|Ecommerce in Europe|
How to sell in Europe?
We have a website that is currently targeting the US market. We are planning on expanding to the Europe (UK and EU) market sometime next year. We believe that there are 2 options to achieving this. First will be to ship direct from US and the second will be to set up an operation somewhere in Europe.
The disadvantage of the first option is that the time taken to ship from US may be long and expensive. And the customers are also faced with custom duties. The advantages are that we do not have to set up a separate website and payment gateway, register the business and logistic issues. The second option advantages and disadvantages are just the direct opposite of the first option.
We would like to know what kind of decisions are made and experiences for those who have been through the similar process like us. ie... wanting to expand into the Europe market. What have you done and how do you go about doing it? Are there any potential pitfalls and regulatory issues that we have to be aware of?
Thanks in advance!
Being a European resident, I don't order tangible goods overseas, unless the product is so unique that I can't find anywhere here. Besides the duties, items can be kept at the custom until you go and take yourself, so, a lot of hassle there for the customer.
How about buying tangible goods online within the EU and UK? Does the same thing happens?
No, if bought in the EU or UK they are just delivered normally.
I too avoid buying tangible goods from the US because of the hold up. The shipping bit is fine, but what happens then is you get a letter from customs with a code number and have to either send them money or call and pay by cc over the phone before they are released, which is usually several days later.
It's a pain, and unless I really need something I just couldn't be bothered.
I am in Ireland btw.
These are great information. Straight from the mouth of the customers.
So what are the major delivery carriers for the UK and EU? What about credit card? Are VISA, MC and AMEX widely accepted for online purchases?
All three cards are widely used, though AmEx would be less popular than in the USA. Debit cards are used a lot.
DHL deliver most parcels I get and serve all of Europe, though many come via the national postal service - not sure what service they originated with, probably other national postal services. In the UK Parcelforce, which is part of the Royal Mail, are pretty big as are Interlink Express.
I have no involvement with sites shipping tangible goods, but have with several taking online payments for memberships and so on. Even in that field we get a lot of people who prefer to pay offline - by sending a cheque - and always offer this option.
One thing to think of if you decide to base in the EU.
You have been looking at the duty issue, but another one is that customers within the EU pay sales tax, VAT, on goods in the country of origin of the goods. They are not required to make up the difference if the VAT rate in the country they live in is higher.
This is quite important as VAT rates vary very widely, so for example the standard VAT rate on most goods in Ireland is 21% (yuck) while in the UK it is 17.5% and in Luxemburg just 15%.
But it is not always even that straightforward. For example if you sell children's shoes, Ireland is the place to sell them from as children's footwear is VAT exempt, while the UK has a zero rate for books.
But then importing your goods from outside the EU will also attract different rates of duty too, so it is really very complicated.
The Deloitte website has a lot on this.
Great! These are very good information!
Regarding payment, I was working with some Italian pilots who uses some form of cash card with a "Electronic Payment" logo on it. I guess that must be a debit card. What about interbank transfer? Interbank transfer payment is a very popular form of payment in Asia. I guess this system will be analogous to paypal. Is paypal widely accepted?
Regarding VAT and Sales Tax. I believe customer will bear this. Do you actually shop around for the lowest rate?
For the benefit of the customers, it seem like that if we really want to do well, we will have to set up some type of presence in UK or EU. Unless there is another way around this. I believe that the legit way to do this is to register a business, pay import tax on our goods and income taxes generated on the products sold.
I imagine that interbank transfer would only be useful for larger amounts, but yes, they are used.
PayPal is increasing in popularity but has nowhere near the Market penetration that it has in the USA. On one site I am involved with which has about 5,000 paid members and where PayPal is offered as an alternative to CC payment, but less than 1% avail of it. About 7% on the other hand choose to pay their subscriptions by chaque annually, which is a pain to be honest but when we tried to drop it there was uproar.
People definitely do shop around for the lowest tax rate. For example the 0% VAT on books makes it cheaper for me to even a single book on Amazon UK, even when you add the shipping, than locally.
VAT is borne by the customer, but unlike the case in the USA must be charged to all EU citizens and included in the quoted price, not added on afterwards. People do most assuredly shop around.
There are moves afoot to change the current situation so that in future online merchants will have to charge VAT at the rate that applies in the customer's country - this will be a total nightmare, since VAT has to be included in the price displayed it will mean each product will have to have a different price for just about every EU country and they will be constantly changing as the countries alter their rates and the products to which the different rates apply.
I am no expert on this, but these are some other things I think a US or any non EU company registering here need to consider, in addition to VAT, duty and so on:
- The law regarding repatriation of profits, which varies from country to country
- The rate of corporate tax payable - which can vary from over 30% to 10%, though again there is pressure to harmonise rates in the future.
- The cost of employing people - and EU employment law which is very VERY different from the US.
There are a number of additional regulatory issues to consider.
A particular one worth mentioning is the European Distance Selling Regulation. It gives private individual who purchase online (or mail order) a right to cancel their order for seven days after receipt of goods. They are then entitled to a full refund.
Some further details at www.dti.gov.uk/ccp/topics1/ecomm.htm
Keep the language diversity in mind.
You wont get customers in France without a website in French.
Same in Spain, Italy, Germany etc... You get the idea.
|This is quite important as VAT rates vary very widely, so for example the standard VAT rate on most goods in Ireland is 21% (yuck) while in the UK it is 17.5% and in Luxemburg just 15%. |
I don't think this would necessarily be an issue for a US exporter importing into the EU - afaiui they can just pick a country and register in it, and charge vat at the rate of that country. This may just be for intangible goods though - I'm not sure.
The page you need is 'VAT & International Trade' on the HM Revenue and Customs website.
|Unless there is another way around this. I believe that the legit way to do this is to register a business, pay import tax on our goods and income taxes generated on the products sold. |
I don't believe you need to register a new corporate entity; my understanding is that you can perfectly legally be a US business that operates in the UK (for example).
PS: you'll need to get professional advice on this, obviously.