The e-tailer’s cross-border trade guide

Currencies Direct January 30th 2015 - 6 minute read

 
The UK's marketplace is becoming a crowded venue for most retailers, and the increasingly connected world is making it easier for local sellers to be connected with buyers worldwide. In this day and age, everyone seems to be online. It’s astonishing to think about how a consumer can browse global products from their smartphone while they commute to work, or while they’re queueing for a coffee. However, for e-tailers out there, it opens up an exciting array of opportunities.
 
As consumers are increasingly taking to online marketplaces to while away their spare time, small businesses with an online cross-border presence will be poised to reap the most benefits – especially as some economies are failing to regain their former glories. In fact, the value of the cross-border online retail market is expected to pass $300 billion by 2018 in just six key markets around the world, according to a survey from The Nielsen Company commissioned by PayPal.
 
The survey looked at cross-border online shoppers from the US, the UK, Germany, Brazil, China and Australia and highlights how valuable online commerce is to these countries, and the businesses that operate in them.
 
However, before dashing off to set up your online shop you should formulate a strategy based on hard facts and that takes into account the variety of cultures and customs of the nations where you’re about to be trying to sell your product or services to.
 
Think about the type of cross-border shopper you’ll be targeting — the deal hunter or the fearless adventurer (both have their merits). Don’t forget to account for language barriers and dealing in multiple currencies. Foreign exchange issues may mean you need to contact currency specialists for advice.
 
There are many pitfalls to avoid, but successful navigation of the online marketplace can boost growth. If you’re looking to get involved with cross-border trade, read up on our key online marketplaces below to get all the details necessary for success.

United Kingdom

Ranked number 1 for cross-border trade
 
Estimated growth

  • In 2013: 15.9 million online cross-border shoppers, spending £8.5 billion a year
  • By 2018: 18.5 million online cross-border shoppers, spending £18.0 billion a year

Top three cross-border purchase categories

  • Clothing, shoes and accessories
  • Gems and watches
  • Health and beauty products

 
Marketplaces

  • Amazon
  • eBay
  • Pixmania

How do customers pay?

  • Credit card: 40% of all online transactions
  • Debit card: 30% of online transactions
  • PayPal: together with credit and debit cards PayPal accounts for 96% of all online payments

Currency: British pound Sterling
In the past 12 months, the pound has seen swings of around:

  • -13% against the USD (Jul 2014 – Jan 2015)
  • +8% against the EUR (Jan 2014 – Jan 2015)

 
VAT rate: 20%
Distance sales threshold (VAT): £70,000
 

USA

Ranked number 2 for cross-border trade
 
Estimated growth

  • In 2013: 34.1 million online cross-border shoppers, spending $40.6 billion a year
  • By 2018: 41.8 million online cross-border shoppers, spending $80.2 billion a year

Top three cross-border purchase categories

  • Clothing, shoes and accessories
  • Health and beauty products
  • Gems and watches

 
Marketplaces

  • Amazon
  • eBay
  • Bonanza
  • Etsy
  • Craigslist

How do customers pay?

  • Cheque remains popular
  • PayPal and credit card use increasing

Currency: US dollar
VAT rate: 10%
Sales tax and local tax varies from state to state

 

Germany



Ranked number for cross-border trade

 

Estimated growth

  • In 2013: 14.1 million online cross-border shoppers, spending €7.6 billion a year
  • By 2018: 15.8 million online cross-border shoppers, spending up to €11.0 billion a year

Top three cross-border purchase categories

  • Clothing, shoes and accessories
  • Computer hardware and software
  • Health and beauty products

 

Marketplaces

  • Amazon
  • eBay
  • Rakuten
  • Otto

How do customers pay?

  • Invoice/bank transfer
  • Credit cards used by 34% of German online customers
  • PayPal, ELV, GiroPay, Sofort, Überweisung, RatePay and cash-on-delivery

Currency: Euro

VAT rate: up to 19%

Distance sales threshold (MWST): €100,000
 

France

Ranked number 4 for cross-border trade
 
Estimated growth

  • In 2013: €3.8 billion a year in sales
  • By 2018: €5.7 billion a year in sales

Top three cross-border purchase categories

  • Travel and airline tickets
  • Clothes, shoes and accessories
  • Computer hardware and software

 
Marketplaces

  • Amazon
  • eBay
  • LaRedoute
  • Cdiscount

How do customers pay?
Credit card, PayPal and bank transfer are the most popular methods.
 
Currency: Euro
VAT rate: up to 19.6%
Distance sales threshold is €100,000.
 

Australia

Ranked number 5 for cross-border trade
 
Estimated growth

  • In 2013: 6.3 million online cross-border shoppers, spending AU$7.6 billion a year
  • By 2018: 8.4 million online cross-border shoppers, spending AU$16.6 billion a year

Top three cross-border purchase categories

  • Travel and airline tickets
  • Books
  • Health and beauty products

 
Marketplaces

  • Amazon
  • eBay
  • Quicksales

How do customers pay?
PayPal is the most popular payment method, with around eight out of ten cross-border online shoppers having used it for overseas purchases.
 
Currency: Australian dollar
VAT rate: 10%
Goods & Services Tax (GST) threshold AU$1,000 (any goods under this amount can be imported duty and tax free).
 

Japan

Ranked number 6 for cross-border trade
 
Estimated growth

  • In 2013: $9.5 billion a year
  • In 2018: $13.8 billion a year

Top three cross-border purchase categories

  • Books
  • Clothes, shoes and accessories
  • Health and beauty products

 
Marketplaces

  • Amazon
  • Rakuten
  • Yahoo

?How do customers pay?
• Credit card and PayPal
• Cash-on-delivery via local convenience stores remains popular
 
Currency: Yen
VAT rate: 8% (from Oct 2015)
Local taxes and customs duties may also apply.
 

Spain

Ranked number 7 for cross-border trade
 
Estimated growth
Forrester’s research suggests Spain is to be Europe’s fastest growing ecommerce country for the next three years, with a predicted growth rate of 18% year-on-year.

Spain has the biggest ecommerce industry in southern Europe and the third biggest ecommerce economy in Europe.
 
Top three cross-border purchase categories
Travel and airline tickets
Clothes, shoes and accessories
Sports equipment
 
Marketplaces

  • Amazon
  • Rakuten
  • eBay
  • Buyvip

How do customers pay?

  • Credit card 53%
  • PayPal 26%
  • Bank transfer 22%

Currency: Euro
VAT rate: 21%
Distance sales threshold (IVA): €35,000

 

China

Ranked number 8 for cross-border trade
 
Estimated growth

  • In 2013: 18 million online cross-border shoppers, spending RMB 216 billion a year
  • In 2018: 35.9 million online cross-border shoppers, spending RMB 1.0 trillion a year

Top three cross-border purchase categories

  • Clothes, shoes and accessories
  • Health and beauty products
  • Computer hardware and software

 
Marketplaces

  • Amazon
  • Tmall
  • Jingdong

How do customers pay?
PayPal is the most popular payment method.

Currency: Yuan renminbi
VAT rate: 17%
Pilot VAT system reform is currently underway in some provinces. VAT registration is not allowed for non-resident businesses.

Cross-border online shopping will be significant as the consumers of more nations get connected. Because the use of mobile devices for online shopping is already fast outpacing that of desktops and laptops, it's the task of today's e-tailers to increase access for their mobilised consumers.
 
A recent report from research giant IMRG showed that more than half of visits to UK retail websites came from mobile devices, and that more than a third of online sales are completed on a mobile device. Moreover, this research only accounts for UK e-tailers where there is a population that is way ahead of others in the use of smartphones and tablets. If we extrapolate this data to consider the whole world, there is an amazing potential for growth, especially in China.
 
Smartphones in China are becoming a must-have item. By the end of 2013 the number of active smartphone users in China exceeded 700 million. Some reports suggest that the smartphone penetration rate is nearing 90%, which represents a huge potential market for ecommerce businesses.
 
At the same time as increasing support for mobile users, firms should look to create buyer protection for overseas purchases and bolster security. Nine out of ten consumers in the PayPal survey placed great importance on buyer protection, citing a perceived lack of security as a barrier to purchasing overseas. Identity theft and fraud was one of the top reasons for not making a cross-border transaction, which further illustrates the need to calm fears by providing clear indication of the security used on your website.
 
Don’t forget that most countries will offer support to firms looking to export overseas, as it helps boost the nation’s economy. In the UK, one scheme aimed to support small businesses sell overseas is Export Week, which is run by the government's UK Trade & Investment. The aim is to help firms realise that exporting is not as difficult as they fear, and is a great way to boost business as well as the national economy.
 
Your marketplace is no longer limited to the local area, or the pages of your local newspaper. The reach of your business has been stretched by the internet and makes your products, services and brand available to millions of consumers across the globe. In today’s online environment, businesses that are slow to get involved will likely find themselves outpaced by rivals who were quicker on the uptake. 

Currencies Direct work with online retailers who sell worldwide on international marketplaces, and help them with international transfers. Our aim is to make it as easy as possible for you to manage your sales proceeds from multiple online marketplaces, so that you can grow faster and receive different currencies without being held back by unnecessary barriers.

For a free trial, or to find out more about e-tailer Collection Accounts in the UK, the EU and the US, contact the dedicated online retailer team on +44 (0) 20 7847 9269, email etailers@currenciesdirect.com or visit currenciesdirect.com/etailers

Sources
http://www.simplyvat.com/
https://www.paypal-media.com/assets/pdf/fact_sheet/PayPal_ModernSpiceRoutes_Report_Final.pdf
https://www.paypalobjects.com/webstatic/mktg/pdf/PayPal_ModernSpiceRoutes_FactSheet_Six-Markets.pdf

 

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