Expanding your business across borders presents you with a huge range of new opportunities, the most important of which is access to a huge marketplace full of new customers, and therefore the potential to massively increase revenue. But before your business expands abroad, you need to ensure you have a robust plan in place for scaling your business internationally.
There are new challenges to overcome as an international business, and it’s important you have a plan to overcome them. For instance, not planning for the increased pressure international deliveries can create for your shipping department can lead to significant delays and customer dissatisfaction. Similarly, neglecting your cross-border tax compliance can mean incurring financial and legal penalties, which can jeopardise your expansion as a whole.
Avalara is helping businesses to launch into new markets with ease. We’re dedicated to helping you overcome the challenges of expansion, wherever your business operates. In this article, we’ll look at why expansion is a good choice, and how automation can help you expand successfully.
The rewards of cross-border trade
Why trade across borders? For the most part, brands want to expand their customer base. Selling internationally as an ecommerce brand can get your business in front of the approximately 2.14 billion consumers worldwide who shop online.
If you’re solely a retailer (i.e., you don’t manufacture your goods, and instead sell products from branded manufacturers), breaking into new markets can be difficult, but not impossible. A big part of succeeding internationally as a retailer is offering products that consumers can’t purchase in-country. As such, consider your products carefully — expanding abroad might mean focusing your marketing on certain goods, or introducing a new offering for the international market.
Retailers may also face lower margins when selling internationally, due to increased expenses within their supply chain. However, the costs will likely be balanced by the increased overall revenue they’ll earn by selling in a larger market with many more customers.
Getting your finance team on-board with an expansion may require some persuasion — they will likely ask why the business should spend a considerable amount of money to sell across borders. The simple explanation is that there’s a lot of potential in overseas markets. There are more customers, there’s more money to be made, and there are more opportunities to build your brand’s story.
Testing the water in new markets
If you’ve investigated the many benefits of expansion, but you’re not convinced that expanding abroad is possible, you can always test the water as an online marketplace seller before attempting a full cross-border initiative. By selling through an online marketplace, your business will take on less risk.
As well as allowing hesitant businesses to try out cross-border trade, acting as a third-party retailer in an online marketplace can help those who are already dedicated to international expansion. Becoming a marketplace seller allows you to check the demand for your products in a foreign market before you begin trading there in earnest.
Keep in mind that selling through a marketplace comes with its own challenges, such as dealing with specific tax obligations. If you like the idea of investigating cross-border trade through an online marketplace, check out Avalara’s tax guides on the practice. There are separate guides for both the EU and the US.
Using automation for your cross-border initiatives
Automating cross-border tax compliance
If you’re set on trading internationally, working out how to stay tax compliant should form a core part of your planning. Automation can help immensely in this task. In its most basic form, having an automated tax compliance system means having a software tool that can calculate international tax rates, then automatically apply them to a customer’s total when they’re making a purchase.
When investigating how you’ll automate your compliance processes, be sure to look into how easy it is to implement into your existing tech stack. For instance, Avalara has more than 1,200 signed partner integrations for the most popular ecommerce platforms, accounting systems, and enterprise resource planning tools.
You can read more on how automation can support multinational business in our new whitepaper, ‘Scaling up your retail business’. You can also click here to find out more about how Avalara can streamline cross-border tax compliance.
Automating customs compliance
One particularly important role automation can play is in the application of HS codes onto your goods prior to shipping. A Harmonized System (HS) tariff code is a six-digit code used to calculate tariff rates for all internationally traded products. Global customs authorities require tariff codes for the classification of goods and services traded across the world.
Having the right HS code on your goods is a crucial aspect of customs compliance. For instance, an item with an incorrect code may be delayed while customs identify it, leading to a late delivery and an unhappy customer. Even worse, items with the wrong HS code are charged the highest possible customs duties, so incorrectly labelling your goods can cut into your profits.
If you frequently ship a wide variety of products in large amounts, it’s a smart idea to automate the process instead of relying on human employees. Avalara Item Classification uses an AI-based classification engine to quickly categorise products in any industry, from retail to manufacturing.
You can also read up on the Harmonized System and customs compliance in our dedicated guide: Are HS codes your business’ weak spot?
Build an automated tax compliance system with Avalara
With Avalara’s help, you can make any international expansion a success. Whether your business needs a little help with tax calculations or you’re looking for a full suite of digital solutions to support your international sales, we’re here to help.
Interested in getting started? Contact us to speak with one of our experts today.