Top 5 Strategies for Harnessing Cross-Border Commerce Success!

By 2021, the cross-border market will boom up to $1 trillion, as per recent Business Intelligence reports. There has been an exceptional rise in global purchases due to the ample reach, given by cross-border commerce along with its price and quality benefits. The driving force behind cross-border commerce has been the lack of access to goods domestically. Also, the better product pricing and affordable shipping contribute to its success. Thus, most of the consumers are turning to international vendors who are prevalent in local online markets.

Consumers in the countries like China and US import and export several products and services. For instance, people in China tend to everything from baby products to gadgets online owing to their lack of quality in some local markets. In response, merchants aim to expand their businesses to a global level, while making sense of the local sense, language, flavour, and preferences. They target the overseas market and expand their horizons to new global customers for obvious reasons.

Major Strategies that can leverage cross-border commerce benefits

Are you thinking about entering a new cross-border market or are keen to expand your eCommerce business globally? Here are some strategies you need to pay attention to.

  1. Select the market appropriate to your business

Do your homework. Determine who will be your international customers. Understand your product value in terms of their demands and your supplies. You can consider the following factors before finding the best product :

  • What is the condition of your selling product in the market?
  • Will there be a substantial growth of your business with your product?
  • Who are your competitors and your consumers?

Possibly, there is a solution for all your queries.

  • You can search for the most trending products on Reddit, Alibaba and more.
  • You can decide accordingly and refine your selection later.
  • Finally, dive into the data analytics to validate your idea.
  • Check out the competition in the global market on the basis of surveys and reports.
  • Analyze your sales and calculate the profit margin.

  1. Research on the trends in the international markets

A proper and efficient research always helps in providing effective results. For international markets, you have to be keen on the trending strategies and policies. You have to take into consideration the competitors, their product quality and the discounts they offer. You have to analyze your production rates and its corresponding market values. You have to focus on the product quality and its marketing so it can stand out in the international market.

You should not miss out on the data security and customer’s satisfaction. You can hire an international support in that case. These are going to be a real wealth of your company and its market value.

  1. Focus on the payment modes

There are multiple payment options available in the market. Some have global access, while some are limited to local markets. You have to be very careful and precise considering the most secured payment modes in eCommerce. The payment modes vary largely in terms of countries.

In order to successfully scale globally, you have to focus on integrating and accepting all payment options. But again, know what your target market prefers. You can always consider the standard secured payment options such as Visa, MasterCard. Later, as per the market and sales, you can add the appropriate ones. You also need to take account of the local currencies and conversions for cross-border markets. Most importantly, you have to promise the consumers about their money security.

  1. Be aware of the tax rules and regulations

This is the most important point when thinking about expanding your eCommerce across borders. You have to be well aware of the government taxes and how to apply them to your products. You have to investigate the custom duties charges and taxes. You have to inform about the additional charges to your customers.

You have to understand the free trade agreements before venturing to do business across the borders. You should also know the market policies and tax rules. Ultimately, these will be inclusive of the costs, packages, shipment of your product. Hence strategic pricing and quality based on local market conditions and competitions is highly important.

  1. Set up an International returns policy

When you think about the cross-border market, you ought to consider the international returns and policies. You have to understand the local laws and the overhead costs. You have to be transparent about the return fees or the restocking amount. Also, you have to be clear to your consumers about the full refunds or the store credits.

You have to consider the approaches for faster and secured refund options. For this, you can build partnership with the logistic services or set up a local returns center. These can offer a number of return options to the customers. This altogether, helps you manage and simplify the process efficiently.

Apart from all these, one also needs to take the ownership of the business. You have to upscale the entire process not as an individual, but as a team. So, it is better to appoint the right manpower, resources and logistics in the local region too. You should also focus on the technology and services for delivering a standard process. This will help your business get major visibility globally.

That said, to make an impactful start in the cross-border markets, you need to identify the right marketplace. This can help you earn cool profit margins for your global business.

Cross Border Commerce Taxes when selling to the US and China

Most countries embrace a VAT or GST tax system that defines how cross-border commerce works there. It is essential for entrepreneurs to get the tax rules and regulations sorted before doing business in a particular country.

Taxation for cross-border commerce in the US

United States is an OECD country that embraces a final sales tax system wherein sales tax is consumption tax based on the final transaction of the offerings – product or service.

More than 12,000 taxing jurisdictions apply sets of rules for specific products and buyer location. This makes it difficult for enterprises elsewhere to promote trade of their offerings in particular locations.

  • In US tax laws, ‘NEXUS’ describes a situation that showcases an out-of-state business with a physical presence in a US state and is required to pay income taxes and collect sales taxes within a particular state.
  • The Nexus determines the actions that a company needs to pursue in a state before it is supposed to pay taxes. As a foreign seller, exceeding $20,000 turnover or more than 200 orders is a requirement.

For example, if a particular buyer and seller are located in a US state, the seller can collect taxes for the buyer and remit them to the state. This applies even if both parties are in different US states, and the seller has some presence in the form of a warehouse or office in the buyer’s state. If buyer and seller are in different states, the buyer is required to pay sales tax to his state only.

Taxation for cross-border commerce in China

The Chinese Enterprise Income Tax (EIT) is levied on income gained by any Chinese enterprise that has been initiated and managed in China. This fact includes physical presence and even websites of foreign enterprises and any income sourced in the country.

China has invested in different rules related to new business dynamics so that it does not lose tax revenue. Online stores are required to register and disclose identification for taxation of e-commerce by the government.

  • In general, VAT is levied in China at 17%.
  • Other taxes applicable to goods sold in China include consumption tax along with taxes mentioned by PwC. One can look for a breakup of taxes from the General Administration of Customs of the People’s Republic of China website.
  • The State Administration of Taxation administers VAT, while the customs collect import VAT on their behalf.

While importing goods, the taxes applicable as mentioned by Dutycalculator.com include:

  • Duty Rates – Duty rates range from 0% to 100%, with average duty rate levied at 12.47%. Laptops and some electronic products are free of duty.
  • Sales Tax – Imported goods are subject to VAT at 17% or reduced rate of 13% for specific products
  • Minimum thresholds – Duty and VAT are charged when together they take up RMB 50 or the import is exempted from both taxes.
  • Other taxes and customs fees – Consumption tax is imposed on alcohol, petrol, jewelry etc. The rates vary from 1% to 45%. The taxes are calculated based on CIF value and its duty.

In recent years, the importance of cross-border commerce in China has grown drastically thus boosting online trading in logistics, customs, and shop registration. Several barriers have been significantly eased in many respects.

  • The government has launched pilot zones for cross-border e-commerce, in Hangzhou, Shanghai, and Chongqing. The Pilot Zone in Hangzhou tries to reduce online transaction costs by making use of VAT, postal tax and even export tax refund in some respects.
  • The country’s regulations for foreign investment in e-commerce have been liberalized off late. The regulations council has set a deadline in 2020 for China to achieve unified, competitive, and reliable e-commerce market. The government strives to lower the barriers to market accessibility, reduced tax burdens and proper streamlining of registration processes.

The Ministry of Industry and Information Technology has eased foreign ownership restrictions in cross-border commerce according to a note in 2015. To view a detailed report and rules and regulations of promoting cross-border commerce in China, check out the PWC China website.