10 Tips On International E-Commerce Selling
Are you a U.S. e-commerce business that wants to expand your business into foreign markets? If so, we have ten tips for you that you’ll want to know about international e-commerce selling.
1. Don’t create another business entity unless you are looking to isolate your product liability for different products that you’re selling in different places, or unless there is some kind of international tax benefits of doing so. Don’t create an entirely separate company to sell internationally, you can sell to other markets with the company that you’ve got and you can avoid having all the administrative burden of running two businesses.
2. Register for a VAT license, which stands for value-added tax. It’s kind of like a sales tax that they charge in other countries and if you’re signing up for this VAT license and say you’re doing the process online with your Amazon store just be aware that that’s only about a third of what you actually need to do to get your VAT license.
It is probably best if you just hook up with another company that specializes in VAT to get to the information that you need so that you’re up and running quickly and you don’t miss any steps.
3. Remember that VAT is tax inclusive so when you’re selling a product in the US let’s say you sell something for $100 you’re charging six percent sales tax so instead of $100 you’ll be charging one hundred and six dollars. You collect that from the customer, six dollars goes to the government and you keep the hundred dollars for yourself.
However, with VAT the prices are tax inclusive when you’re charging that, so assume it is 20% (20% is not an uncommon number to be charging internationally) so if you charge 20% VAT and your price is only a hundred bucks that means twenty dollars is going to the government and you only get to keep 80 dollars. So make sure that when you’re saying your prices you are allowing for that value-added tax.
4. Make sure that you configure your shopping cart to collect the value-added tax. A lot of our clients like to do is e-commerce sales, let’s say they’re selling on Shopify. They’ll set up one Shopify account for international sales and one Shopify account for domestic sales and the domestic sales can then be set for all the sales tax they need to collect and the International one can be set for all the VAT tax that they need to collect and that way you’re not combining your sales figures. So make sure that your shopping cart is configured properly.
5. Get your inbound VAT refunded. When your products are being shipped to let’s say the UK when that’s going through customs you’re going to be paying a value-added tax. This amount can be refunded to you as a credit on your value-added tax return when you file, so don’t forget to do that.
6. Minimise your payment processor fees. There’s an easy way to do this, you find a local payment processor so a payment processor that’s unique to that country and you’ll probably pay a lower rate than if you’re using one that’s in the United States.
7. Use a virtual online bank. For international funds transfer services like World First, Payoneer, or OFX.com as examples. What these services can do for you is connect to Amazon, GrooveKart or Shopify, or something like that. You can make the sales in that foreign currency, have the funds deposited into your account in euros or British pounds or something like that and the money can stay there in that foreign currency.
The money that’s in that account can stay there and before you withdraw it you can make sure that the currency conversion rates are more favorable for you before you take that money out.
8. I would recommend you keep the 20 percent of value-added tax that you collected in that foreign currency and then pay it in from there. Then you don’t have to pay the currency conversion rates going back and forth to U.S. dollars.
9. Work with a freight forwarder. A freight forwarder will handle all of the paperwork related to getting your inventory into this foreign country. They’ll handle the shipping, customs, and paperwork insurance. We recommend somebody like Shapiro or Flexportwhich are common ones that we’ve seen our clients use.
10. Stage your products. We’re talking about taking your inventory and keeping it at a 3PL or the main warehouse for longer storage purposes instead of sending all of that inventory to somewhere like Amazon FBA. If you send it to Amazon and it sits there for too long they will start charging you more and more fees that are long-term storage fees. These fees are huge so if you keep it in a warehouse or a 3pl they can help move the product to where it needs to be to save you money in the long run.
Frequently Asked Questions About International E-commerce Selling
What is the best way to increase international e-commerce selling?
- Identify your Ideal Client
- Learn about Local Competition.
- Cultivate Value.
- Demonstrate your Expertise and Credibility
- Learn the Local Lingo.
What makes an international company successful?
To be successful in a global market, a company’s brand and products must appeal to the resident culture. For this reason, companies that show openness to local marketing strategies and new products will often achieve a higher return on investment.
How can I be successful in international marketing?
- Develop a Solid Global Strategy.
- Identify Your Ideal Client.
- Start Small and Expand When You Get Positive Data.
- Pick a Global Expansion Partner for Market Success.
- Understand Your Competition
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