgian company with a turnover of more than €10,000 selling to a French customer will have to apply 20% VAT).
Another important change: Imports of goods worth less than €22 which were previously exempt from VAT will no longer be exempt, so sellers will have to charge and collect VAT.
Contact the Retis E-commerce team of experts
Are you planning to open a webshop aimed at a French and international clientele? Do you need support to ensure that your future webshop appeals to this eclectic clientele?
Are you already selling online on a national scale and need advice on how to effectively expand your business beyond your borders?
Contact the experts of the Retis consultancy to present your context and your projects in online sales.