We have all been there: Your e-commerce business is going great, but it gets increasingly difficult to attract new customers. To reach a greater market, you are thinking about selling internationally. And why should you not? – the potential of cross-border e-commerce is huge.
But is it really that easy to go global? The short answer: International expansion is one of the best and quickest ways to increase your customer-base, but there are certain factors that you need to know about beforehand.
Here are 5 major obstacles to consider when expanding your e-commerce business internationally:
Customs & duty
While customs barely play any role for businesses selling within the EU, there are certain aspects to keep in mind when selling to non-EU countries.
The amount of customs duty for shipments across international borders depends mainly on three factors:
- Trade agreements between different countries
- The characteristics of the goods (value, country of manufacture and intended use)
- The HS code, which can be obtained from the website of the customs authority of each country.
Duties and taxes are calculated based on the information on the commercial invoice and other relevant documents. Therefore, it is important that data such as the HS code is indicated on these documents.
To determine the exact amount of customs duty, get specific information for the requirements for your product in each country.
Environmental laws & compliance
Environmental compliance is one of the biggest obstacles to international e-commerce, though not a well-known issue. In addition to the EU, other countries have enacted laws that oblige manufacturers, importers, and even e-commerce sellers to pay fees for recycling certain products. These fees are used to fund national recycling systems, but also serve as an incentive to reduce waste overall. The principle is called “extended producer responsibility” or EPR for short.
The biggest obstacle to international sales: each state (even within the EU) has enforced its own laws, created its own institutions, and has its own recycling systems. Cross-border sales to end users in different countries is therefore very complex, as you must comply with the laws in each country.
Here is a quick overview of the most important product types for which sellers need to be aware of environmental legislation:
Packaging laws:
Online retailers are responsible for their packaging abroad. In addition to transport packaging, sales wrapping, and outer cover are also considered packaging and must be taken back or recycled in accordance with nationally applicable laws. In the European Union, the Directive on Packaging Waste applies, which is transposed into national law in each member state. Thus, the laws differ slightly among states within the EU. We have already covered the German packaging law and its implications for e-commerce in a separate article. To get an overview of all Europe-wide packaging laws, and how to join recycling schemes in each country, it makes sense to use consulting services as the one ecosistant provides.
Electronic and battery waste laws:
The extended producer responsibility also applies to the placing of electronic devices on the market. In Europe, the so-called Waste of Electrical and Electronic Equipment Directive or WEEE for short applies. This directive has also been transposed into national law in every EU country. Similar regulations apply in many other non-EU countries, such as South Africa or Russia.
For batteries, the laws are even more complex, since nearly every country has its own laws for handling. In Germany, batteries must be registered with the EAR Foundation in accordance with the Battery Act BattG. Depending on the legal situation, such registrations must also be carried out in all other operating countries.
Textile waste laws:
Laws for textile waste have not yet been implemented across the board. The EU’s Waste Framework Directive provides for the transition to a circular economy for its member states. For textiles, this directive provides for waste reduction and recycling measures.
The anti-waste law passed in France, for example, prohibits the destruction of unsold clothing. Here, companies are required to finance the disposal of the waste they generate. If you plan to sell to France, you must join their recycling system and report your sales volumes of textiles and footwear annually.
Accordingly, when it comes to textile laws, we also recommend: Find out about the regulations in your destination country
VAT registration in the EU
If your online business exceeds a certain threshold, you are obliged to register for VAT in the respective country. We have summarized for you the annual VAT thresholds for EU countries in this article.
As a general rule, VAT is levied and owed within the EU where the goods are actually consumed by the end recipient. If your e-commerce business is based in the EU, you will not be charged VAT on exports of goods to non-EU countries. But beware! In this case, VAT will be levied and owed in the destination country. You must be able to prove to your local tax authority that you have complied with the VAT in the respective country.
In the European Union, different VAT rates apply. These rates are regulated individually in the member states. The general rule is that the minimum standard VAT rate must be at least 15%. Besides that, states may adopt two reduced VAR rates, albeit the amount must be greater than 5%. Also, in some EU countries sales are handled via so-called zero rates.
The following table shows which VAT rates apply in the EU member states plus the UK. To find out the exact value for your products, check the respective government website. As a general rule, everyday products such as food are taxed at a lower rate than other goods. In addition, a zero rate exists for certain products.
Payment methods
There’s one thing we definitely don’t want in online retail: to scare away potential customers during their shopping experience. If you offer the wrong payment options for your international customers, you risk losing them just before they complete their order.
While credit cards are the leading online payment method in Japan and Turkey, most purchases in China are made via digital wallets. In the Netherlands, on the other hand, bank transfers are the most popular payment method for online purchases.
Our tip is to inform yourself about the preferred payment method in the respective country and which fees you might have to pay. In doing so, the Worldpay Global Payments Report can therefore be helpful when choosing payment methods, as the various options are listed here by country and region.
Marketing localization
Finally, it is important to get to know your new target market thoroughly. The consideration of all the previous points is meaningless, if you ignore this one: Adapt your content and strategy to your international customers.
It is often not enough to translate the existing content. We recommend informing yourself in advance about suitable marketing strategies for the corresponding locations in order to offer local content.
Since each new target country is different, it is worthwhile to set up a new customer and market analysis for each new market.
In this video you will find more information about marketing localization:
Recap
Preparation is everything. Before you internationalize your company, you should get to know your target market in detail. This will help you overcome challenges and realize your full potential as a global online retailer.
To be on the safe side, you can always ask an experienced consultant for advice.
About the author
Lena Bettin is an environmental scientist. She has been working for ecosistant since 2021, researching and writing on various topics related to sustainability compliance and e-commerce.
