How To Get Started With EU Cross Border Online Trade
How To Get Started With EU Cross Border Online Trade
International expansion is an exciting milestone for any business. Thanks to the Internet, any retailer can win customers in new markets and countries with almost the same ease as you would at home.
The barriers to international expansion are much lower than they were, but the Internet hasn’t removed all borders. We still do business with our neighbours using cross-border relationships throughout Europe, which are much as they were before the digital transformation of trade.
Tax and other regulatory implications are much the same, too. For companies new to international trade there is a lot to consider – here we provide an overview.
Covering the Bases: EU Cross Border Trade
Your first priority will be to make sure you get paid. This needs to be as easy and cost-effective for you and your customers, no matter where they’re based. Simple, transparent and convenient payment processes are the key to success, maximising the chances of conversions and repeat customers.
Secondly, you need to ensure your goods are delivered promptly, and offer a cost effective shipping solution for you. Again, transparency is key to ensure that your new customers have confidence in your ability to fulfill their order, and that you offer a competitive service.
Therefore at this point you need to factor in the different options when it comes to shipping. What you are selling? How will it be shipped? Will you charge for shipping or will this be absorbed in your pricing? This will all depend on the sector you are in, your clients, and your product.
Thirdly, what taxes and regulations do you have to consider, such as VAT?
Selling into the UK: Once your sales to the UK (from another EU country) exceed £70,000 a year (approximately 93,7000 Euros, you need to register for Value Added Tax (VAT) in the UK. Distance selling only applies when;-
“a business registered for VAT in one EU country sells and delivers goods to someone in another EU country who isn’t, and doesn’t have to be, registered for VAT.” www.gov.uk
Selling from one EU country to another: Here is where things get a bit more complex. Although the EU has a minimum standard rate of 15% (which flows into European funds), each country has a different rate. Not only that, but there are discount rates depending on where you are selling to and from. Also, some sectors are eligible for reduced rates.
Here’s a useful table and explanation from the European Commission, but we would also advise speaking to your accountant and payments processing provider, such as Secure Trading.
In theory, the EU has made cross-border trade easier. In reality, you still need to do your homework before you start selling to your neighbours.
How Do I Make Payments As Easy As Possible?
Cross-border trade isn’t simple, or at least not as simple as you might hope. But payments really can be simple, and if you want to compete for online sales this is a necessity. Here are some of things that will be make payments easier for you, and your customers:
- DCC (Dynamic Currency Conversion)
Dynamic currency conversion (DCC) converts the cost of a transaction into a credit or debit cardholder’s local currency. Settlement still takes place in your currency, with foreign exchange rates fixed at the point of sale (on the day of the transaction).
DCC ensures merchants have a transparent and efficient transaction solution, keeping things simple for customers at the checkout, resulting in higher online conversions.
- Multi-currency / Multi-settlement
As a merchant, when you receive payments they should automatically convert into your currency.
Exchange rates will always play a role, thereby increasing costs, since conversion expenses need to be factored in. Although the adoption of the Euro (€) within 19 of the 28 Eurozone countries makes it more straightforward, there are still 9 countries using their own currency, including the UK.
One way to keep these costs low is with a cross-border payments service provider, like Secure Trading, with the ability to convert multiple currencies and provide settlement in like for like currency accounts.
- Reduce Fraud With Tokenisation
The digital transformation of trade and European Union has made cross-border business easier, but where money and goods flow, criminals follow.
Cyber-crime and identify theft are more prevalent than ever. Consumer identities, bank and credit card details are a commodity in the criminal world. Hackers buy and sell these details in batches of tens and hundreds of thousands. The dark web is an international bazaar of stolen identities and disrupted lives.
Payment providers are working harder than ever to prevent identity theft. One way is through tokenisation, which converts card numbers into tokens. These tokens act as proxies when a payment is processed.
The tokens are only useful for a specific transaction and mean nothing in any other context. There’s no way to convert the token back into the original data to reveal the card number or any other useful piece of information.
With customers feeling more secure, international payments and the number of transactions will keep increasing through your website.
For more on how tokenisation works read this post: Tokenisation – Behind The Scenes.
- APM’s (Alternative Payment Methods)
Credit and debit cards are the most common way customers will pay (with Visa & MasterCard being the most popular brands). But don’t overlook alternatives, many of which are seeing an increase in uptake.
Research your market thoroughly to see what payment methods your prospective customers prefer. These may vary from country to country, and in some there will be local options. International alternatives, such as Alipay, Yandex, Paysafecard, EPS, Giropay and many others should also be explored.
- Language Options
Making things easy for your customers is the best way to start cross border trading, and make sales. People are much more likely to go through with a sale online if they can get all the information they need without needing to make a call or send an email. Therefore localisation is essential.
Invest in an international language version of your website, with a simple drop down on the homepage. Ideally, don’t use Google Translator for this, a native speaker to translate and write copy is the best way to ensure your message and calls-to-action make sense in the language of your customers.
Recap: How To Get Started With EU Cross-Border Online Trade
- Make getting paid as easy as possible. Customers want to pay in their own currency, whether with a credit/debit card or using an alternative method. A few clicks, with instructions in their own language, should be all they need to get from browsing to buying.
- Arrange a simple, cost effective shipping method, preferably integrated into your payment process, localised for your new market.
- Trust is essential. Demonstrate this with security badges, customer reviews and a payments provider that keeps you and your customers safe from cybercriminals and hackers.
- Do your homework on taxes and other regulations, for more support visit the EU’s Export Helpdesk.
UK retailers! For further reading on cross-border trade and selling online see: