Merchandising

Is your business ready to serve international customers this holiday season?

Craig Reed, senior vice president, global trade at Avalara, shares insight on how retailers can serve the customer base that is well beyond the domestic border.

Photo by istock.com

November 4, 2020

By 2022, research firm Forrester predicts 20% of global e-commerce sales will be made up of cross-border purchases. However, as the 2020 holiday season goes virtual, it's likely that more consumers will be making purchases from international merchants online before the year comes to an end.

As retailers work to stock their shelves and prepare their systems for an uptick in consumer spending around the holidays, many will need to consider how they can serve customers beyond their domestic borders this season.

The world of cross-border e-commerce can be confusing and challenging for retailers to break into, as most countries have varying customs duty and import tax rules, as well as differing definitions of products. Even further, consumers in other countries have varying shopping habits, payment preferences, and expectations when it comes to delivery and customer support. Here are four components your business should check to see if you are ready to sell internationally this holiday season.

1. Shipping and fulfillment

Accurate shipping and insurance cost calculations are essential to e-commerce order fulfillment and customer satisfaction. When selling cross-border, shipping rates will likely vary by county, season, or even commodity. Depending on the type of products you're selling, your business will need to research shipping and insurance rates by country to ensure your business is able to accurately calculate and charge varying shipping costs globally. One way sellers can mitigate shipping disruptions is by shipping delivery duty paid, which is when the seller pays all fees and assumes all risk associated with transporting goods, taking any responsibility or burden off of the customer.

2. Tax compliance

Indirect taxes like sales and use tax, value-added tax (VAT), and goods and services tax are used across the world. As many countries continue to undergo tax reform, keeping track of and assigning the right amount of tax can become burdensome. For example, in the U.S. alone there are more than 15,000 taxing jurisdictions that have their own rates and rules when it comes to sales tax. In the EU, there are sweeping changes coming in 2021 that could impact your tax obligations. If you're a U.S. retailer looking to sell into new countries online, being able to automatically calculate the appropriate tax in real-time is required to process transactions, remain compliant, and minimize disruptions to the customer experience.

3. Duties, tariffs, and product codes

Similar to tax compliance, goods are assigned tariffs based on their product attributes that correspond to the appropriate customs duty. Because every country extends the six-digit Harmonized System codes to 10 or more digits to classify products, retailers need software that understands varying definitions across countries to prevent customs delays and surprise costs at delivery. Getting the correct codes is critical to the entire cross-border transaction life cycle. If a code is assigned incorrectly, the retailer risks having products being held in customs and, in some cases, face heavy fines. Accurately assigning country-level codes also has a direct impact on the customer experience by allowing retailers to calculate and collect the customs duty and import taxes upfront and avoid delays and surprise charges for the customer.

4. Marketplaces

Consumers trust marketplaces and are often inclined to purchase products from an international retailer through a respected marketplace. For retailers looking to expand their reach across borders, established marketplaces are an ideal channel to reach a larger customer audience. In fact, Amazon is the top online retailer in the European Union, which provides sellers in the U.S., China, and elsewhere a key opportunity to reach European customers. When determining how to most efficiently expand into new regions, retailers should identify which marketplaces they are already on or could join to expand their reach internationally.

The digital-first nature of this year's holiday season will usher in ample opportunities for retailers to expand their reach and attract new customers — domestically and internationally. However, before a retailer can begin to effectively sell online beyond their borders, there are a host of considerations that must be acted upon. From sales channels to compliance, cross-border selling requires added expertise and technology to manage added layers of red tape and complexity.

To streamline and reduce the complexity of getting cross-border operations online, enlisting the help of compliance technologies is not an option, but a requirement. Retailers will need to rely on sophisticated e-commerce platforms that enable flexible payment options to serve multinational customers, as well as compliance automation technology to ensure the appropriate taxes, duties, and tariffs are paid. Attempting to sell internationally through manual processes will waste time and money for retailers, but also increase the risk of customer experience disruptions and compliance audits.