Taking on cross-border retail – are you ready?

Christophe Pecoraro
29 November, 21

In 2021, 2.1 billion consumers across the globe are turning to eCommerce to access the latest offering from a variety of brands, and this is only expected to rise as we adjust to the new digital retail era. The rapid shift to eCommerce has presented an opportunity for brands to reach new customer bases and geographies around the world.

Despite rising “buy local” trends, price, value and experience are the driving factors behind consumers looking further afield to find the right brand and product. Recent PFS research suggests that whilst carbon footprint reduction is viewed as a strong fulfilment parameter by consumers, 57% still purchase products based on cost as the primary differentiator, as might be expected when employment patterns have been precarious after this past year.

For brands wanting to leverage the lucrative markets on offer, getting a product to a customer with a single distribution centre can be tricky. Customers demand fast, frictionless delivery no matter where the package is coming from. That’s not to mention the added changes brought on by Brexit and new EU VAT rules that came into force from 1 July 2021.

On a continuously evolving terrain, how can retailers take the first step towards cross-border retail and the opportunities on offer?

Ripe for the picking

With 26% of European eCommerce sales in 2020 being cross-border, up from 24% in 2019 and 7 in 10 European online shoppers having made a purchase abroad, this is a strong opportunity for brands to seize. Those restricting themselves to their home countries are opting out of a huge potential market.

Size notwithstanding, the UK is the third-largest eCommerce market behind the US and China. Neighbours Germany and France are fifth and sixth respectively. These offer a great launchpad for UK brands to expand into, gaining the experience they need to make their mark and presence wider. As cross-border spend increases and shoppers become more secure, now is the time to strike or risk playing catch-up in the future. 

Overcoming obstacles and realising opportunity

Before July, EU VAT applicable on the sales of goods online was dependent on the location of the goods at the time of purchase. Each country set its own VAT sales threshold – only charged once that sales threshold had been crossed. Now, all goods that move across EU borders will be subject to a new set of rules known as the “one-stop-shop” (OSS) registration; aimed at simplifying sellers’ VAT responsibilities.

All EU-based businesses will see a threshold of €10,000 applied. As soon as this limit is crossed in a year, VAT will be charged at the destination country within the EU where customers are located, rather than the location of the goods at the point of purchase.

If the company is based outside of the EU, or for those shipping from several member states, no threshold will be set. As a seller, it’s crucial to determine where customers are based, from the point of sale and what VAT rate will be applicable if turnover exceeds the €10,000 limit.

The VAT obligation will be with the seller, not the marketplace – and the new OSS registration for all EU-based businesses will need to be organised by the retailer, for their marketplace. For non-EU sellers keeping items and stock in an EU country, the OSS registration will be needed in one of the member states where stock is contained.

Armed with omnichannel

To lay the foundations for effective cross-border commerce, the first step is cascading omnichannel throughout operations. By looking to a multi-node fulfilment model, dispersing inventory across the UK and mainland Europe through multiple distribution points, which will speed up deliveries, build capacity and spread risk.

An advanced Distributed Order Management (DOM) system will ensure your order management system (OMS) can divert orders to the appropriate inventory pool, depending on several factors, including delivery address to product type. During peak volume periods, additional fulfilment and distribution points with an effective DOM system can help alleviate pressure and spread resources. What, and where inventory is placed will have a significant impact on the ability to keep orders moving and meet demand. After all, the key is business continuity, during and beyond the pandemic.

Brands could also opt to utilise pop-up distribution centres (pop-up DCs) or micro-fulfilment centres. These can be established in new locations, or inside existing high street stores to extract even more from each square foot of space.

Pop-up DCs can also be utilised to test new markets. These temporary operations are often cheaper to set up and operate, while providing relief to your primary distribution centre. An effective DOM system ensures orders are directed to the appropriate fulfilment point.

Considering local and regional preferences

Brands must not overlook local and regional preferences when shopping online. Considerations must be made around translatable websites, local payment offerings and ensuring customer service teams can support local languages. A seamless experience beyond delivery is essential for maintaining loyalty – engaging with a flexible partner with first-hand local knowledge can be the most effective way of achieving this.

The pace of change for retail has surged over recent years and those who can keep up and lead the way by expanding their customer base, will be the most profitable now, and in the future. The opportunity for cross-border has never been greater, and retailers must act now to ensure they remain ahead of the game.

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