If you have an ecommerce business, one way to expand as a brand is by offering cross-border shipping. We’ve put together a guide with everything you need to know about how cross-border shipping can help you grow internationally.
What is cross-border shipping?
When a company decides to sell its products in another country, it has a couple of choices. You can choose to set up a warehouse in the new country to store your products, and ship internally. Or you can send out your orders from your existing warehouse in your base country. The latter is known as cross-border shipping.
It’s a decision businesses should think carefully about, but there are several benefits of choosing to do cross-border shipping. These include:
- Cost-effectiveness: It can be expensive to set up in another country. Rather than paying to store your stock in two locations, you’ll just be paying to hold stock in your base country.
- Fast reaction times: If only business always ran smoothly! We know that business doesn’t always go to plan! If any supply chain issues arise, it should be faster and easier to deal with if everything is in one place.
- Easier management: It can be easier to manage your business when all of your stock, staff and orders are all in the same location.
Things to consider
However, cross-border shipping isn’t without its challenges, particularly when you’re just getting started with it! There are a number of things to think about before you start shipping internationally. You want to ensure that your site is tailored to customers in your target countries, so they don’t feel alienated or are put off ordering from you. Things you need to consider include:
- Localising the content on your website so it’s tailored to customers in the countries you’re planning to ship to
- Review competitor pricing in your destination country to ensure you’re not over or underpricing your products to your new market. Update your products up your ecommerce store so that they’re in the relevant currency.
- Customers in other countries may typically pay by different methods than users in your own country. Consider offering different payment options to appeal to your target market.
- Deciding on an international returns policy. This should be prominently displayed on your website.
- Consider which shipping carrier or carriers you’re going to use to fulfil your international orders.
- Remember that international shipping will take longer than local shipping. You need to be transparent about this with your customers, and ensure accurate information is included on your website and in your email notifications.
It’s also important to anticipate potential difficulties when it comes to planning your international shipping strategy. It’s important to understand how cross-border shipping can help you grow internationally, but part of that is knowing what issues might arise and how to prepare for these potential drawbacks. The challenges you need to be aware of include:
- Laws and regulations around international shipping. Make sure you understand what laws might affect your cross-border shipping. Find out in advance whether you need any specific documents permitting your company to ship internationally.
- Handling returns. This can be expensive, so how will you tackle it?
- Import duties and taxes. You can let your customers pay duties, which will increase the overall price of the product. Or you can cover the costs as a business, which is more expensive for you but a better option for customers.
What are the advantages of cross-border ecommerce?
You might be asking yourself if expanding your business internationally is worth it. There are certainly plenty of advantages! Let us tell you how cross-border shipping can help you grow internationally:
Explore new markets
Expanding your business internationally opens you up to new markets. This could be hugely beneficial for expanding your customer base and increasing your brand awareness globally.
Bigger audience = bigger revenue
The more countries you ship your products to, the more potential there is to grow your brand. This can increase your revenue, and allow you to serve more happy customers.
Increased product interest
Product demand varies from country to country. So if you have a particular product that doesn’t perform very well in your home country, there’s nothing to say that it might not be a bestseller in a new destination. Shipping internationally can be a good opportunity to try out new product lines and see what works best for different customers.
Continental and extra-continental cross-border shipping
There are different considerations to take into account depending on whether you’re shipping within the EU, or outside the EU, as the regulations are slightly different. How cross-border shipping can help you grow internationally will vary from region to region, but here are a few pointers to remember.
Shipping within the EU – EORI number and EFTA
If your business is based in the EU and trades internationally, it must be registered with the national authority of the country in which it’s based, and have an EORI number.
An EORI number is an ‘Economic Operators Registration and Identification Number’. It’s a system of unique identification numbers which are used by customs authorities throughout the EU.
There are some countries, specifically Norway, Switzerland, Iceland and Liechtenstein, which are part of Europe but aren’t in the European Union. These countries have a special trade agreement with the EU as another customs union called the European Free Trade Association (EFTA). If you’re shipping to these countries, you need to declare your goods at customs and provide a commercial invoice.
Shipping within the EU – VAT
Currently, if your business is based in the EU, and you’re selling goods to customers in another EU country, you usually need to register your business in that country and charge VAT at the rate applicable there. This doesn’t apply, however, if the total value of your sales to that country falls below the limit set by the country for the tax year. Every EU member state has a different tax threshold.
The European Commission aims to simplify VAT obligations for companies that are carrying out cross-border sales, ensuring that VAT is paid correctly to the Member State of the customer. The proposed new rules will benefit businesses, as there will be a substantial reduction in cross-border VAT compliance costs. This means it’ll be far less costly to trade across borders.
It also means that EU businesses will be able to compete on an equal footing with businesses from outside the EU, which don’t have to charge VAT.
Shipping outside the EU – CN22 & CN23 custom forms
If you’re shipping goods outside of the EU, there are two customs declarations needed: the CN22 form, and the CN23 and CP71 forms. These forms provide information about what’s included in the package. Customs officials need these so they can determine what import duty to apply when the package crosses the border.
The CN22 and CN23 are different, and which one you should use depends on the weight and value of your package:
- Packages weighing up to 2kg, with a value of up to €425 need a CN22 customs declaration
- Packages weighing 2kg-20kg, with a value of €425 or more need a CN23 declaration
If you’re using a CN23, you also need a CP71 dispatch form. This should be used like an address card on the outside of the clear documents wallet. It doesn’t show the value of the individual items in the package.
Threats and opportunities of cross-border shipping
When you’re considering how cross-border shipping can help you grow internationally, it’s important to be aware of the threats and opportunities to your business.
What are the threats of cross-border shipping?
- Lost packages
- Expensive returns
- Customers paying in foreign currencies, and having to deal with exchange rates and potential fees when exchanging currency
- Complex laws to get your head around regarding what you can and cannot send to different countries
- Some items you sell may be restricted or prohibited in other countries, meaning you won’t be able to sell them – or if you do mistakenly sell them, there could be issues with customs, and refunding customers
- Every country has different tax regulations, so it can be tricky to keep on top of it for each country you’re shipping to, particularly if you’re operating both within and outside of the EU
- Customers may still expect free shipping even though you’re posting from abroad, making it difficult to strike a balance between making a profit and keeping customers satisfied
What are the opportunities of cross-border shipping?
Cross-border shipping offers a fantastic opportunity to take your business into brand new markets. The number of consumers who are using their spending power to buy internationally is increasing. A study by UPS found that 83% of shoppers in Canada have bought from ecommerce stores in other countries, as well as 81% of shoppers in Brazil and 78% in Mexico. In the USA, nearly half (47%) of all shoppers had purchased from stores outside of the country.
As long as you’re offering great products at a great price, do customers really care where you’re based?
How to track your international shipments
As international deliveries can take longer than domestic ones, you’ll want to know that your package is safely on its way to your customers. International tracking gives both you and your customer peace of mind that everything is on track. If something does happen to go wrong, then it’s easier to notify your customer and find out where the parcel is if you have tracking in place. This leads to fewer delays in delivery times, and it safeguards against parcels getting lost in transit.
ShippyPro offers a Track & Trace service which automatically sends out shipping notification emails to keep your customers up-to-date on the status of their order. From one easy-to-use dashboard, you’re quickly able to see whether there are any issues with late shipments, allowing you to reach out to your shipping carrier to identify what the issue is. You can also proactively email your customers to notify them of the issue before it becomes a major problem.
The ecommerce businesses already using Track & Trace have found that there’s been a 78% reduction in tracking enquiries. That leaves you with a lot of extra time to focus on growing your business, and learning more about how cross-border shipping can help you grow internationally!
What does making international returns involve?
International returns don’t have to be the headache that you might think they are. There are a few different options that you can give to your customer to make things easier, both for them, and for your business.
Pre-paid returns labels
One option is to provide a pre-paid returns label so your customers can quickly and easily return their unwanted items. This choice is convenient for customers and can help to improve their experience of shopping with your brand, safe in the knowledge that even if what they order isn’t quite right, they can just pop the returns label on it and send it back.
However, it can be a costly option for you as a business, and you will need to have a contract with couriers in each country that you sell too. If you sell lots of different products, which are all of different sizes, weights and values, the logistics of pre-paid returns can be tricky, and the costs can be quite high. On the other hand, if all of your products are of a similar size and value, then you can work the average cost of returns into your margins.
Write the item off
If you want to avoid the logistics of returns altogether, you could simply write off the cost of the return, and let your customer keep the item. Obviously, this isn’t an ideal option! It leaves your business out of pocket. It leaves you open to customers who might take advantage of this generous approach.
Let the customer post the item back and refund them
Another option is to ask your customer to post the item back to you and then refund their postage costs once you’ve received the item back. However, with international returns, this can take a long time which can lead to unhappy customers. That’s not good for your brand’s reputation. Customers shouldn’t be left anxiously wondering whether their item has reached your business and when they’ll get their money back.
ShippyPro Easy Return
Easy Return is a better way of managing reverse logistics challenges. You can easily manage customer returns by creating a return portal and embedding it in your website. Set up your return policy and customise returns rules. You can choose not to accept returns after a certain date, for example.
Once you’ve embedded it on your website, the self-serve portal is live and you can accept or refuse returns. Your customers can print their shipping label in one easy click, with instructions on what they need to do next.
The dashboard also offers return analytics, helping you to understand why your customers are returning products. This means you can fix any recurring issues and improve the shopping experience for your customers.
Adopt a multi-carrier strategy and rely on the right partners to succeed in cross-border shipping
One key aspect of how cross-border shipping can help you grow internationally is when you partner with the right shipping carrier. Choosing the right carrier, or carriers, for your business can really help to improve the customer experience, growing your brand and increasing your global customer base.
How to choose the right shipping partner
There are a few key factors you should take into account when choosing a shipping partner. Think about the following points:
- Shipping options offered: Even when buying internationally, customers often want free or fast delivery. Carefully consider what shipping options can be offered with your chosen carrier. Usually, customers prefer to have multiple options so they can choose the one that best suits their needs.
- Cost: What’s the cheapest way of shipping internationally? Postal carriers can be cheaper but are often slower. Specialist regional carriers may be faster, but they’ll also be more expensive for cross-border shipping.
- Customs and duties options: Do they offer Deliver Duty Paid (DDP) rather than Deliver Duty Unpaid (DDU)?
- Customer service: What is the carrier’s reputation for customer service like? Are they quick to respond to customer enquiries? Are their ratings good, or are there a lot of customers complaining online about lost or late packages?
- Support from carrier: Does your carrier work with customs clearing agents for the countries you’re looking to expand to? If so, you’ll benefit from their help in clearing customs more easily. This is a plus as it can be a tricky thing to navigate when you’re new to it.
Rather than relying on one carrier for all of your shipping, you could consider using multiple carriers. This reduces the dependency on a single carrier, which can be particularly useful during peak periods like before Christmas.
If you use multiple carriers, you may be better able to negotiate rates between them, getting a better deal for both you and your customers.
Can local distribution be an alternative?
As mentioned at the start of the article, an alternative to cross-border shipping is local distribution. This option involves creating a local distribution model. You’d set up a warehouse to store your goods and manage deliveries within the country you’re selling to. This can reduce shipping times, as your stock is kept in the same country it’s being shipped to. However, it can be tricky to estimate supply and demand. You must look at this carefully to ensure that you’re neither over nor understocked.
Operating an international warehouse
One option you might want to consider when it comes to cross-border shipping is operating your own international warehouse.
If you choose to operate your own warehouse, then you’ll need to invest a significant amount upfront for somewhere to store your products. If you plan to ship a high amount of goods to one particular country, then having your own warehouse is a good option as it gives you control over every aspect of the fulfilment process.
Rather than operating your own international warehouse, you might choose to outsource all or part of your supply chain management. If you choose to go down the third-party logistics (3PL) route, you can expect the following services:
- Storage: Your goods will be stored in a warehouse in the country of your choice
- Service: 3PLs unload goods from containers, add tags and barcodes, pick orders, process returns and offer a warehouse management system
- Freight: Fulfilment of orders
Using 3PLs takes a lot of work off your hands, but there are risks involved. You’re handing over a key part of your customer experience over to another company. If anything goes wrong, like shipping delays, then customers will turn to you for answers – which might not be easy to provide since you’ve not been involved in the picking, packing and shipping process. It might also take longer to resolve quality control issues if your inventory is stored in a different location to your business.
Inventory exposure risk
There’s also the risk of holding onto inventory. This comes from the cost of storing your products, as well as the cost of any spoilage and products becoming outdated.
It can be difficult to predict what the demand for your products in other markets will be. This means you can leave yourself open to inventory exposure risk if demand is lower than anticipated. If you opt for cross-border shipping rather than local distribution, your inventory exposure risk will be lower.