As the eCommerce market in the United States continues to flourish, many retailers are expanding their eCommerce presence to different geographies not only out of preference but also to accomodate the demands of their customers.
Released earlier this year for the first time, the Top 300 Europe report highlights the top 300 internet retailers in Europe. Although many on the list are European-based retailers, the number of retailers from North America crossing the pond to sell in the second largest eCommerce market in the world continues to increase as the North American share of Europe’s web retail market increased from 18 percent to 22 percent in just one year.
With more and more U.S. based retailers expanding into the European eCommerce market, what are some of the major differences of selling online in Europe compared to the U.S.? To answer this question and more I asked our Sales and Marketing manager of PFSweb Europe, Anabelle Kinet:
What would you say are some of the differences today in shopping online in Europe compared to the U.S.?
There are actually many differences one must understand about shopping online in Europe compared to the U.S. in 2011 and moving forward. Some differences include…
- Marketing strategies – they must be developed with a country by country approach. This includes customizations such as site/e-mail language and currency changes. While messaging in the U.S. can be broad and reach the entire country a single marketing campaign in Europe campaigns may have to be redone several times to be successful throughout the continent.
- Regulations on a country by country basis can be very specific – for example different countries have different policies with the right of retraction (product returns) so we must know these policies to make sure we are in compliance with all of these regulations. In the U.S. there is usually one general rule or law everyone must follow.
- The call center experience in Europe is very unique in that in the U.S. there is not as much preference on who customers talk to compared to Europe. People in the U.S. are generally fine to talk to others from the U.S. to help with their concerns. In Europe people are more particular, if they speak English they prefer to talk to a British representative, if they are Spanish they prefer to talk to someone with a Spanish dialect, and so on.
- Payment methods, delivery options, and taxes can vary by country. Regarding payment methods, consumers have a clear preference for payment methods tied to their country so simply by adding a specific payment such as the IDEAL payment method in the Netherlands can lead to a large increase in sales. This country-based phenomenon also carries over to delivery options, where sometimes offering a delivery service specific to the needs of a country can be very beneficial. For example, in France delivery to “drop points” (i.e. pick-up locations in the U.S.) is very common but with some other European countries this delivery service isn’t even an option.
- The VAT tax is also specific per country and local VAT taxes must be applied to eCommerce transactions. For example, if we sell to a German customer, we need to apply the German VAT tax to the purchase and we (the seller) need to be VAT registered in each of the countries where we are shipping.
Taxing eCommerce transactions in the U.S. can be a long and complicated process. How are eCommerce taxes applied in Europe and which system do you feel is better for the future of eCommerce?
Tying back to my answer on the previous question, a retailer selling online in Europe for the first time may find it challenging to work with all of the different countries in Europe. The selling entity (i.e. the retailer) must be registered in all countries where they ship to so they can follow the specific VAT policies. There are also specific export documents which are needed if a retailer chooses to ship outside of the EU-27 zone. Sometimes dealing with all of the countries in Europe can be too much for some retailers to handle initially so they may focus on a few countries for their initial launch and Europe and expand from there.
Regarding which system is better for the future of eCommerce, it is difficult to tell. Here the taxation of eCommerce is more universal and well-defined despite having so many different countries. In the U.S. it seems to be much more varied because some states collect sales tax for eCommerce transactions and some do not.
Countries in Europe who do not use the Euro have their own currency and VAT policies – how should retailers entering Europe for the first time approach the constantly changing conversion rates between the currencies?
Currency rates are unpredictable and there is fluctuation but over time it usually evens itself out. Sometimes you may be charged more for currency losses when conversions are made and other times you may come out ahead. There are certainly risks with foreign exchange so if one country is really struggling it could be possible that a retailer would stop selling online in that country to stop taking currency conversion losses.
What are some big changes you foresee taking place in European eCommerce in the next 5 years?
Like in the U.S., eCommerce is projected to see double digit growth here but in particular some of the less-developed countries in Eastern Europe could see growth rates as high as 20% as more people in those countries get online.
Interesting insights from Anabelle on just how different selling online can be between the two locations. With eCommerce still developing in certain parts of Europe it adds even more excitement to the prospects of European eCommerce but could add even more complexity to customer care and tax solutions. There are also issues of localization which retailers should consider as simply doing a direct site translation is not enough to specifically cater to the identity of each European culture and will not allow retailers to maximize their ROI on their European eCommerce efforts.
Moving forward it’s apparent retailers aren’t letting these obstacles get in their way as they expand their eCommerce presence not only to Europe but to Asia and the rest of the world. With reports that European eCommerce is safer than Brick and Mortar stores in Europe it should come as no surprise that some retailers are looking to expand their digital footprint first in Europe to test the market before they set up shop in major European cities.