It's inevitable. E-commerce companies can’t limit themselves to domestic sales forever. International demand is growing. Ninety-five percent of the world’s market is outside the US. A simple look at one of the website analytics tools (e.g., Similarweb, Google Analytics) will show visits from international buyers. I’ve worked with companies claiming they don’t have any interest from international buyers only to find that 40% of their web traffic is coming from foreign IP addresses.

Many companies aren’t logistically prepared to serve the international customer pool and simply refuse those orders. Others have decided to give it a chance, ship without any preparation, experience failure, and give up. The tools and expertise are now available to support international e-commerce, and it’s becoming more and more common for online sellers to successfully balance a positive customer experience while still complying with international regulations. There are two aspects companies should address to achieve that success. The first is to manage costing mechanisms. The second is to ensure they meet regulatory requirements.

Managing International Costing Mechanisms

Everyone is aware that international transportation is expensive. It’s difficult to sell a $20 item and then quote $40 for shipping, and even then, that basic transportation cost doesn’t include other fees. Too many times, online sellers ignore those additional fees that make up the total cost to deliver, or “landed cost.” If a seller ships with those additional fees as the responsibility of the buyer, then those additional costs must be clarified on the website. A typical VAT charge in Europe adds 20% to the cost. An added carrier administrative fee could be another $20. With various fees, that cost can become substantial. Many small online sellers have been forced to pay for returns or abandon shipments altogether because the buyer was presented with an unexpected cash on delivery (COD) charge and then refused the shipment. Retail buyers, like many small online sellers, just don’t anticipate the expense of international shipping.

A seller might take responsibility for those costs in an effort to boost international sales. That’s good for customer service but the seller could easily end up losing money on those orders. A company that I worked with was quoting international buyers $200 in delivery costs, but we found that they were actually paying $1,200. Sales numbers were wonderful, but at the expense of the shipping department. The two departments didn’t communicate and reconcile total order cost.

Meeting Regulatory Requirements

Regulation of exports begins before a shipment has even left the US. For various reasons, the US government will prohibit sales to specific individuals, entities, or countries. This isn’t just for companies shipping weaponry or encryption. Foreign businesses, schools, and individuals appear on a Consolidated Screening List issued by the US government. There are also a few countries that are embargoed. An attempt to ship to one of those entities is illegal and fines are large.

Another consideration before an order even enters a foreign country is local law. Retail buyers will sometimes order materials knowing they aren’t allowed in the country. Countries will prohibit imports on the basis of religion, safety, local compliance, import licenses, or health standards, among other reasons. I recently worked with a company trying to get nutraceuticals into the EU. Sales in the US were very straightforward, but the EU had a different approach and disallowed them.

If a product makes it to the destination country, the importer of record (IOR) is legally responsible for the import. In the case of the nutraceuticals example above, customs might want to know the creatin content of the product. In a retail sale, that would be the end-user who has the responsibility as the IOR. Those retail buyers are likely incapable of answering those specific customs-related questions.

When a shipment gets rejected or the seller wants to return the order, the seller must now manage international returns. Not only is it more expensive to have the return shipped back, but sellers must also determine what to do about any duties and taxes that were paid on the original order. Those earlier fees could go unrecouped even though the sale was incomplete.

Thankfully there are solutions to all the issues above, although they require thorough planning. When it comes to responsibility for cost, I’ve mentioned that communication is key. It's always best to ensure customers are clearly informed on the website of what fees they’ll be paying. It’s not uncommon for a seller to now provide calculators for landed cost and have the buyer pay those up front. That improves customer satisfaction and lowers the rejection rate. In-house developers can use various APIs to create those tools or there are a number of vendors that offer tools for landed-cost quoting (e.g., Zonos or Borderfree).

An online seller might find it advantageous to create an entity to serve as an IOR if they receive sufficient orders form a particular country or customs territory such as the EU. This shields the buyer from visibility to any of the customs issues. The buyer simply becomes the receiver of a parcel. Becoming an IOR can be done by opening a physical presence in the destination market, contracting with a local fiscal representative, or in some cases opening a virtual, non-resident importer entity. Taking the IOR route is a large commitment but does eliminate many of the customer-facing problems created with online international retail sales.

Information on these topics is becoming more and more accessible. Publications such as this one and events such as the recent PARCEL Forum can provide tips. The US government offers local assistance through the US DOC Commercial Service. There are also District Export Councils, state trade offices, and Small Business Development Centers that are all prepared to help. The carriers and brokers a company is already paying are also positioned to provide support. These service providers all have specialists in online transactions.

The first crucial step a company can take is to come up with an international plan. They shouldn’t wait until they have a number of international failures, but rather develop policies and a programmatic approach before embarking on selling internationally. Those plans should be developed at a high level of expertise. I’ve seen companies lose several hundred thousand dollars allowing shipping clerks with little experience to make these decisions. However, it’s crucial that the planning includes the clerks that will be doing the actual work, as I’ve seen great plans never make it down to the shipping department. Moreover, those plans should be documented and updated regularly as people and regulations change.

I’ve seen too many companies have frustrating international sales experiences when solutions could have been easily found. Be knowledgeable, determine how engaged you want to be, and ensure everyone knows their responsibility.

Shawn Levsen is a customs broker with over 20 years in global supply chain sales and Chair of the National Association of District Export Councils.