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Are you thinking of selling your products outside the U.S.? If you are like most small business owners, it's likely there will be more to it than you think. The potential for high profits from cross-border sales is alluring for numerous business owners. However, you must be careful and adhere to proper procedures.
The thinking usually goes something like this: 'My sales are going well here in the U.S. Just imagine how my business would grow if I started selling in brand new cross-border markets. I've already got the products and the infrastructure, so the margins will be great and the extra work minimal'. If you've been thinking along those lines, I am betting, as a certified ecommerce accountant, that there is a lot more to it than you think.
Now don't get me wrong. I don't want to rain on your parade. Yes, selling cross-border can be a great move for many small businesses, but it can also become a nightmare if you go into it uninformed and unprepared. So, here are five tips to help you avoid the most common pitfalls of taking your business international.
Know Your True Costs
In today's globalized economy, cross-border e-commerce has become an essential part of the business strategy. It's a great opportunity to expand your customer base by selling internationally through your online store. However, it also comes with its own set of unique challenges, particularly when it comes to shipping costs.
Cross-border commerce requires a lot of research and planning. To ensure success, you need to understand the regulations and tax requirements of each country you plan to sell to. That includes import tariffs, taxes, and shipping charges. This way, you will accurately calculate your actual landed cost for each product you sell, so you can price your products accordingly.
In addition to the financial aspects of cross-border ecommerce, there are also other considerations to keep in mind. You need to be aware of cultural differences, language barriers, and other country-specific requirements, such as product labeling and translation. Moreover, you need to know the true costs and margins required to cover additional expenses.
There is another critical thing that every international seller needs to do. You must ensure that your e-commerce store is optimized for international customers. This includes accepting multiple currencies and payment methods, offering localized pricing, and providing accurate shipping information. A seamless checkout process can make a significant impact on the customer experience and increase the likelihood of repeat business.
Have a Country-Specific Marketing Plan
Expanding your business on a global scale requires careful research, planning, and execution. It is easy to fall into the trap of thinking, 'If I build it, people will come.' You might think that since you already have a website, people around the world can search for your products, and voilà you can easily start generating sales from cross-border customers. But use caution here. Yes, selling into international markets is much easier these days due to technology. But you need to have a solid plan on how international customers will find you.
For instance, you need to be on international search engines and local social platforms to effectively market to your potential customers. You will also need to make sure brand and product names resonate with international buyers. And do your research to avoid product name blunders! Did you know that Coca-Cola's brand name, when first marketed in China, was sometimes translated as "Bite The Wax Tadpole?" Or that Mercedes-Benz entered the Chinese market under the brand name "Bensi," which means "rush to die?" Yes, those epic fails really did happen.
When you improve your cross-border strategy and ensure that your ecommerce store is optimized for global sales, you will surely expand your business to a larger audience. Start with researching the market opportunity in different countries. As already mentioned, it's essential to understand the cultural and language differences that could impact your online sales.
Another important consideration is understanding the country-specific regulations and requirements for selling. Every country has its own set of regulations, including tariffs, duties, taxes, and banned products. Failing to comply with these could result in hefty fines or even legal action. Therefore, it's crucial to do your due diligence in researching and understanding all of the requirements.
The next thing you should do is to identify your primary competitors in each market. Determine how you will differentiate yourself from them and develop a plan to compete effectively against them. This could include offering unique product features, providing exceptional customer service, or developing innovative marketing strategies to capture the attention of your target audience.
Finally, develop a mini business plan for every market you plan to enter. This plan should outline your strategies, goals, and objectives for entering each new market. It should include details on your pricing strategy, marketing plan, and customer acquisition strategy. This way, you will successfully target markets and grow your business through your future online sales.
Determine the Most Effective Selling Strategy
There are three common approaches when you start selling your products in an international market. You should select the one that is best for your company during your new market entry phase. Later, you can always switch strategies as your international business grows.
Sell on Your Own Website
At first glance, this may look like the obvious best choice. But as discussed above, it is critical that you know your landed costs under this strategy. The total cost to get your product to your international customer will include taxes, tariffs, and shipping and, as a result, can be quite high. This is one of the biggest pitfalls for new international sellers. If you don't calculate costs accurately and inform customers upfront of the final cost to receive your product, you risk ticking them off, getting a bad review, and losing a customer. You might also incur additional costs and headaches. If the customer refuses to accept the goods because they weren't informed of the true cost, you will be charged for the return freight and incur costs associated with returned goods.
Consider Partnering With a Shipping Provider
There are various options available to take care of the details of getting your products from the U.S. to international customers. It is worth your time to check out providers like FedEx Cross Border and ShipperHQ. It's just a few clicks, but it can greatly benefit you. Take a look at what they offer and do your research to determine if this is a good option for your business.
Sell on an International Marketplace
Marketplaces such as eBay, Rakuten, Amazon, Lazada, etc., are often the easiest and most cost-effective way for small businesses to enter international markets. But using one of these marketplaces will add to your costs. You will need to look at how these added costs impact your margins and end-user price. Can you still be price competitive after factoring in these additional costs? These sites also have rules, so check them out to make sure you can comply before finalizing your decision.
Create a Phased Approach for Cross-Border Sales Expansion
When you start expanding into cross-border trade, you need to work smart. You must develop a step-by-step approach to all your international operations.
One of the first steps is to have a good plan for handling cross-border purchases. That includes shipping services, payment options, business insurance, and dealing with returns. You need to consider every challenge of selling products across geographical boundaries and ensure that you can handle everything.
Another critical component of selling products to other countries is the use of technology. It will enable you to automate processes where possible. Moreover, it can help you deal with different languages, international pay types, and product descriptions. Leveraging analytical tools can streamline operations, reduce costs, and enable more efficient cross-border trade.
It's also important to consider the cultural differences and varying regulations of each country in which you plan to sell your goods. These differences can impact your operations, including tax requirements and local business regulations. Therefore, it's essential to research and understand the cultural and regulatory landscape of each market you plan to enter.
Don't Get Tripped Up by Taxes
The recording, remittance, and accounting needed to manage taxes related to your international sales can get complicated quickly. Just one of many complicating factors is the VAT (Value Added Tax). This must be collected from the buyer at the point of sale. You're then required to remit the VAT payment to the relevant country's revenue authority on specific dates. These complexities exist even if you use a marketplace such as eBay or Amazon.
It is important to understand that the IRS prefers clear and detailed information. If you opt to use a marketplace, it is not advisable to process all sales through a single marketplace account. You want to have detailed reporting for each country - the setup is critical here. Work with an accounting and tax firm that has experience helping small businesses with international sales. Setting things up properly upfront can save you time, money, and headaches in the long run.
Hopefully, these tips will help you avoid some of the common pitfalls of international selling and gain worldwide exposure on your ecommerce platform. Expanding your business into the global market can bring you way more sales, increased brand presence, and global expansion - but you need to be careful. Cross-border shopping can be tricky, but with the right approach, everything is possible!
We have already helped many ecommerce clients set up their accounting and tax reporting in preparation for going international, and we are here to help you. If you are thinking of starting cross-border selling or have already started but need help getting your accounting and tax reporting in order, get in touch. Give us a call at (619) 819-0252 or submit our contact form - our goal is to ensure that everything runs without any hitches!
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