Today, 2.1 billion consumers around the world are turning to eCommerce to access the latest brands, presenting retailers and brands with the exciting opportunity to access new customer bases and geographies across the globe. During 2020, 26% of European eCommerce sales were cross-border, up from 24% in 2019 (23% in 2018) – with 7 in 10 European online shoppers having made a purchase abroad. Whilst “buy local” trends and a demand for carbon footprint reduction continue to grow, a net total of 57% consumers still purchase products based on cost – prompting many to search further afield for the best value for money.
To be able to take advantage of the lucrative markets on offer, retailers and brands need to get it right. And that means a frictionless and fast delivery experience, no matter where the package is coming from. Getting a product to a customer when you have a single distribution centre fulfilling all orders is no easy task. That’s without the ongoing supply chain friction and added VAT rules which have been estimated will cost SMEs in the UK £180m a year in extra red tape.
In the middle of so much uncertainty and disruption, how can retailers seize the opportunity and take advantage of the cross-border opportunities on offer?
VAT – another hurdle to jump
The path to cross-border growth has become slightly, and inevitably more complex since the end of the Brexit transition period. As of 1 July 2021, all goods that move across EU borders are subject to new VAT rules known as the “one-stop-shop” (OSS) registration; aimed at simplifying a seller’s VAT responsibilities. This will see all EU-based businesses subject to a “one-size-fits-all” threshold of €10,000. As soon as the €10,000 limit is crossed in a year, VAT is charged at the destination country within the EU where your customers are located. This is rather than the location of the goods at the point of purchase. As a seller, it’s crucial to determine where your customers are based from the point of sale and what VAT rate will be applicable if turnover exceeds the €10,000 limit.
Brands must note that the VAT obligation will be with the seller and not the marketplace. The new OSS registration for all EU-based businesses will need to be organised by you, for your marketplace. For non-EU sellers that keep items and stock in an EU country, the OSS registration will be needed in one of the member states where stock is contained.
The solutions for success
Despite the added complexities ahead, with the right tools and infrastructures, retailers and brands can lay the foundations for effective cross-border commerce. Here are just a couple of solutions brands should consider:
- Multi-node fulfillment: By dispersing inventory across the UK and mainland Europe through multiple distribution points, retailers can speed up deliveries, build capacity and spread risk. During periods of peak season volume, these additional fulfillment and distribution points, when underpinned by an effective Distributed Order Management (DOM) system, can effectively route orders to alleviate pressure and spread resources. Where inventory is placed has a significant impact on your ability to keep orders moving to meet consumer demand. After all, it’s not just about capacity, the key is business continuity.
- Pop-up distribution centers: These temporary infrastructures can be utilized to test new markets. Often much cheaper to set up and operate, they provide relief to your primary distribution centre. For one major alcohol brand with customers in both the UK and Europe, the construction and implementation of a UK pop-up DC meant the business was able to become fully operational in just two weeks – just in time for Black Friday and the Christmas peak season.
- Micro-fulfillment centers: To keep up with growing eCommerce demand, many are turning to existing store spaces into mini distribution centers. This allows more “bang for your buck” from each square foot of space. When teamed with automated fulfillment technologies such as RetailConnect, retailers and brands can quickly transform their in-store operations to pick, pack and ship orders direct from the stock room.
In addition to fulfillment, local and regional preferences when preparing for cross-border expansion must be considered. Seeking local knowledge and ensuring investments are made around translatable websites, local payment offerings and native-speaking customer service will set them apart. Enabling 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 opportunity for brands online and cross-border has never been greater – get in touch with a member of the PFS team now to kick-start your cross-border journey!