The road to international trading is a potentially golden one and many UK retailers are already grasping the opportunities that exist in overseas markets, particularly in this era of digital revolution. According to figures from the leading business consultancy OC&C, UK overseas online retail sales were worth £4.2 billion in 2013 and we expect that figure to rise to £20 billion by 2020. As Richard Lim, the BRC’s Chief Economist points out, “Britain is at the heart of this phenomenon, ranking second in global e-commerce sales – so the opportunity for UK business is huge”.

The US remains the world’s largest online market and, using a combination of metrics, ranks as the world’s third most attractive market for e-commerce sales. The US online retail market is larger than the whole of Europe’s and is currently worth about $177 billion. That figure will nearly double by 2017. The proportion of Americans shopping online is greater than anywhere in Europe, the value of the US average online transaction is bigger and over the course of a year, Americans will individually spend more online than Europeans.

The American consumer appetite for buying online, together with UK expertise in selling online should be a match made in heaven. However, as AT Kearney’s Global Retail E-Commerce Index makes clear, US customers expect competitive prices, easy payment options, quick delivery and free returns, and all these demands present challenges for retailers looking to sell online to the US.

THE CHALLENGE OF COMPLEXITY
The expectations of a target market can also be varied and complex. In the real world, the expectations of customers across national markets can vary significantly; that is true even within the European Union. Failure to understand the realities of an overseas target market could undermine an otherwise very well-executed export plan.

So you need to ask yourself some searching questions. Will the target market be right for the brand or product? Is the customer base large enough to warrant investment? Who are the local and multinational competitors? Can the business find a niche in the commercial landscape? Do you have the resources and expertise to adapt the offering to local expectations? Here, UK Trade and Investment (UKTI) can offer tailored advice through its OMIS (Overseas Market Information Service) reports and related advisor support.

Another key issue is the variation and complexity of regulatory environments. Businesses are subject to increasingly complex corporate governance, public disclosure, accounting and tax requirements and environmental legislation that have increased both our costs and the risk of non-compliance. It is essential in today’s environment that employers stay abreast of legal developments and continuously examine their policies, procedures, processes and personnel actions for compliance purposes.

PRICE COMPETITIVENESS
US customs duties can have a big effect on price competitiveness in the US. Rates of duty vary considerably from one product to another and it is worth checking on the US International Trade Commission’s website (www.usitc.gov) for details of the rates that apply to specific products before committing to supply.

There may be a few nasty surprises along the way. For instance, some of the rates applying to clothing and textile products are as high as 17.5 per cent. The US duty rate on imports of bicycles is 11 per cent and for commercial vehicles, the duty rate is a huge 25 per cent. Not all retail sales are affected; there is a consignment threshold value of $250 before the applicable duty rates apply, but it is always safest to check with US Customs Authorities exactly what the rules are before making any consignment. In the longer term, the BRC is pressing for the removal of all customs duties on trade between the EU and US as one of the main goals of the TTIP negotiations.

On the other hand, online sellers to the US can avoid any local sales taxes as long as the firm has no physical presence in the taxing jurisdiction. This situation is fiercely contested in the US by locally-based retailers who feel it represents unfair competition and some larger US-based internet retailers have already agreed to start collecting taxes on their online sales. However, for the time being, this tax arrangement provides a valuable advantage to UK online sellers.

NEGOTIATING THE CARD FEE MINEFIELD
Both UK and US retailers alike face significant challenges with payment systems. For decades retailers across the world have been calling for a fair, transparent and competitive payments market and a reduction in complex and excessive interchange fees charged by banks to process card payments, which can be particularly detrimental to small businesses who invariably pay the highest fees. While US retailers remain locked in numerous court cases, the European Court of Justice has finally dismissed MasterCard’s Appeal and found that interchange fees are anti-competitive.

One interesting development in the US is the Merchant Customer Exchange (MCX). It offers an alternative to the established players and is entirely owned and funded by retailers. This means participants no longer have to rely on card schemes to process payments, nor suffer their unjustifiably high interchange fees. Beyond payments, MCX can offer exciting new digital consumer experiences as well as protect retailers’ data against the advances of mobile operators and social media, who are introducing their own digital wallets. MCX now even offers CurrentC, a new mobile application that is built to offer this integrated consumer experience.

MCX is both a challenge and an opportunity for UK online retailers. It is a challenge because it is not clear whether UK-based online retailers would be able to join MCX and therefore offer the range of services and customer fulfilment that the platform enables. On the other hand, MCX might represent a model that could be profitably replicated in the UK. It is a model that ultimately enhances the retailer proposition, offering a more personalised and convenient consumer journey means integrating marketing, loyalty and payment services together within a simple offer.

OVERCOMING DELIVERY BOTTLENECKS
US consumers want quick delivery. This is a challenge for UK online retailers because in addition to supplying from a more remote location, all consignments from the UK will be subject to customs clearance and Homeland Security inspections. These procedures inevitably add cost to the seller, but crucially they add time to the delivery.

The US authorities are very transparent about their customs and border requirements but nevertheless new e-commerce exporters should consider using reputable international delivery companies with expertise in the field who will be able to advise how best to comply with US customs formalities and reduce to a minimum the time delay these impose. More widely, the BRC wants to see simpler customs procedures globally which will reduce costs for suppliers and will reduce delivery times. We have been a strong supporter of the International Agreement on Trade Facilitation reached in the World Trade Organization (WTO). This Agreement will simplify customs procedures and save traders between $1-3 trillion per year when fully implemented, and the BRC is concentrating its efforts on persuading reluctant countries that swift ratification will benefit everyone.

DEALING WITH PRODUCT RETURNS
US consumers expect to be able to return goods they do not want, free of charge. Of course, e- commerce traders are quite familiar with this already in the UK, but exports to the US raise other considerations. For example, what happens if you have paid customs duty on a delivery to a customer in the US and they subsequently decide to return it? Are you entitled to a refund of the duty you have paid? The answer is yes, but it can be quite a job getting the money back.

A mutual elimination of customs duties between the EU and US, of the sort that the BRC is campaigning for, would solve this problem, but we are not there yet. In the meantime, this is all the more reason to work closely with an experienced international shipping company who will be able to advise how to secure any customs refunds to which a trader might be entitled.

EMBRACING A COMPLEX WORLD
To thrive in the US market, suppliers, wherever they are based, will need to consider customers’ expectations on price, delivery and returns. They will also need to comply with a range of local regulations which might be quite different to those they face in the UK market, and making sense of the complexity of trading in multiple markets is a challenge in itself.

Tom Ironside, Director of Business and Regulation at the BRC has heard many success stories on the international stage, but warns that “there’s a danger of underestimating how complex these variations between markets are. It pays to think ahead and really ask yourself whether your organisation is well prepared enough to take the leap”.

At the BRC’s Annual International Conference Tim Maule, CEO of Mamas & Papas, illustrated these complexities by explaining how different local rules in Europe, the US and a variety of Asian markets meant that individual modifications had to be made to a baby stroller in order for it to comply with national product safety rules in each of those different markets.

Ultimately, as a new exporter to the US, it is important to ask “will my product comply with US rules?” US regulatory authorities generally do a very good job in posting and explaining their requirements on their websites. Remember also that UKTI can help by pointing would-be exporters to the right sources of information about the regulatory landscape in the US. A “head-in-the-sand” approach is not a viable alternative.