Introductory Guide to International eCommerce, Part 4: Emerging Legal Challenges
This is the fourth part in our series on understanding and thriving in international eCommerce. The series dives into the most crucial considerations for eCommerce brands with an international presence, with the understanding that the shifting landscape of international eCommerce presents both a challenge and opportunity to these brands.
Just as in Parts 1, 2 and 3 of this series, we want to emphasize that, with the right mindset and armed with the right tools, eCommerce brands can avoid becoming overwhelmed by the challenges of international eCommerce. Instead, they can take advantage of the opportunity ahead of them.
You can check out Part 3: Logistics & Reverse Logistics to get the details on how your company can address the complexity of cross-border fulfillment. In Part 4, we deal with a particularly sticky element of international eCommerce: emerging legal challenges.
“eCommerce is exponentially becoming regulated as a consequence of recent decisions and changes of consumer and privacy laws,” writes Giulio Coraggio at DLA Piper. These consumer laws may be a major factor in emerging legal challenges, but so are brewing trade wars, Brexit and the trade agreements that have been making the headlines recently. In fact, TextMaster COO François Déchelette highlights such legal regulations as one of the major challenges for cross-border eCommerce.
The quick rise of international eCommerce creates a wealth of opportunities for eCommerce brands, in both emerging markets and established foreign markets. But they also present some challenges.
“Traditional boundaries are clearly blurring, with online retailers expanding to new geographies,” writes Pavan Chandra at The Economic Times. “This leaves companies to deal with government regulations, geopolitical status, ‘stateless income,’ and extensive local and international competition.”
These challenges are driven by the issues identified above. It’s the combination of those issues that we wish to address here.
The New Trade and Tariff Wars
Tariffs have made headlines in recent years as a political tool, and this is sure to hold consequences for many eCommerce companies.
Most of the impact does not come from the tariffs themselves, which are largely focused on industrial goods like aluminum and steel, as Marcia Kaplan at PracticalEcommerce notes.
Instead, most of the effect felt by eCommerce brands will be from the retaliatory tariffs instituted by other countries against the US. Examples include the EU, which has placed 25 percent tariffs on a number of food and fashion items, and Canada, which has introduced new tariffs for foodstuffs, as well. As a result, this new trade war may affect eCommerce brands dealing mostly with food items and those dependent on raw materials coming from other countries.
The other potential impact here is the potential for future legal challenges as a result of the escalating trade war. Online sales tax, for example, could be put on the table (and Trump has made it no secret that he supports the idea).
“There are several ways that internet sales taxes could hurt eCommerce businesses,” writes Rhiân Davies at GetApp Lab. “Whereas brick-and-mortar stores are currently only liable for a small number of general sales taxes, eCommerce businesses could be liable for collecting a huge number of complex sales taxes. Such a tax system could increase costs for businesses, which would eventually be passed on to customers.”
Annie Gaus at TheStreet agrees, saying that consumers may end up being the biggest losers in the back and forth.
The true impact of these new trade and tariff wars remains to be seen — but it is sure to be a challenge.
The Impact of Brexit on International eCommerce
In 2016, the UK voted to leave the European Union, signalling a major shift in international commerce and coining a catchy hashtag in the process. With Brexit officially scheduled for early 2019, eCommerce companies are determining how it will impact their business.
As Bija Knowles at CTMfile notes, the UK is the third largest eCommerce economy in the world after the US and China. This means it is almost sure to slow down sales in Western and Eastern Europe. At the same time, some UK-based eCommerce brands are setting up sites in mainland Europe in anticipation of the transition.
The other major Brexit impact would changes in tariffs and regulations, which have yet to be determined. “UK merchants currently have access to European customers and are able to leverage the Eurozone for standardized costs,” writes Hendrik Laubscher at eCommercePlatforms.
“Brexit will mean that tariffs on goods and services will be increased and as such shipping and merchandise costs will be increased.” This is also likely to impact third-country eCommerce vendors, since they are used to dealing with the standardized common market.
There are also marketing elements to think about with Brexit. “There’s no denying that the vote has markedly altered the social and political atmosphere of the country,” writes Rebecca Sentance at EConsultancy. These alterations are sure to affect how eCommerce marketers approach their consumer base. The true impact remains to be seen, pending government regulation — but it is certainly worth keeping your eye on.
Shifting Trade Agreements Elsewhere
Another wrinkle to this story involves trade agreements such as NAFTA the Trans-Pacific Partnership (or TPP). The now-defunct TPP would have been a boon for eCommerce brands, as it aimed at decreasing trade barriers among member countries (which included the US, Singapore, Japan, Mexico and New Zealand, to name a few).
While the original TPP may be dead, earlier in 2018 a new version became public and is in the works. One of the goals, as Ron Cheng at Forbes reports, is to “preserve the single, global, digital marketplace to ensure the free flow of global information and data that drive the digital economy.”
If the new version of TPP gains steam, eCommerce companies should take note.
Further, with the North American countries re-negotiating their relationships as trading partners, brands should at least brace for some fallout there.
Changing Consumer Protection Regulations
One other emerging legal challenge that has been in the news lately is the shift of consumer protection regulations around the world.
GDPR, the European Union’s General Data Protection Regulation, is one such regulation that has come from this shift. GDPR places limits on how companies can collect and use the information of EU consumers. “GDPR has unique consequences for eCommerce companies precisely because you receive so much data via email marketing and sales orders,” writes Melanie Fitzgerald at ChannelSight.
Staying accountable for this information can prove to be the real challenge. “The new rules create logistical challenges and compliance costs for companies,” write Financial Times reporters Ralph Atkins and Mehreen Khan. “… The challenge for brands will be to maintain a personal and exclusive relationship with their customers while making sure marketing campaigns are still targeting the right people under the new laws, which will place a premium on customer consent.”
The challenge here is already clear. It’s more than just an IT issue, Robert Pennings at TechRadar notes. Consumer privacy awareness challenges how eCommerce brands think about the way they handle their customers’ information.
Alexander Clark at SmartInsights goes into greater detail with the challenges GDPR and other changing consumer protections present. Clark says eCommerce companies should be taking a close look at how they are collecting, using, sharing, storing and deleting the data they collect on customers and visitors.
But this challenge can give way to an opportunity. Rather than seeing these regulations as a barrier, eCommerce vendors have the opportunity to see them deep consumer insights — a reflection of what consumers want.
The Nielsen Norman Group has been studying the usability of eCommerce sites for nearly two decades. For its fourth Ecommerce User Experience report, which came out in 2018, NN/g asked participants to perform dozens of tasks across nearly 50 digital shops. Then, the researchers asked the participants for qualitative feedback. Data security came up multiple times in those conversations.
“Shoppers in our studies wanted to feel safe and needed to know that sites had the proper security measures and protections in place,” write NN/g’s Kim Flaherty and Anna Kaley. In other words, GDPR and other consumer protection regulations are the culmination of consumer trends. Brands should act now to get ahead of that.
The Bottom Line: Keep it Agile
If these emerging legal challenges highlight anything, it’s that eCommerce companies need to learn to be light on their feet, so to speak. This is just one area that smaller eCommerce brands may have an advantage.
“A smaller size used to be a hindrance for companies going up against large global players with companies that have scale and operational efficiency,” writes Mike O’Brien at ClickZ. “Technology empowers everyone to stay competitive and fix what’s missing, whether they’re David or Goliath.”
Some of these legal changes could even bring more competition to your market — though tech advancement is just as likely to be a culprit. There’s more competition in eCommerce than ever, which comes with greater motivation to meet these challenges.
Regardless of the source, eCommerce vendors can get ahead of the emerging legal challenges outlined here by taking a strategic approach to everything from platform development to cross-border fulfillment.
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