Cross-border trade (CBT) can be a daunting prospect, but there’s never been a better time to expand your e-commerce business abroad. To help you decide where you should take your business in 2015, we’ll be sharing insights and tips into some key regions that should be on your international expansion radar. Over the coming weeks, we’ll look at the US, Australia, China and Brazil. Today, let’s kick things off with Germany.
Germany is a great place to develop a lucrative new customer base. According to recent research, it’s the fastest growing online commerce market in Europe. Germany has excellent logistics networks, and its consumers have wholeheartedly embraced the world of online shopping. In fact, the country saw online sales reach record levels of over 40 billion euros in 2014. And with spend per household still relatively low, it looks like there’s plenty of room for growth.
Marketplaces: Like any country, Germany has its particular nuances that you should be familiar with if you want to be successful there. Germany’s key online marketplaces are eBay, Amazon, MeinPaket.de, Zalando and Rakuten.de. EBay is an ideal marketplace for selling into Germany if you’re new to cross-border trade. EBay recommends starting out with basic international selling to gain visibility abroad – and making it clear that you’ll ship to German customers. Once you’re comfortable with your status as an international trader, you can move on to more advanced international selling: listing directly on eBay.de. When listing directly to eBay Germany, you’ll be able to tailor your listings directly to the German market. According to eBay, direct listings can generate up to eight times more revenue per listing compared with simply offering to post items from within a domestic setting.
Your Amazon account is automatically set up to allow you to sell on Amazon.de. The marketplace’s Build International Listings feature automatically creates and manages offers and monitors exchange rates to adjust pricing, making the process simpler and more cost-effective.
Other marketplaces to consider include Zalando, a well-known German company that saw sales of 1.76 billion euros in 2013. Rakuten.de offers you the option of creating seller-defined storefronts and gives you marketing tools to help build customer loyalty. MeinPaket.de is operated by renowned global shipping provider DHL, so you can expect top-notch delivery solutions as well as payment protection and reasonable commission rates.
Payments: PayPal is very popular with German online customers, with over 84% of overseas online purchases being made in this way. Unlike UK buyers, German shoppers are far less likely to pay using a credit or debit card and more inclined to favour invoices as a method of payment. This is a pay structure you may not have used before but definitely need to consider if you want to entice German online shoppers to buy from you.
Social Media: When you’re establishing a presence in Germany, take note of the fact that German consumers regularly engage with companies on social media sites. A reported 44% of Germans stated that they had Liked a brand on Facebook, so advertise your Facebook page whenever you can.
Fulfilment: Getting fulfilment right is crucial in building long-term lucrative relationships with your German customers. Returns in particular play a big part in Germany’s fulfilment culture, with 71% looking at returns policies before deciding whether to buy. EBay and Amazon can be useful when it comes to fulfilment, with eBay offering a Global Shipping Programme (GSP) and Amazon offering Fulfilment by Amazon (FBA). EBay’s Global Shipping Programme (GSP) offers you an easy and convenient way to list items on the German marketplace, with automatic shipping and import charges calculated for you. All you have to do is list your product on eBay and ship to a UK shipping centre. From then on, international shipping experts manage all aspects of delivery to Germany. This means you don’t have to worry about customs or logistics. Plus, there aren’t any hidden fees, leaving you free to focus on your business.
FBA’s tagline is “You Sell It, We Ship It” (from their expanding network of fulfilment centres around the world). You simply need to opt in to the FBA programme and store products in Amazon’s fulfilment centres. Amazon then picks, packages and ships them on, handling all aspects of customer service including enquiries, refunds and returns for you. FBA can also go beyond reducing your workload. Amazon states that 71% of members increased sales by more than 20%.
VAT: Lastly, think about taxation. The distance-selling threshold in Germany is currently 100,000 euros, and once you’ve exceeded that limit you’re responsible for paying VAT in Germany and filing German as well as UK VAT returns. The standard rate of VAT in Germany is 19%, with a reduced rate of 7%. The standard rate applies to most taxable goods, while nearly all food items, books and newspapers are subject to a reduced VAT rate. When it comes to your tax status, the bottom line is that if you’re not sure, speak to a tax expert.
Be on the lookout for the next post in our Local Insights series, which will discuss managing your expansion to new regions!
For quick tips and tactics to help expand your business internationally, download part 1 of our Agile Cross-Border Trade eBook.