Stay-at-home orders and social distancing measures put in place in response to COVID-19 have prompted more consumers to turn to online shopping to buy everything from necessities to discretionary items. This shift to predominantly online shopping means that retailers will need to be prepared for the potential of gaining new customers in the coming months from virtually anywhere in the world. Whether you are already selling to international customers or just getting your ecommerce presence set up, having a global view of customer expectations and preferences will be a critical factor in growing and scaling your business moving forward.
While customer expectations like consistency and transparency across selling channels are fairly standard across regions, there are a number of rules and nuances that vary by customer audiences around the world. For example, a customer in Italy may prefer a different payment type than someone in Canada, so it’s important that your ecommerce website is optimized to provide the features that customers expect when shopping based on where they live.
Much of the customer experience lies in a business’s ability to optimize the front-end or customer-facing aspects of the shopping journey. Everything from personalized accounts to customer support has a direct impact on how satisfied a customer will feel with your brand. However, businesses can also up-level their customer experiences by investing in the backend processes that are essential to processing transactions, but are often overlooked when it comes to customer satisfaction.
Selling across borders comes with its own set of challenges and opportunities, so it’s important that businesses first understand the ins-and-outs of international ecommerce before looking at how operations can positively impact customer experiences online.
Challenges retailers may face when selling cross-border
According to an Avalara study, 86% of U.S. retailers are already selling across borders. Still, for many sellers, selling internationally is a whole new ballgame with all-new rules. From inventory to shipping to taxes, there are numerous considerations that retailers should be prepared to address as they begin the process of selling internationally.
Ecommerce sales have been increasing for years, but some industries have recently seen a major uptick due to stay-at-home orders and more consumers shopping online. As with any sudden increase in sales, it’s important to make sure that your business is keeping track of inventory so that all the products being sold online are readily available. Research shows that the outbreak may have already interrupted the supply chains of nearly 75% of US companies, which could translate to limited inventory, frustrated customers, and canceled orders. Keep in mind that it may take a longer time for your supplier shipments to come in, which could impact when your customers receive their orders.
Similarly, cross-border sales have additional layers of complexity when compared to shipping and fulfillment for domestic orders. It’s important that your ecommerce platform is equipped with the right technology to handle cross-border transactions so that international customers are provided with accurate delivery dates and shipping costs during their checkout experience. Due to the added level of uncertainty during the pandemic, it’s important to be transparent with your customers and let them know if they should expect longer than normal wait times to avoid potentially poor customer experiences.
The impact of tax on cross-border transactions and customer experience
In addition to supply chain management and shipping and fulfillment, compliance plays a major role in customer satisfaction for international transactions. Beyond knowing sales and use tax here in the U.S., businesses must be adept at handling value-added tax (VAT), goods and services tax (GST), customs duties (also called tariffs), import fees, and the variations of each from country to country.
From a customer experience perspective, if an international sale does not include the cost of the customs duties or tariffs at the time of purchase, sellers risk surprising customers with unexpected costs at the time of delivery and losing money on returned items. Most customers expect to have all the taxes and duties already included in the cost at the time of checkout.
Furthermore, there are several legislative changes currently in motion or pending that will inevitably impact sellers engaging in cross-border transactions. One example of this is Brexit, which will impact U.S. sellers who have used the U.K. as their gateway into the E.U. Another regulation that continues to change across taxing jurisdictions is marketplace laws. The changes to marketplace laws in France, Germany, Austria, and others will shift the responsibility for VAT collection and remittance to the marketplace, but many sellers will still be responsible for obtaining a certificate from the host country and verify that the tax is calculated correctly. Lastly, a rise in fraud has forced many E.U. countries to begin working to close the VAT fraud gap in 2020 by applying VAT to all sales by non-EU sellers.
A successful approach to cross-border sales hinges on a business’s ability to provide exceptional customer experiences, regardless of where the customer is located. With all of these factors to consider while selling cross border, tax automation is beginning to become no longer optional, but a requirement to stay compliant in the global retail space. Depending on the number of countries, breadth of products, and staff available to handle rates and regulations, an automated tax solution may be the most efficient, cost-effective way to manage tax compliance. Positive cross-border customer experiences cannot be accomplished in a piecemeal fashion. As more businesses wade into the waters of international ecommerce, it is imperative that they pay close attention to every aspect of the digital commerce journey from customer acquisition to delivery.