5 reasons why you should seize the EU market
By Camille Felappi
Wherever they are based, online sellers shouldn’t overlook the EU market. If you are not selling your goods to EU customers, you deprive your business of 440 million consumers and the largest economy in the world.
If you are a non-EU company and you have a small business, expanding to the EU might sound like an elusive dream. Yet, many overseas companies take the leap and sell their goods to EU customers because it is worth the effort.
There is a growing number of eCommerce shoppers, and they increasingly tend to buy goods from non-EU sellers. A lot of EU customers buy goods on marketplaces, and they use both local and international platforms. Besides, the EU is one of the most outward-oriented economies in the world. Member States have the highest number of trade agreements, and they have in place the IOSS scheme to facilitate the collection of VAT for non-EU sellers. This convinced many non-EU companies, like the Australian Firefighter Calendar, to develop their activities in the EU market using the IOSS. Still hesitant to reach EU customers? We give you 5 reasons why you should consider expanding your activity in the EU.
A growing base of eCommerce shoppers
Over the last decade, and especially since the covid pandemic, eCommerce became a pillar of the EU economy. In 2021, the European eCommerce market peaked at over 465 billion dollars and is expected to reach over 569 billion dollars by 2025. These record levels should draw the attention of online sellers. They mean that online shopping is increasingly popular among EU customers. If it is not already the case, you should therefore consider extending your activity to the EU market. Besides, it is very likely that your competitors are already reaching EU customers.
This increase in online shopping can be noticed all over the 27 members states. The highest shares of eCommerce shoppers are in Western Europe, with Germany first. In 2021, Germany had the biggest eCommerce consumer base with over 62 million online shoppers. However, over the last 5 years, new eCommerce markets emerged in the EU. The largest increases in online shopping were lately recorded in the Czech Republic, Slovenia, Hungary, and Romania. It is a great opportunity to develop your online activities in those emerging markets. Indeed, demand is growing fast, and the competition is not as tough as in well-established eCommerce markets.
EU customers like to buy goods across borders
Even if EU eCommerce customers mostly buy in their country, we can observe an increase in online purchases from non-EU sellers. A survey made by IPC in 2021 illustrates well this phenomenon. EU clients have been asked from what country they made their latest online cross-border purchase. Most of them named China, the UK, and the US. It is interesting to observe that in almost every country in the EU, China is the number one overseas seller. This means that EU customers do not purchase goods only from intra-EU countries. They are open to non-EU sellers when purchasing online. It is also interesting to note that in 2020, the top EU partners in terms of import of goods were China (22%), the US (12%), and the UK (10%).
If you are an overseas company selling your goods online, you shouldn’t fear local competition. EU customers are mainly driven by the price, so if you sell goods cheaper than local businesses, they will most probably buy your products. They will prefer buying the same product overseas if it is cheaper than in their domestic country. Among EU countries that purchase the most from non-EU countries, we can mention Ireland, Denmark, and most Eastern Europe countries.
EU eCommerce shoppers love marketplaces
If you are a global online seller, you likely work with marketplaces to reach customers all around the world. Marketplaces are an easy way to access international markets and gain customers’ trust.
If you are trying to reach EU customers via marketplaces, we have great news for you. EU eCommerce shoppers love to buy goods on these platforms. In Europe, around 50% of online shoppers use them. The most popular marketplaces in the EU market are Amazon and eBay.
Many EU customers do not even make Google research when they are searching for a product. Instead, they go to their favorite marketplace and start their search from there. If your goods are sold on those platforms, you can therefore easily reach EU clients.
If you want to target specific EU countries, selling your goods on local marketplaces is very efficient. EU customers do not only use Amazon or eBay, but they are also very keen on local marketplaces. For example, French online shoppers are among the bigger marketplace users in the EU. They use a lot of local platforms like Cdiscount, Rue Du Commerce, or La Redoute.
The EU market is open to non-EU sellers
The EU has about 45 trade agreements in place with 80 countries. It is the highest number of trade agreements in the world, making the EU one of the most open markets to foreign trade. These agreements are concluded with individual countries or with other free trade areas. Among the most important agreements, we can mention the EU-UK Trade and Cooperation Agreement that was agreed upon after the UK left the EU, EU-Canada CETA, or Switzerland agreements. The EU is also planning to extend trade agreements with other countries. Negotiations are for instance ongoing with Australia, New Zealand, and Mexico. It is however important to note that currently, the EU doesn’t have trade agreements with the US or China.
At first glance, those agreements might not seem that impactful for online sellers. However, they can make your export activity much easier. Free trade agreements can for instance reduce or remove tariffs. Tariffs are taxes imposed on sellers when they import goods or services in another country.
Let’s take the example of the EU-UK Trade and Cooperation Agreement. If you are a UK seller and you sell your goods to EU clients, you will benefit from a zero tariff and zero quota. applies to all goods that comply with the appropriate rules of origin.
The EU introduced simplified VAT schemes for non-EU sellers
If you are not new to the EU market, you might already know how collecting VAT can be confusing. VAT often discourages businesses from expanding in the EU. It is hard to calculate because each Member State applies its own rates. Moreover, sellers often don’t know that it applies to transport. Last year, the EU also set up new trade rules affecting the way businesses need to collect VAT. Which added more confusion among sellers.
The EU rapidly understood that these new trade rules were not sustainable for eCommerce sellers that already have a lot on their plate. A new scheme, the IOSS (Import One Stop Shop) has therefore been created. The IOSS is an online portal that allows non-EU sellers to collect and report the VAT collected in one place only. Although the IOSS scheme is meant to facilitate the supply of goods, non-EU businesses cannot register for the IOSS themselves. They must hire an intermediary to complete the IOSS registration on their behalf.
Are you ready to seize the EU market and are searching for easy ways to achieve your goals? Our eCommerce solution can help you unlock new markets. We can make sure your company is compliant with VAT registration in every country you are selling to. In addition, we help you handle your taxes, fill mandatory VAT reports, and ensure that you have no issues with local Tax Authorities. If you need a fiscal representative, check out our IOSS service!