Around one-in-five SME businesses are capitalising on growing markets by selling goods overseas, with 50% of these expecting to increase their level of sales to international customers in the next few years, according to the most recent Government data*.
For SME retailers, selling to customers outside of the UK can drive growth and spread risk. It can tap into global demands for Britishness and, perhaps, open-up new markets willing to pay a premium for this. It can also create a bigger pool of target consumers, helping to offset local sales impacted by the cost-of-living crisis. Scale and success can be accelerated through overseas sales, but it can also prove daunting for small and medium sized e-commerce retailers to take the plunge and start exporting.
Chris White, head of delivery at international fulfilment services provider, fulfilmentcrowd, looks at the five key steps SME retailers can take to make selling overseas plain sailing.
1. Start With the Right Cross-Border Trading Scheme for you
Selling to European consumers is a logical first step for many British e-commerce retailers. Shipping can be quick and cost-effective, making it a manageable introduction to exporting. To realise this, SME retailers should start by deciding whether they should or shouldn’t register for taxation and custom union schemes such as Import One Stop Shop (IOSS).
This scheme can overcome the challenges of fiscal representation in other countries and prove beneficial for high volume sellers of low-priced goods. Via an electronic portal, a monthly IOSS VAT return can be submitted to collect, declare and pay VAT to the relevant tax authorities where customers are based. This saves time and paperwork associated with paying VAT at the point goods are imported into the EU. There are also organisations such as Taxamo and Zonos dedicated to helping SME retailers get this process set up, which can alleviate some of the administrative pressure to support SME retailers going down this route.
2. Leverage the Opportunities of ‘Proof of Origin’ and ‘Customs Offsetting’
There are rules in place as part of EU trade deals that allow businesses to recover customs costs – tariff free. For example, if a company is purchasing materials from an EU country and shipping them to the UK to make a product that will then be shipped back to an EU country for sale, then the business should look at customs offsetting. These are designed elements of trade deals that can be utilised by SME retailers when the commodity is purchased in the EU in first place. This is where it’s worth taking the time to research the different options to see what financial savings are possible.
3. Don’t be Put-Off Looking Further Afield
If trading with the EU isn’t a viable option for an SME retailer, they shouldn’t let this spell the end of their exploration of selling overseas. It’s easy and understandable to get overwhelmed thinking that other further-away markets are hard to trade with. This isn’t always the case. The US, for example, has relatively high duty and sales tax thresholds for online retailers selling direct to American consumers. Companies won’t pay any import duties on goods up to the value of $800 and, with the right partner, shipping from the UK can be surprisingly cost-effective, particularly for small and light consignments. Taking into account the market size and ease of trade, the US is a market certainly worth considering.
4. Create an In-Market Hub
Exporting larger qualities of goods, and doing so less frequently, can prove time and cost-saving for SMEs. Bulk shipments sent on a weekly or monthly basis can streamline the management of stock inventory, making it more efficient than shipping on a sale-by-sale basis.
Holding stock closer to the point of sale can also present opportunity to enhance customer proposition, with shorter delivery timescales and services such as next-day delivery an affordable possibility in international markets. In some cases, it may also prove cheaper to store and handle goods, compared to operating costs in the UK.
It’s possible for SMEs to reap such benefits without having to purchase or rent warehousing space in non-domestic markets, or even having to invest in fulfilment infrastructure. Experienced fulfilment partners will be able to work in partnership with retailers to provide a mix of flexible warehousing, picking, packing and delivery solutions. This will be supported by local market insight, enabling the outsourced solution to seamlessly integrate and work as an extension of a retailer’s existing operations.
5. Don’t Think Outsourcing isn’t an Option
Retailers that are keen to scale-up and drive growth through international sales have often found themselves in limbo when looking for fulfilment services. The market has been more geared towards much larger multinationals, which are already operating at significant scale and shifting high volumes of goods. These services haven’t been flexible or cost-effective for rapidly growing retailers, eroding any value of outsourcing and creating a perception that fulfilment services are unobtainable for them. This is no longer true.
Rather than specifying rigid minimum order quantities, fulfilmentcrowd offers flexible options that aren’t dictated by volume. Instead of traditional ‘off-the-shelf’ tariffs, retailers can opt for simple pricing structures according to the quantity of goods they are selling. This level can be easily scaled up in line with growth and is backed up by a network of centres and partners across the UK, Europe and internationally, as well as innovative cloud-based software and a mobile app.
Expansion overseas can be achieved quickly and affordably, with retailers able to retain full visibility of customer orders. The status of products can be easily tracked via the mobile app, enabling retailers to effectively manage international growth without huge investment in technology and infrastructure.
*Longitudinal Small Business Survey: SME Employers UK 2020, released 18th Aug 2021 by the Department for Business, Energy & Industrial Strategy.