Partner Blog | Considerations for cross-border selling in the Luxury Fashion sector

Partner Blog | Considerations for cross-border selling

In 2021, the global Luxury Fashion sector; including apparel and footwear, saw revenues of $106bn with further growth expected in the next 5 years. For UK based retailers this opens a huge market with the USA accounting for a huge portion of that revenue.

With the COVID-19 pandemic impact still dominating the high street, it is anticipated that the shift in consumer behaviour will see more and more shoppers continue to think digital, and it is imperative that brands act decisively to prepare for the new normal.

However, the shift to cross-border selling should not be taken lightly. There are numerous considerations that must be made when exploring new territories if you are a luxury fashion retailer.

Today, we talk to our Partners Avalara and Linnworks; along with our own Head of PPC Andrew Boreham and Head of Social Claire Warne, who discuss a few areas to consider including tax compliance, logistics, inventory management, marketplaces and marketing.

Firstly, you need a compliance strategy.

If you have plans to expand into new markets, there will be many areas of your business that will need to be successfully managed  Tax compliance is often one of the most overlooked areas and if not addressed will present significant problems going forwards.  The fact is that when you grow your sales internationally you will encounter new tax obligations and will need guidance along with a scalable compliance process.

By developing a compliance strategy, you can implement the right processes for your business — now and for the future. Like anything that affects multiple areas of your business, creating a tax strategy requires solid investigation upfront, with an honest assessment of the status of your business and plans and that’s why we partner with Avalara, which specialise in indirect tax compliance for companies who sell internationally.

Where do I begin?

With tax compliance, it all starts by evaluating risk. Your strategy should start with identifying the risk you have now so you can address it properly. It’s also best to be mindful of where your long-term plans might expose you to additional liabilities, so you can build sufficient coverage into your processes.

Here’s a few examples of factors that can influence your compliance strategy.

Interna factors

  • Entering new markets
  • Launching new products
  • Changing your production or distribution process
  • Growth of sales / reaching thresholds

External factors

  • Tax law changes
  • Rate changes
  • New or altered trade bloc agreements

These factors can often have a direct impact on where your business will need to Register, collect, and file tax.  Avalara provides support and guidance on how you can simplify your compliance process when expanding into new markets.  The specialist teams all have the relevant expertise to help you manage your Registration and tax filing process along with software to automate the calculation of VAT, GST, US Sales Tax & Customs Duties.  So, if you are confused by tax legislation, experiencing challenges when selling internationally or are planning to expand into new markets then please let us know and we can arrange an introduction.

Consider your inventory management.

Many businesses have looked to revamp where their stock is located. For some, that means delivering stock directly to the UK, with sellers dictating that a proportion of their inventory be delivered directly to fulfilment centres around Europe. Larger businesses are going one step further and shipping a higher proportion of goods to one region by investing in their own European warehouses.

3PL partners can also help with the general transportation of goods and customs on a retailer’s behalf. These partners can also set up European warehouses for British businesses. However, it’s important to clarify contracts between the retailer and the 3PL so that each side is clear on their responsibilities.

Try Marketplaces to help your business reach a wider variety of customers.

Creating a marketplace strategy is a great way of testing your products in various markets before fully investing. Many domestic markets have marketplaces that often outperform Amazon & eBay so choosing a variety can help to assess which online marketplace is right for you.

Localise your customer service.

Businesses need to ensure that they are investing in customer service processes so that they can answer questions from customers as quickly as possible – whether that’s about the cost of cross-border delivery or chasing a parcel that’s taking longer to arrive than expected.

Shipping management software.

Control of inventory and shipping is made easier with a total commerce platform like Linnworks. Linnworks’ automated shipping management software allows multichannel sellers to ensure fast order fulfilment and secure the cheapest shipping rates. The ability to manage the entire shipping and order fulfilment process from one centralised location gives improved control and visibility. Similarly, inventory management software allows businesses to connect sales channels and synchronise stock and enable control of inventory at any time and from anywhere in the world.

Ensure you are present in the right search engines & social platforms.

According to a survey conducted in 2018, 27% of US respondents said they shop both domestically and cross-border. In Austria, 71% of respondents said that they shop online both domestically and cross-border, while, in Israel, 16% said they only shop internationally. Moreover, in China, cross-border online sales are quickly rising with a growth rate of over 15% YoY according to China Internet Watch. However, ensuring you are targeting the right search engines for these overseas shoppers is paramount. Yandex has a 60% market share versus Google at 38%. In China, this is even more important, with Baidu at a 76% share.

In addition, While Facebook tends to dominate there are some exceptions, e.g. Twitter is more popular than Facebook in Japan. There will also be differences in how users engage with these platforms and how receptive they are to advertising.

Tweak Ad Copy to fit local terminology, but don’t overthink it.

Whilst expanding from the UK to/from the USA seems simple enough in terms of language, there are subtle differences that if not considered will lead to underperformance. The classic one is Sleepwear (US)/Nightwear (UK).  Although do consider that whilst translating copy and building new web pages is the natural thing to do, this is a costly expense that may not cover costs in the initial stages. Instead, consider running on English-only first, building a brand presence at a lower cost, before then investing when a share has grown.

Think about demographics to reach the right people.

Do your demographics differ by region based on, for example, the relative cost of living? Can you target by tailored competitor interests or local brands that are aligned with your customer’s lifestyle? Lookalike audiences may be less effective when you launch in a new region, so finding the right interests to target is essential to start building brand awareness.

Be specific with your creativity.

Do you need to adapt your tone of voice? Are there different messages that are likely to perform better? Be mindful of cultural differences, e.g. a thumbs up is generally positive but is offensive in some parts of the Middle East. Also, try to tailor any imagery or video you are using to reflect the target audience – people tend to respond best to people they identify with.

If you are contemplating entering new markets, then get in touch with the Red Hot Penny team today. As an agency, we pride ourselves on maintaining great relationships with a large ecosystem of partners including payments, integrations, tax and logistics. To set up an initial call, email roscoe.brown@redhotpenny.com

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