Why it's now easier to sell in the US than in the EU
Selling to an international audience has never been easier. E-commerce has opened up the global marketplace, enabling businesses to target audiences globally. But despite this, until very recently, sellers have concentrated on their own backyard. UK sellers have always targeted the British Isles before slowly venturing into Europe, the 'unbreakable' reputation of America deterring many sellers from even trying to access the enormous potential of the US market. Bu that may no longer be the case. More UK ecommerce businesses are beginning to successfully target America over the EU. Why?
Why are UK ecommerce sellers moving away from the EU marketplace?
The answer here is relatively simple – trading in the EU is hard. While most e-commerce startups think that they should be focusing on markets closer to home because proximity should, theoretically, make trading easier, the reality is that the EU is one of the hardest markets to enter. Because, despite the much bandied 'single market' label, when you're selling to the EU, you're not selling to a single country, you're selling to the residents of each individual nation state. Europe is made up of 44 countries, 27 of them are within the European Union, and they all have their own rules and languages. This means a number of things.
Firstly, you have the matter of language. If you want non-English speaking customers to trust and buy your products, you're going to have to invest in accurate language translation for each one of them. But on top of that, you're also going to need the resources available to answer any questions that come in from those customers. And that can start to become expensive.
Secondly, you've got the admin. If you're selling on Amazon to a foreign market, for example, it makes sense to take the fulfilled by Amazon (FBA) approach and make use of their European distribution centres. However, before you can store goods in an FBA distribution centre, you have to register for VAT in the intended sales locations. So, if you were targeting a German customer base, you would have to register in Germany, Poland and the Czech Republic before you could even start selling. It doesn't cost anything, so you may wonder what the problem is, but it does take time and effort – and with the language barrier again in place, it may well require the work of a translator.
When you add in the German packaging reporting requirements, the administration and expenses begin to add up, making it pretty tough to turn a profit.
Is the US market any easier?
There's no denying that the US market has a fearsome reputation. But it doesn't necessarily apply to e-commerce. In fact, when it comes to online selling, America can be the best market to go into – for all of the reasons above.
We'll start with the obvious shared language factor. You may have to change a few 's' into 'z' and drop a few 'u' from your copy. But by and large, we speak the same language, which makes everything from contracts to customer communication so much easier.
And then there is again the question of admin. America may be the biggest market in the world, but its tax regime is the easiest to navigate. Using the same FBA approach, if you are a UK business then you can sign up to Amazon US and only pay taxes on your profit in the UK as if you were selling at home. You won't even have to register for or pay sales tax because Amazon deals with that for you. There are no incremental costs of compliance or additional admin to navigate – you're free to sell across the full 50 states and enjoy the benefits.
The only caveat to that is if you are selling via your own distribution centres in the US. If that's the case, things do become more complicated. You will have to monitor your sales tax thresholds in each of the 50 states and potentially register in many of them. While this is not as costly as registering in Europe it can be quite a burden. However, that only applies once you are making around 100,000 USD, depending on the state. And because of the phenomenal size of the US market, it can still be a very worthwhile venture.
When you're looking for a new territory to sell into, there are so many different things to consider. But if you're looking for an easier life, choosing a location with a shared language always makes sense. And if that location happens to have an easily navigable tax system and similar culture, it's the obvious market to opt for.
