In the first issue of the Cross-Border Magazine, Franck Boniface, VP Legal and Payments at Vestiaire Collective, talks about the company’s expansion strategy to the US. “The UK was the first country we really developed and we see it as a test before going elsewhere. The UK office also served as a stepping stone to the US, a market we felt a match with from very early on. We had clients from the US from the beginning. However, we saw other French companies struggle overseas and we did not want to underestimate the challenge.” Vestiaire Collective ultimately chose a 2-phase approach, starting off with a few local people without investing too much. Boniface: “We pursued this strategy for a period of 2 years, without too much marketing. Then we found our country manager and we set in a real push. We moved towards being active instead of being a market observer.”
The market, mature and complex, is at the same time full of opportunity and challenges for European online sellers. We summed up some tips and insights for you:
1) A clear USP
The US e-commerce market is at the global top: 173.6mn online shoppers, a yearly turnover of $595.12bn and an average per capita expenditure of $3,428 per year, that clearly exceeds what we see in Europe. The US is home of a wide range of very successful international companies, and has brought forward many global milestones of technology and digital development. All this shows the maturity of the market. Consequently, the consumer is used to high industry standards. Succeeding in such a mature market demands a clear USP and a strong service proposition.
2) Be aware of the diversity
Compared to Europe, the US has two major advantages for retailers: There is only one (major) language and one single currency for 315mn inhabitants. However, due to its size and regional differences in climate, landscapes, living conditions, culture and traditions, there still is a great diversity. In addition, the US is a federal state and the central government shares competences with state and local administrations. This leads to a great diversity in policies throughout the US, which can have a substantial impact on retailers selling in several parts of the country. A good example is the application of sales tax, which will be discussed later on in this blog.
Another fact to take into account is that in some areas, large parts of the population are Spanish speakers (an estimated total of 12.4 percent). This is a substantial group which might be worth targeting: According to PayPal/Ipsos[i], 35% of American online shoppers would rather buy from a foreign site if the offer was in their native language.
3) “If you can’t beat them, join them”: Marketplaces
It’s not for free, but it can be a very valuable marketing- and sales channel in the US. Sellers can test the market with a relatively low business risk; they can launch some of all of their products or use the marketplace as a complementary channel to their website, flagship stores or other sales channels. According to PayPal/Ipsos, 64% of American online shoppers has indicated that they would rather buy from foreign sellers via large, well-known platforms because they trust them and feel assured about the service levels.
4) Delivery: Better free than fast!
American customers are demanding, also when it comes to the delivery of their orders. However, price is a little more important than speed: Whereas 47% would refrain from a purchase because the delivery costs appear to be higher than expected, 50% would choose to buy from sites that offer free delivery. Free returns would motivate 38% of American respondents to order from a cross-border website. Only 35% base their choice for a webshop on delivery speed, 38% would abandon an order because delivery expectedly takes too long.[ii]
5) Don’t let sales tax give you headaches
European sellers are used to VAT, but US sales tax is a different prospect entirely. With over 12,000 taxing jurisdictions throughout the US, each empowered to alter rates and rules, leading to 100,000+ rules and boundary changes annually. International businesses selling in the US are not required to collect sales tax in a state unless they have ‘nexus.’ Nexus is defined as a connection or business presence in a state or jurisdiction. If you have nexus in a state, you need to collect and remit sales tax according to their regulations. Activities leading to having nexus vary per state and can include activities such as opening offices, stores or franchises, storing items in warehouses or even attending meetings or tradeshows. Make sure you sort this out carefully to avoid complications.
Want to learn more? Tax specialist Avalara is featured in the Cross-Border Magazine with an article about tax! Order the magazine for free following this link.
Luckily, there is loads of research and insights on selling in the United States. Here are some interesting sources for you to explore:
[i] Paypal Cross-Border Consumer Research 2015 by IPSOS: https://www.ipsos-mori.com/Assets/Docs/Publications/ipsos-paypal-cross-border-consumer-research-2015.pdf
[ii] Paypal Cross-Border Consumer Research 2015 by IPSOS
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