Global markets offer considerable opportunities to DTC brands. Entering these markets is not without specific cross-border eCommerce challenges, however.
Chief among them is the confusing web of laws and regulations that come with entering a foreign market. Companies can spend months caught up in them.
It doesn’t have to be that way, though. Third-party BaaS experts can help eCommerce brands quickly and successfully enter new markets, avoiding all of the following pitfalls.
Regulations Concerning Market Entry
There are a lot of hoops to jump through in order to start selling in an international market, which means problems can arise from the outset.
Before anything else, eCommerce brands need to make sure they have a legal right to start operating in a new market. This could mean a business license or other forms of documentation, say the team at Ecomdash.
These licensing obligations vary from country to country, so it pays to partner with a BaaS provider that understands what is required from every major market. It’s not just a case of knowing what legal documents you require. Applications can be lengthy and complex, too, and one mistake could delay market entry for months.
You’ll also need to check for potential copyright infringement issues, says NatWest’s Nick Pedersen. Typically, these are protected on a country-by-country basis, but they can be protected across trade blocs like the EU. At the very least, you’ll need to partner with a company that can perform freedom-to-operate searches.
Once you’ve established your legal right to sell, you’ll need to be aware of exactly what you can and can’t do in every market. Every country also has its own trading standards and regulations that you’ll need to abide by if you want to sell legally, notes the team at TradeGecko. Meeting these kinds of regulations is critical.
“Failing to meet compliance regulations in a country you’re attempting to expand into can not only put a halt to your expansion plans, but also create additional costs in your home country,” they write.
A 2019 study by Internet Retailer, BlueSnap and Kount found that one of the biggest challenges for U.S. retailers looking to enter foreign eCommerce markets is currency and payment processing.
Further complicating matters: Consumers in different markets have wildly different preferred payment methods. “For example, consumers in Germany frequently pay for online orders upon delivery, while Chinese consumers often pay for web purchases with a payment method called Alipay and many Brazilians favor Boleto Bancário,” the study notes.
If collecting payment in foreign currency isn’t hard enough, consumer regulations can make things even trickier.
Take the EU, for instance. In 2019, the European Commission introduced a Strong Customer Authentication ruling to provide greater authentication of online transactions. The move is part of a broader initiative that is changing the way Europeans pay online, says Michelle Evans, Senior Head of Global Digital Consumer Research at Euromonitor International.
“Under the SCA ruling, merchants, banks and payment processors will have to implement two-factor verification on electronic transactions over €30,” Evans writes. “Such transactions in the future will require two of three authentication methods, including personal identification, such as a fingerprint, something the consumer owns, such as a smartphone, or something the consumer knows, such as a password.”
Taxes and Remittances
Then, there is the matter of understanding what taxes you’ll need to collect from customers, writes Red Stag Fulfillment’s Jake Rheude. “For example, sales to the UK must include that country’s VAT tax in the price. It’s the opposite of the US, where many states don’t allow retailers to list prices that include sales tax.”
That’s not all. There are some countries that charge a duty when you ship orders over a certain amount and others that require customs forms. You’ll need to work out exactly what you need to do when you make a sale in every country you operate in.
Brazil’s tax system is a great example, writes Vtex’s Rafael Campos. “It is nearly impossible for someone from another country to fully understand its functioning because it is always changing.”
This isn’t something you can figure out as you go or after a few thousand sales have been made, notes We Make Websites Cofounder Alex O’Byrne. Not if you want to avoid big fines from governments.
That’s where third-party BaaS companies come in. By combining the expertise of their employees with industry-leading software, these service providers can offer everything eCommerce brands need to sell successfully in foreign markets. Digital platforms can be used to handle transactions in any currency, while experts can advise on the necessary taxes that can be collected.
Fulfilling, Shipping and Returning Orders
There are many regulatory hurdles that eCommerce brands can face when it comes to shipping internationally, says Payoneer’s Richard Gilbert. “Not only must you consider the logistics of shipping to different countries, but there can also be significant country-by-country variances in costs, customs, and duties, which can ultimately make a big dent in your bottom line.”
Abiding by each country’s import regulations and tariffs is essential, writes MotionPoint Cofounder Chuck Whiteman. However, it’s also important to be aware of your own government’s export laws and tariffs. In some cases, you won’t be allowed to ship certain products to some countries. In others, tariffs may be so high that it becomes unprofitable.
DTC brands will also need to abide by country-specific regulations surrounding product returns. Consumers have different statutory rights in different countries, and there are often specific regulations surrounding online purchases.
As well as knowing the rules, you’ll need to be able to articulate them in a country-specific returns policy. This is one of the keys to making international reverse logistics as simple as possible, notes E2M Solutions President and Founder Manish Dudharejia. It will also help to improve the customer experience, too.
Data Security and Privacy Laws
For online business, data security is critical. And just as with taxes and tariffs, every country has different data security laws that you must abide by.
Research by UNCTAD Global Cyberlaw Tracker has found that more than three-quarters (77%) of countries have online transaction laws, more than half (58%) have privacy laws and 72% have cybercrime laws.
Make sure your website and your marketing comply with the data security laws of every country that you operate in. Take the EU, for example. GDPR regulations require websites to ask permission before using cookies to track user behavior, even if those sites aren’t based in the EU.
These laws are always changing, too. It’s a challenge, but it’s essential to stay abreast of every new and amended regulation in every country where you operate. Even the best in-house legal teams will struggled to keep track of how the EU or Australia is updating its data security laws.
Choose Your International Partner Carefully
However you choose to partner with a third-party, it’s crucial that you exercise your due diligence, writes Massive Alliance’s Tom Popomaronis.
Partnering with an accounting firm or a marketing agency is one thing; it’s another thing entirely to partner with a provider who will help your business navigate the maze that is international customs and regulations.
So, check that providers have a proven record, ask for references and make sure they can deliver.