Running a successful online business is no mean feat. Product procurement, marketing, logistics, fulfilment, finances. You’re sure to have tackled at least a few of these in order to build your eCommerce brand. Getting to grips with so many aspects of the business can be a laborious task. But now that you’ve conquered it, and your store is running smoothly, what’s next for you? How do you stay on the upward curve and expand your operation beyond your borders?
Enter stage right: marketplaces. There’s a huge number of marketplaces dominating the European market right now – many of which might be new to you. With a third of online users starting their product searches on Amazon compared to the 13% who started their search from a traditional search site, it’s clear that marketplaces are quickly becoming the go-to for consumers on the hunt. The convenience of purchasing multiple products from one place, one account, and (sometimes) in one delivery, is enticing more and more shoppers to these virtual malls.
A whole new world
How can you make marketplaces work for you? How would selling on one help your business? First things first, is the considerable customer bases. As aforementioned, Amazon’s business is booming. But depending on where you want to expand, it’s not the only platform out there. Cdiscount is currently ruling the roost when it comes to French eCommerce with a whopping 20 million unique visitors per month. The Polish marketplace Allegro boasts an impressive 17 million monthly visits and bol.com, which covers the Benelux region, averages over 1 million visits per day.
Those are hard-to-ignore figures if you’re considering expanding cross-border. These marketplaces are not just dominating on their home turf either. They’re also serving several other European Union countries or even cross-continent markets. Providing a perfect opportunity to grow and diversify your business.
Building a brand
From white label to private label: brand matters. Whether you’re positioning yourself against sellers of the same product or crafting an exclusive offering, customers need to know who you are. Not all marketplaces give you the freedom to really show off the essence of your business but if utilised correctly, you can use them to cement your presence as an established brand. With 65% of consumers saying they’d feel comfortable buying from an unknown retailer on a marketplace, it’s clear that being associated with a larger organisation instils trust in shoppers. You can use this to drive new customers to your direct site or focus on your marketplace store. Either way, you will be building the foundations needed to start your new international business.
When looking to sell internationally, it’s imperative that you research the competition in the market. You might be the sole provider of your product in the UK but end up facing new challengers in an alternative country. How does your product compare? Do you position yourself as premium in comparison or as a budget friendly option? Depending on the market, different products might be seen as luxury or basic in the eyes of your new customer base. In France, clothing and footwear are priced at a hefty 17.2% higher than the UK on average. Whereas in the UK, furniture is 9.9% more expensive than in Germany. As selling on a marketplace will open these new markets, you’ll need to adapt your pricing strategy accordingly.
What’s also valuable to note here is the chance to turn shelf-space-stealing stock into a best seller. It’s not just the pricing of products that changes cross-border but the demand. If sales are slumping on one of your items – could they flourish somewhere else? With international shoppers looking to ‘buy British’, perhaps you can shift that slow-moving stock and free up some much needed warehouse capacity.
Cost of compliance
Whilst on the subject of pricing, there’s another thing that can have a monumental effect on your margins when moving into cross-border sales and that’s accounting for the additional costs of complying with international VAT law. Once you’ve recognised your VAT obligations, they’ll need to be reflected in your pricing strategy.
Marketplaces across the EU are putting the pressure on non-compliant sellers; closing accounts and sharing data with tax authorities who will issue fines where they see fit. This is due to legislation being passed, in countries such as Germany and France, making marketplaces liable for VAT owed by their sellers. You might have heard about or been affected by Amazon’s effort to enforce this. They’re insistence on Amazon.de sellers providing a German VAT certificate (F22) left many out in the cold with frozen accounts. And France is soon to follow with their deadline coming up on the 31st of January.
Compliance is not optional! If you don’t prepare for the different obligations selling on a marketplace can incur, you could face severe penalties or be required to backdate the VAT owed. This can sometimes grow to a business-ending sum if neglected for too long.
A multi-channel business can bring multiple headaches. One of the most impactful logistical issues thrown up by selling on marketplaces has got to be delivery. As with all covered so far, preferences vary wildly between countries and cultures. From a higher return rate in Germany to a demand for parcel tracking in Italy, it can be a lot to take on by yourself. It might be worth considering automating if not outsourcing some of this process. Software options that integrate with your chosen marketplace can save you time on tasks such as shipping label creation. And carrier management solutions can give you the flexibility to offer a variety of delivery options: ensuring the best experience for a wide range of clients. Services like this can be game changers when it comes to managing an expanding business.
“He profits most who serves best.” Arthur F. Sheldon
They knew it in the 1900s and you know it now. In a world where the customers voice carries a newfound weight and a single poor review can tank a listing – customer service is king. As marketplaces introduce you to international audiences, they bring with them the need for a diversified customer satisfaction strategy. As well as the pricing, shipping and demand differences previously mentioned, you must consider language. Making the most of your listing will require translations in non-English speaking countries. You might have the capacity to do these yourself or opt to outsource it but whatever you do: don’t use Google Translate! Whilst it might seem like a quick fix there are so many nuances and turns of phrase which that service just can’t replicate with its vocabulary.
Besides, there are very different cultural expectations when it comes to ‘a good service’ that aren’t just language based. Consulting an experienced expert on the best practices could be make or break in your new market.
Takeaways (Not the greasy kind)
There’s no doubt that marketplaces can offer opportunities that are hard to drum up on your own. Expansive reach, consumer trust, niche product positioning or favourable pricing possibilities. Any one of these might be enough to turn your head towards the rapidly growing platforms. But as with all things eCommerce, it might come at a cost. You’ve been one resilient entrepreneur so far and you know opportunities don’t just fall into your lap. Success is earned through hard work and research. It’s been said before, and it will be said again, but preparation is key.
Pick the right channel for you, consider your logistical challenges, comply with local VAT laws, simplify your processes and seek expert advice. Sounds simple doesn’t it?
Who are SimplyVAT.com?
We help eCommerce businesses with their international VAT obligations. With clients in over 70 countries, we specialise in VAT compliance services – including VAT registration, VAT returns and VAT consultancy – in all 28 EU countries, Canada, Australia and New Zealand.
With fifteen different languages spoken in our UK office, we love working with businesses from around the world – from start-ups to multi-national corporations. Through education, support and practical industry knowledge we make cross-border VAT simple.