Tapping into the lucrative EU market can be a great way to grow your business and increase profits. However, it can also be a daunting prospect, especially if you’re a UK seller. With Brexit, there are many new challenges to consider, including customs, tariffs, and VAT.
In this article, we’ll offer some advice about how to get your business expansion underway and gain more customers by distance selling in Europe.
Key Takeaways from this Post
What are the benefits of an EU business expansion?
The EU has 27 Member States, some of which offer the largest and most promising e-commerce markets in the world. European e-commerce is projected to reach US$730.30bn in 2023, making it the ideal market for anyone considering a business expansion. Here are just a few reasons why you should think about selling within the EU:
Access to a larger market
A business expansion into the EU gives you access to a market of over 447 million people. This means an increased customer base and more opportunities to sell your products and services.
Removal of trade barriers
Distance selling within the EU allows for free trade and the removal of customs duties and other trade barriers between EU countries. This makes it easier to import and export goods and services to EU customers, leading to cost savings.
Improved supply chain
With a business expansion from the UK into the EU, you can establish a supply chain within the EU, reducing the time and cost of shipping products and materials from the UK.
Having access to EU markets and customers means you can diversify your business and reduce the risks associated with relying on one market. Such a business expansion can also help to provide stability during economic downturns or changes in regulations.
How to grow your business in the EU
If you’re looking to expand your business and increase your sales, the EU single market offers almost endless possibilities. However, it's important to do your research and make sure you have a solid business plan in place before starting your business expansion. Here are some steps you can take to successfully expand your UK e-commerce store into Europe:
Understand the rules and regulations
The first step in distance selling goods to the EU is understanding the rules and regulations that apply to your products. This includes regulations around product safety, labeling, and certification.
You also need to consider customs and import/export regulations, as well as any specific rules that apply to the country or countries you sell goods to. You must ensure that you’re fully compliant with all relevant regulations before your business expansion can get underway.
Consider customs declarations and tariffs
UK companies now have to make customs declarations when exporting goods to the EU single market. They may also be subject to tariffs on goods exported to the EU, depending on the type of product and its origin.
The UK and EU have agreed on a free trade agreement (FTA) that eliminates tariffs on most goods, but some products may still be subject to tariffs so make sure you check whether your goods are tariff-free.
Research existing markets in the EU
When expanding into any new market, it’s important to do your research. Before beginning your business expansion, you need to understand the buying habits of your potential customers, as well as the competition.
Look at your competitors' websites, see what they offer, and how they market their products to customers. Find out what the trends are in your industry in Europe, what’s popular, and what’s not. You should also be thinking about your brand identity and how it translates to a European market.
Decide on a strategy
Once you’ve researched the market, you need to decide on a strategy. There are two main ways to expand into Europe: using a third-party distance selling platform or setting up your own online store.
Using a third-party platform, such as Amazon or eBay, can be a quick and easy way to grow your new business within Europe. These platforms have a large and ready-made customer base, so you can start to sell to them straight away. If you’re already a seller on any of these platforms, you’ll find your expansion into the EU to be far smoother than if you were starting from scratch.
Alternatively, you can set up a dedicated online store, if you haven’t already. This will give you more control over your business, but it will also require more investment in terms of time and money. You’ll need to create a website, find a payment gateway, and deal with shipping and handling for customers.
Register for EU VAT
The process of undergoing a business expansion comes with great opportunities, but also with administrative work. You have to keep in mind that you’ll need to meet each EU country's individual VAT obligations if you want to reach their millions of potential customers.
You’re no doubt familiar with the tax and VAT compliance requirements in the UK, but what should you do if you want to sell beyond the UK’s borders and reach new markets and potential customers in the EU?
Companies may be required to register for EU VAT in the Member States where they have customers. This is likely to be the case when:
● Your company sells or buys products in the given country.
● Your company exports products abroad from outside the EU or imports products from another EU member state.
● You sell products from foreign warehouses.
● You move your products across borders within the EU (with some exceptions).
● You deliver products to foreign end customers (B2C delivery of goods).
Employing the services of a specialist tax compliance company such as Taxually is the easiest way to deal with your EU VAT obligations. Even though each country has its own VAT rates and regulations, Taxually can help you register and comply with all tax authorities, taking care of the paperwork so you don’t have to and letting you get on with your business expansion.
Apply for an EU EORI number
UK companies will need an Economic Operator Registration and Identification (EORI) number when they sell goods to the EU. The EORI number is a unique identifier that’s used to track and record customs information for any business engaged in cross-border trade. UK businesses now need a separate EORI number for the EU (their UK EORI number is no longer sufficient).
Since the UK left the European Union on January 1, 2021, it’s now considered a ‘third country’ for customs purposes. This means that any goods being exported from the UK to the EU will need to clear customs and be subject to customs checks and procedures.
Companies not established in the customs territory of the EU are required to apply for their EU EORI number in the country where they will carry out their first import or export. Specialists like Taxually can also help with this process.
Comply with data protection requirements
UK companies may need to comply with EU data protection laws to sell goods to the EU. This includes complying with the General Data Protection Regulation (GDPR).
Manage your inventory and cash flow
Managing your inventory is key to a successful business expansion into Europe. You need to ensure you have enough stock to meet demand, but not so much that you end up with a surplus.
You also need to be able to track your inventory accurately, so you know when you need to restock. Again, you can take care of this yourself or use a fulfillment service such as Fulfilled by Amazon or Spocket.
Before you think about a business expansion into the EU, remember that cash flow is also an important consideration. This is because there are many unique factors that can impact your cash flow when entering a new market, such as changes in exchange rates, taxes, and regulations.
Offer multiple payment options
To expand into Europe successfully, you need to offer multiple payment options. Different countries in Europe have different payment preferences, so you need to be able to accept a variety of payment methods. For example, in Germany, many people prefer to pay by bank transfer, while in the UK, credit and debit cards are more popular.
Choose your shipping partners carefully
Shipping can be one of the biggest challenges when it comes to a European business expansion. You need to choose your shipping partners carefully to ensure that your products arrive on time and in good condition. Look for partners with a good track record, and make sure they offer tracking and insurance.
Offer multilingual customer support
Finally, it’s important that your e-commerce store offers multilingual customer support within the EU. You should be able to communicate with your customers in their own language and able to handle any queries or complaints effectively. This will help to build trust and loyalty among your European customers.
Get your business acquiring customers in the EU
Of the world’s ten richest countries, six are in Europe. The EU single market offers huge potential for business expansion, but it can be difficult to know where to put your efforts and focus first. Here are a few suggestions to help get you started:
As the largest economy in the EU, Germany has a strong consumer market with a high proportion shopping online. It’s also known for its high-quality products, so if your business offers premium goods, Germany could be a good fit.
France is the second-largest economy in the EU and has a diverse consumer market. It’s also known for its high-end fashion and luxury goods. If your e-commerce store operates in these industries, France offers excellent possibilities.
The Netherlands has a small population but a high percentage of online shoppers. Dutch consumers tend to be open to new products and are interested in sustainability. An estimated 90% of people in the Netherlands can speak English, making it a great way to test the EU-consumer waters before taking your EU business expansion further.
The Nordic countries
Comprising Denmark, Sweden, Norway, Finland, and Iceland, the Nordic countries are known for their high quality of life and consumer spending power. They also have a strong focus on sustainability and ethical consumerism.
Start your e-commerce business expansion today
With the right approach, there’s no reason why you can’t successfully grow your business in Europe. Your business may face new challenges in this post-Brexit world, but they needn’t be a barrier to success.
Whether it’s dealing with exports, or sorting out your EU VAT obligations, there’s always help at hand thanks to the many professionals who specialise in these areas.
Let the VAT compliance experts help with your business expansion. Book a call with Taxually to find out how.