Meeting the duties and taxes requirements of each country can be one of the most confusing and frustrating parts of an international e-commerce expansion. But both are inevitable factors that are part of any successful cross-border growth strategy.
For every international transaction, brands’ localized websites must support the calculation of any applicable taxes and duties. And these calculations need to be conducted in real time in the background, ensuring that if duty/tax is pre-paid by the customer, the full price is accurately displayed so that the customer understands how much they’re paying. Or at the very least, brands need to communicate to their customers how duty/tax is being paid so that customers aren’t surprised with an extra bill later upon order delivery. This can result in refused deliveries and returns, ensuring that your customers will never buy from you again.
Clearly displaying duty and tax on your site in important, either on the product detail page, at checkout, or in both areas. And while shoppers in many markets where customers prefer to prepay duties and taxes, there are cases where shoppers prefer to pay these fees later and not at the point of sale. According to our research, roughly half of cross-border apparel shoppers in India, for example, responded that they preferred to remit taxes upon product arrival. In this case, a brand might want to consider the preferences of the local audience and let the customer choose how they pay duties/taxes for their order.
In many of the top e-commerce markets, taxation and duty collection continue to be friction points that can negatively impact a customer’s purchase process. Our research shows that in popular markets such as Canada, Brazil and Australia, taxes and duties ranked as one of the top three most common barriers to cross-border shopping among those who choose to never shop outside of their home country.
It makes sense. Brands and consumers can be caught off-guard by such unexpected costs. So, imagine how your international customer feels when these expenses are sprung on them at the last mile.
Brands who are new to cross border e-commerce may be unfamiliar with some of the other cross border cost considerations. For example, different countries may have a De Minimis threshold. This term refers to a country-specific threshold below which certain country-specific duties and taxes won’t be applied. It is important that e-commerce merchants are aware of the De Minimis thresholds in each global market. Brands will also need to factor in the cost of items that exceed the threshold in real time on their site, at an order level, so that order totals falling below the benefit are not charged the duties or taxes fees.
By communicating the complete landed price to the customer prior to placing an order, savvy cross-border retailers empower international consumers to make an informed purchase decision that does not lead to surprise costs and, ultimately, a poor customer experience. Being transparent about these costs can remove barriers to making purchases, build brand loyalty, and ensure smooth sailing through customs, so items are delivered on time.
Don’t let international taxes and duties ruin your international e-commerce customer’s experience. Contact a Flow expert today to learn more.