The online cross-border sales in Europe are increasing rapidly each year with EUR 95 billion in turnover generated only in 2018. The European eCommerce Report 2018 states that the lion’s share of that income (67%) is taken by markets form the Western part of the continent. The largest eCommerce market in Europe is the UK, followed closely by France and Germany. Europe B2C eCommerce industry is expected to show 7% growth from 2019 to 2023, annually.
Although certain markets seem to be saturated – in countries such as Netherlands, Sweden, and the UK about 80% of consumers are already ordering online goods and services, in others, there is still a lot of space to grow. The most promising region is Southern Europe, e.g. Romania last year achieved the largest eCommerce growth (37%).
Opportunities for further development are encouraging more and more e-shops to enter new European markets. Even one additional market may significantly increase profits in relation to local sales. Big success stories about quick expansion also have their prompting role. Knowing that it is possible to start from scratch and succeed could give a different view on running your e-shop international. The most spectacular examples, such as Amazon or Alibaba may be a bit inadequate, unlike a more to earth case of a company from our own country. History of a Polish shoe shop – eobuwie.pl is a perfect example of eCommerce which does it right. It has started as a small family-owned shoe business in Zielona Góra – an average-sized city in Western Poland. While the older generation was running four local shops, the younger generation insisted to start online sales. Parents weren’t entirely convinced but invested nearly EUR 2.500 in son’s idea. He launched a webshop, doing almost everything on his own. It paid off, in 12 years company successfully expanded into 15 markets: Germany, Czech Republic, Slovakia, Bulgaria, Romania, Greece, Sweden, Italy, Spain, Hungary, Lithuania and Ukraine, becoming the leader in online footwear sales in Middle Europe. Now, this huge e-shop offers over 50 thousand products of 450 brands and ships up to 40 thousand orders a day. International expansion and innovative approach to e-business have resulted in dynamic and constant growth. In 2017, the company doubled its income, which reached a level of EUR 150 million.
Entering a new market is a financial and reputational risk, however it can be mitigated by proper planning. How to prepare your shop for cross-border sales? What solutions will ensure excellent service and efficient logistics, despite the distance and language barriers?
You are going to find the answer to these questions in the four-part article series about international online sales. It will focus on issues such as selling on marketplace platforms, delivery methods, orders handling, costs of returns, payment methods and legal regulations.
1. Take your time on market research
It is quite obvious that before choosing the next country to conquer, the first thing to do is to check the demand for your products. Is there a chance to hit a cozy niche, or maybe the market is already saturated and different directions would be more profitable? At this stage, the analysis of competition is particularly important: is it large, what are the strenghts and weaknesses of existing eShops, and will you stand out on the market with your offer? Such research will also help to set your prices at a relevant level. Remember that in the European Union price discrimination is forbidden. Costs of products and services must not depend on the country of living (this applies to the net value, without VAT), costs of currency conversion and shipping and all additional price components have to be clearly specified in the final amount.
If you sell peculiar products or have a limited choice of assortment but you still want to start sales on foreign markets, try to explore them using marketplaces. Choose between the global ones, such as Amazon or eBay, or these popular locally, e.g. Allegro in Poland or Aukro in the Czech Republic. They have an additional advantage – you don’t have to invest time and money translating the webpage and integration with other systems, like online payments. (More about marketplaces in the upcoming articles).
2. In a maze of legal regulations
To avoid a sting in the tail it is better to remember about international and state laws while designing a shop and planning a marketing strategy. European Union legislation has regulated and unified cross-border trade and services on the single digital market. Retailers’ obligations are set out in the EU Consumer Rights Directive. What must be done in order not to break the law?
- All sales platforms have to clearly describe the rules of purchase, sales and returns. In terms and conditions, available on the website, all company details including full address and tax information must be included.
- The vendor is obliged to provide information about the full price of products including shipping and taxes. All additionally paid services should be discharged and optional.
- The customer has to accept and confirm the purchase and obligation of payment by clicking on a button.
European law also regulates the case of geo-blocking. In the EU, access to websites, products and services aren’t dependent on user location and denying such access is prohibited. Users may choose the language version they prefer on their own. If you have translated the page for different locations, ask for permission before redirecting. Nonetheless, you don’t have offer shipping all over Europe or accept payments in Euro or any national currency.
Regardless of EU law, each country has the right to set its own regulations. For example, a German law called VerpackG regulates the circulation of packaging materials in Germany. It obligates sellers to pay recycling fees and report the number of packing materials in the state register. Another important issue concerned with the law is the value-added tax. Remember to include the proper VAT rate to prices as it is not always the same and depends on the country and product category. Note that if you exceed a certain turnover threshold defined by local regulations, you are required to register for VAT in the country of sales.
While thinking about conquering Europe, don’t limit yourself to the European Union. Switzerland, Norway, perhaps the UK soon are large and tempting markets. In addition to customs clearance remember about further requirements, such as placing documents outside the package, registering parcels in a suitable system and paying additional fees.
3. Pay-by-link vs. cash on delivery
Customer comfort in the entire sales process, especially at the crucial moment of payment, is important both for a single transaction and for building long-term loyalty. For a buyer, it is important to have the opportunity to choose the payment method. It automatically increases trust and convenience in the seller-buyer relation. The best moment to think about payment options is the stage of designing the whole sales experience. Before making final decisions, check what customers on those markets are used to. The second step would be finding out how difficult and expensive it is to integrate each payment system with your sales platform.
Despite the main trends observed across Europe, in each country, the popularity of various payment methods is slightly different. In general the most popular are digital wallets, like PayPal (42%), followed by credit or debit cards, mainly VISA and MasterCard (35%). Surprisingly cash on delivery is only on the 5th position (13%). According to DPD’s E-shopper Barometer report, the situation in each country is as follows: in Switzerland, Belgium and France: credit cards are the most popular, in Portugal, Italy and Ireland: e-wallets, while in Denmark, 97% choose the iDEAL system – online payment method that enables consumers to pay online through their own bank, called pay-by-link. It also turns out that cash on delivery is the most popular payment method in Central and Eastern Europe: Hungary and Slovakia. These apparent nuances should be considered when choosing a shopping platform or transforming an existing shop – not all payment systems are easy to deploy and beneficial for eCommerce.
Electronic payments are regulated by EU legislation. Charges for cross-border payments in Euro cannot be higher than local transfers. Even banks that are located outside the Eurozone need to obey this rule which refers to credit or debit card payments, both online and in-shop.
The relative popularity of cash on delivery is rather a problematic issue when selling abroad. On one hand, in some countries, customers feel more secure paying this way, especially when making the first transaction with a given shop. On the other, the whole process is expensive and risky for the seller. Cash on delivery increases the number of uncollected shipments and adds the cost of returning the parcel, meaning a retailer is bearing the costs of both – delivery and return. To make matters worse, it is often more expensive to send back a parcel than to deliver it.
4. Not only price counts – how to keep customers happy and loyal?
After-sales service strongly affects user experience in online purchasing. Fast and cheap delivery, as well as an opportunity to choose the most convenient delivery method, are the main reasons to return and buy again. In 2015, for 66% of customers, the option to choose a preferred shipping option was more important than the additional costs of it. 51% of this group abandoned their cart due to poor choices of the delivery method. More and more shops being aware of that improve their offer which leads to increasing customers expectations.
How to project an efficient and attractive delivery service? Try to look at the process from a customer’s point of view. What is the most important need: same day delivery, availability of pick-up points or low price? Think also about the products you have in stock. If you are selling something small and cheap, it is good to offer an economical shipment. Maybe you should also provide a free delivery option for orders above a certain value – it is an encouragement for larger purchases. On the other hand, if you sell heavy, large things, it is likely that customers will choose home delivery to doors.
It is not easy to meet all expectations, especially at the beginning of operating in a new market. There is one thing which all customers all over the world have in common: they prefer to decide themselves. They may want to receive their parcels at home or simply pick it up from a pick-up point at any time e.g. on the way back from work. Not only price matters, but also the availability of parcel lockers, post offices or other pick-up points. The reputation of couriers is also important, well-known and experienced companies are preferred – they ensure a sense of security, relevant while shopping remotely. Foreign shipments can be serviced by international giants such as DHL or UPS or corporations that are well-established on local markets, such as Royal Mail in the UK, BRT Corriere Espresso in Italy, Collissimo in France or Bpost in Belgium. They offer customized services and have a well-developed infrastructure – this results in higher service quality which generates customer satisfaction. What shipping options are available for cross-border sales and what can you actually offer to your customers?
a) courier's service
It is a fast and convenient method. According to the International Post Corporation data, it was chosen most often. Globally in 2017, most orders were delivered to home (68%) or to a workplace (15%). Differences between individual countries are significant – 86% of Danes prefer to receive the parcel at home, but only 30% of Russians choose this method. Courier means not only door-to-door delivery to a selected address but also many other extras: tracking and redirecting, choosing the time (also in the evening) and the day of delivery (also on the weekends). Customers often agree to pay extra for additional options, so why not offer such a possibility.
Cross-border delivery can reach the destination address on the next day, but the express option is quite expensive. Standard shipment time starts from 48 hours in Europe and depends on location and distance to cover. Strong competition between couriers results in constant pressure to shorten the time of international delivery.
b) click & collect
Door-to-door delivery is still the most popular, but it seems to give way to alternative delivery methods, e.g. to pick-up points. The pick-up point may be the seller’s physical shop, another outlet (a store of another retail network, post office, courier company shop) or a parcel locker. It is a comfortable method, particularly appreciated in cities – here the network of points is dense, customers are more mobile and don’t want to wait for shipment at home. It isn’t surprising that in urbanized countries pick-up points are more popular. 42% of consumers in France, the United Kingdom, Germany and Sweden chose it in 2017. Large chains offer the opportunity to collect online orders in stores, while eCommerce companies are constantly developing their pick-up points systems. A variety of global operators (like DHL, DPD) and local companies (like Collect+, PostNL, Colissimo) are available in each county. It is necessary to pay attention to the number and location of points, as well as their availability. Parcel lockers are available 24 hours a day, while shops may be closed at late evening or weekends.
c) post office service
Post offices and their services are still popular and widespread, especially in smaller towns and in the countryside, offering many delivery methods at different prices. Worldwide 23% of consumers choose the local or national postal company – particularly it is popular among Russians (74%) and Scandinavians: Swedes and Norwegians (67%), Icelanders (62%), Finns (56%) and Danes (45%). Posts traditionally provide a lot of options like unregistered mail or different forms of tracking and delivery confirmations. Various express options and airmail shorten the time of shipment. Many post offices are competitive and offer innovative solutions, such as real-time tracking, or redirecting the shipment to their own network of parcel lockers and pick-up points available 24 hours a day. International shipping services are also available and worthwhile especially for smaller and less frequent international parcels.
To make shipping easier, retailers often offer only two or three types of delivery. Customers look not only for the low price (however it is good to also include an economical option) but also the choice. From an entrepreneur’s point of view, it may be complicated to handle all the options. On one hand, you need to gain knowledge about customer habits, on the other, you need to find companies that will deliver various types of orders. You will have to negotiate contracts and prices with selected couriers, integrate with appropriate systems and organize processes in order to minimize the risk of mistakes. This requires time and effort but will pay off in the long run.
Yet, there is a chance to simplify the process – the third party logistics operators (3PL), as part of the fulfillment, take over most of the responsibilities related to handling international orders. It is viable: the operator negotiates rates with courier companies or parcel lockers networks, but also the economics of scale works on their advantage – thanks to a cumulated number of shipments, a 3PL has a stronger negotiating position. Additionally, it is often difficult to judge which method or courier is the best – the experience of a company that carries out hundreds of parcels for its customers can be very helpful at the start. Due to a certain specialization, logistics operators are able to adjust the logistics model to the business scale, product category, and circumstances on each market. Such know-how helps to adapt to the new business environment and spread wings on foreign markets.
5. How to handle returns and make them work for your advantage?
Similarly to the local market, in international trade, you have a solution for returns. In the European Union, online shoppers have 14 days to withdraw from a contract without giving any reason. When the order is sent back, the seller is obliged to accept it and make a refund of the payment and delivery cost. It is better to prepare for such situations in advance. Remember that your return policy and address must be included in terms and conditions. For the seller, the easiest way is to leave the whole return process to the customer. In this case, the customer chooses the shipping method, sends the parcel and pays for it. The retailer is obliged to return the value of products and delivery up to the amount of the cheapest option that he offers, but not the costs of sending the parcel back. For example, if the customer has chosen express mail for 12 euros, but there was an option to send an economy parcel, without tracking for 2 euros, the seller has to return only 2 euros.
It seems to be comfortable, but in fact, it isn’t a promising solution. Customer’s experience is one of the most important parts of a successful business, so providing an easy and hassle-free return process will be a smart move. You can insert a return shipping label into the package or provide the possibility of downloading it from a courier’s website. This way, it is easier for the customer to handle the return by providing the shipment on the seller’s courier contract, but still the cost of the return may be charged back from the customer.
A comprehensive pro-customer service is provided by many big eCommerce retailers, e.g. Zalando, which is successful also thanks to its return policy. Offering free returns is an expensive strategy. Although in international trade such a process may seem to be difficult to carry out on our own, there are companies which will take care of it instead. The reverse logistics service helps to offer a local return point or organize a pick-up by a courier dedicated to collect parcels from customers. This approach helps to build brand loyalty which results in repeatable sales and can compensate for the costs of the return processes.
The expected refund time depends on the country, it is better to know what customers are used to on a given market. In Germany, catalog sales have been common for several decades. In this model, customers paid for the ordered products at the end of the month – they had time to rethink their choices and decide if they want to keep ordered stuff. These habits have moved to online shopping – Germans are returning about 60% of fashion orders. Zalando, established in Germany, developed a strategy that is closer to that experience.
To sum up...
Cross-border online sales seem very attractive. In the beginning, it is necessary to analyze your business case and select the right markets. You should carefully check the available solutions and services – they need to be tailored to your customer's needs and expectations. Right partners and service providers are even more important than in the domestic market. Such areas as translations (web content and advertisements), accounting and logistics can be entrusted to professional partners. It helps to avoid mistakes and save time.
In the following articles from our international sales series you will find out about:
- Marketplace platforms in intentional sales - opportunities, advantages and disadvantages
- Shipments and returns in the EU and sales outside the EU - legal aspects
- Supply chain in international sales - what is the best solution?