Are you interested in dropshipping to Europe? These plans have been put on hold by a lack of knowledge. This article will help you to understand the issue.
Dropshipping entrepreneurs have a lot of potential in the US market. The American economy is the most powerful in the world. Its GDP exceeds $20,5 trillion and its population is more than 320 million. It’s therefore not surprising that the USA is the focus of most ecommerce shops.
The competition to win US customers can sometimes be very fierce. The European market is often overlooked. Why? But why?
Dropshipping to Europe is a great idea.
Why not? Chanong, our client, targets a global audience despite being from the Philippines. If you look at his store stats you’ll see that European buyers buy quite a bit from him.
Dropshipping to Europe is a complicated business and many people don’t know how to do it properly before they can get started. It is possible.
You need to think through your business plan before you get started.
We are always happy to assist you and would love to share the essentials of European dropshipping with you.
#1. Dropshipping to Europe is an option.
As we have already stated, there are fewer sellers targeting Europe than the USA. This applies not only online but also offline.
However, this doesn’t necessarily mean that there is less demand for these products. It could even be higher because of a lack of suppliers.
While most entrepreneurs are focused on the United States, there are many opportunities to reap the benefits from the European market.
The early bird gets the worm.
#2. Focus on one country at a time
Dropshipping is only possible if you are successful in marketing. You must understand the target audience to create a memorable promotional campaign. Customers should connect with your commercial.
It is important to understand the customer’s interests, their traditions, and other traits. These vary depending on where people live, since each country has its own language and history.
It will be difficult to find a common marketing strategy across the entire European Union. One country’s relevance could be completely different from the other.
Your commercial should be targeted at one EU country to make it effective.
#3. Translate your website and ads into the local language
What percentage of French-speaking people speak English? How many people speak English in France?
An El Pais article shows that Spain is the most English-speaking EU country with 27.7% of its citizens claiming to know it. Others have much lower levels of English proficiency.
To win more clients, it is important to speak their language.
Your website and commercials must be written in the native language of your customers. You will lose dozens of clients if you don’t.
#4. Dropshipping to Europe?
We have already discussed the importance of choosing a domain name that is suitable for your dropshipping company.
You must make it SEO-friendly. It’s simply the end of your domain, the portion after the dot.
“.com” is generally a good domain. It may be taken, or very expensive. Let me remind you, it is necessary to speak the local language.
It doesn’t make sense if your second-level domain is in Lithuanian, but your top level is “.com”.
It’s better to have a top-level domain that is specific to a region for a small business that is focusing on one European country.
You can, for example, get a domain “.fr” for France and “.de” for Germany. It is likely to be less expensive than “.com”, and it will instill trust with local consumers.
#5. Accept the local currency
Dropshipping to Europe should be about making your customers feel at home when they visit your online store.
This is why your business process should help to increase this feeling. Currency exchange is one example of how obstacles can ruin the whole process. Who wants to lose their money on currency exchange?
Accept local currency payments. This is not an issue as most EU countries use the euro.
#6. Research the competition in your niche
Dropshipping is a popular business model in the USA, as we have mentioned before.
So, US consumers are often bombarded with the same offers from multiple online shops. They eventually stop paying attention to the endless stream of ads.
The EU market might not have enough products in certain niches. The same thing that works in America may not work in Europe.
Always Estimate the competition within the niche you have chosen for the country that you wish to target. This is how you might find your goldmine.
#7. Remember that sometimes, ads may cost you less in Europe
It’s time to share the good news.
Your advertisement is the most important part of dropshipping costs. It is often cheaper in Europe than in the US.
PPC works just like an auction. You decide your budget and the amount you are willing to pay per click. Similar steps are taken by other online entrepreneurs. There is some competition. The ads that offer more reach higher positions on Google, Facebook, and other search engines. Until the budget is exhausted.
It is possible to lose your money if you target the USA without any experience with online paid ads. You will need to be able to manage your PPC campaign well, even if you have all the knowledge.
The same reason. Everybody wants to be a US customer. The higher the number of participants, the more competition you will have at the auction. The cost of the commercial will rise accordingly.
Because the European market is often overlooked, it’s possible to pay less for PPC in certain countries and still save money.
#8. Search for the dropshipping suppliers with warehouses in Europe
Your clients will smile more if you deliver faster.
If you have a niche that is very popular, customers are willing to wait up to 30 days for your products. Customers will flock to your online store if you offer quick delivery.
It will take 5-7 days to get it. Even the most impatient clients will be satisfied.
One of our articles describes the process of searching suppliers on AliExpress with warehouses located in the USA to win new customers.
If you are dropshipping to Europe, this can be used to search for distributors that stock your goods in the EU.
The EU does not have physical borders, so it is unnecessary to search for suppliers with warehouses in France if your target country is France. You can search for Spain, Germany or any other EU member. Delivery will still be quick enough.
#9. Look for a shipping option with the tracking code
Not all AliExpress sellers have European warehouses.
You can find a supplier that offers low shipping costs. You could find an affordable ePacket or a shipping option that is free, or you might look into other options.
It is better to select the one that takes the longest delivery time. The tracking code is also important.
Customers are most interested in where the package is located while it’s being shipped. Some customers might be very upset if they don’t receive the information.
You can calm them down and prevent any problems by showing your clients the proof of your honesty. It is possible to do it with the tracking code. It is a sign that you are keeping your word and that the products have been sent to clients.
Choose suppliers that offer low shipping costs and include a tracking code.
#10. Provide customer support in the local language
What if you couldn’t speak the language of your target country?
What would you do if clients asked questions?
They are too important to ignore.
This is not an option. Your reputation is built by your customer service. Your reputation is essential.
You may be right to say that one unhappy customer won’t do much damage to your business. Yeah, maybe. What about ten to twenty furious customers? It’s not possible to brush it under the carpet.
Customers will have questions every now and again. They can’t be ignored.
It is easy to find the solution.
Hire someone who speaks the language if you don’t speak it. Platforms like Upwork and Fiverr allow you to find a freelancer for a reasonable amount of money. You can find freelancers for a fair amount of money on platforms like Upwork and Fiverr. They will take good care of your clients.
You might be an eCommerce professional and sell to Europeans. The new EU VAT rules 2021 will become effective from the 1st of July 2021.
These new rules were created to combat tax avoidance by eCommerce. They import products from overseas one at a while and don’t pay any duties when they arrive on European soil.
What’s the difference between OSS & IOSS?
The new EU VAT rules 2021 differentiates between One-Stop-Shop (OSS) and IOSS (Import-One-Stop-Shop).
What’s OSS? How does it work
The Union One-Stop Shop “is an electronic portal business that can be used to comply with VAT obligations for e-commerce sales within EU to consumers starting 1 July 2021.
Union OSS is an electronic portal which simplifies up to 95% VAT obligations for online sellers. It also allows them to:
- Register electronically for VAT in one Member State to register for intra-EU distance goods sales and business-to-consumer services.
- In one electronic quarterly return, declare and pay all VAT due on supplies of goods or services;
- Even if they sell cross-border, work with the tax administration in their Member State.
What IOSS is and how it works
IOSS (Import-One-Stop-Shop), “according to the VAT rules applicable up until 1 July 2021, no import VAT has to be paid for commercial goods of a value up to EUR 22.
This provision will be abolished by the new VAT ecommerce rules effective 1 July 2021. All commercial goods imported into Europe from third countries or territories will now be subject to VAT, regardless of their value.
The IOSS allows sellers to collect, declare, and pay VAT when they sell imported goods via the internet. The IOSS makes it easier for buyers as they are only charged at the point of purchase and do not have to pay any additional fees once the goods are delivered. The seller must be registered with the IOSS. The buyer will have to pay VAT and, in some cases, a customs clearance fee.
What are the most significant changes?
Importing Products into the EU (EUR 22 and less)
Products with a declared value equal to or below EUR 22 are exempt from EU import VAT until July 2021. The new IOSS rules will make this change. All products entering the European market must now pay VAT.
N.B. N.B. VAT payments can only be applied to purchases made by EU-resident buyers for items less than EUR 150.
New VAT Rules
The EU will establish a new import system that regulates products imported from third-country countries up to a maximum value of EUR 150.
This new scheme will see VAT being paid at the Point of Sale (POS) rather than after it crosses the EU border.
N.B. N.B. : VAT will be collected at checkout for all sales made through your eCommerce store.
Timeline for the changes
Below is a table that summarizes the changes that will occur with the new legislation.
|EU VAT POITION|
|Prior to 30/06/2021||After 01/07/2021|
|EU suppliers to EU customers||The VAT system is dependent on many factors. Registration in more than one country might be necessary.||One EU VAT registration is required to fill out OSS returns.|
|European Suppliers of Third Party Countries||The VAT rules that apply up to 1 July 2021 state that import VAT is not required for commercial goods with a value of up to EUR 22.||The destination country determines the rate of VAT that is collected at POS.
EU VAT Registration required, along with submission of a Third Party Country OSS Return.
New EU VAT rules 2021:
Although all of this might seem overwhelming, Yakkyofy is here to help! Let’s take a look at how dropshipping works for us.
We will apply the new regulations to all parcels that are paid through our system starting on the 24th June. This is because the new regulations of LOSS will be in effect from the 1st of July. Also, consider the shipping time between China and the EU. It is very likely that all parcels paid after June 24th will reach the EU by July 1.
Secondly, there are different rules if your products are sold via an independent platform or if a merchant account is opened on marketplaces like Amazon or eBay.
Last but not the least, the new regulations won’t affect parcels to EU. If you sell in the US CA, NZ or AU, then nothing will change.
Selling on a Marketplace (eBay or Amazon, etc.,)
Yakkyofy will not change the price of your products if you sell them through online marketplaces like Amazon and eBay.
It is the marketplace that will collect VAT from buyers in the European Union. We will receive their public IOSS, which will be passed on to forwarders.
Independent Online Store Platform (Shopify, Woocommerce, etc..)
You have two options if you want to sell on Yakkyofy with your own store, built on Shopify, WooCommerce or Storeden.
Have an IOSS number
If you are already registered on the IOSS platform and have a registration number, you can upload it to your Yakkyofy Dashboard in the settings area. This will allow us to pass it on to the freight forwarder who will deliver your parcels within the EU.
This will allow you to manage the VAT in your store internally so that you can set the correct rates for each country (17% for Luxembourg, 22% for Italy).
No IOSS number
You can still deliver products to the EU with Special Line if you do not have an IOSS ID number. However, you will need to pay an additional fee for freight forwarders.
This means that, starting from June 24, if you don’t send us your IOSS numbers, there will be an additional charge added to all Yakkyofy orders directed to EU countries.
You must include the correct VAT values in your store settings to cover the correct charges for each country. As you can see, they range from 17% charged to Luxemburg to 27% to Hungary.
- Austria 20%
- Belgium 21%
- Bulgaria 20%
- Croatia 25%
- Cyprus 19%
- Czech Republic 21%
- Denmark 25%
- Estonia 20%
- Finland 24%
- France 20%
- Germany 19%
- Greece 24%
- Hungary 27%
- Ireland: 23%
- Italy 22%
- Lituania 21%
- Lettonia 21%
- Luxemburg 17%
- Malta 18%
- Netherlands 21%
- Poland 23%
- Portugal 23%
- Romania 19%
- Slovakia 20%
- Slovenia 22%
- Spain 21%
- Sweden 25%
What are the changes for bulk items?
These rules do not apply to drop shipping orders. Drop shipping orders are where items are shipped one at a time in one package. If you are importing products in bulk, however, the rules will not change.
Dropshippers pay VAT
Dropshippers who operate in the EU or sell goods to EU customers must charge and pay VAT
If you are an EU dropshipper and have a business that sells in different EU countries, then you can register for OSS to file one tax report per customer for all EU countries. This will be available starting July. The system will automatically distribute VAT to each country.
Non-EU dropshippers selling to EU countries must choose one country to register in. Ireland has an English-speaking website. You will then file your IOSS (import-one-stop-shop), and it will distribute VAT to each customer.
Dropshipping: Do I need to charge VAT?
Dropshipping is required for EU businesses and non-EU businesses selling goods to EU customers.
How can I get OSS?
The OSS system can be described as a digital platform. You can register for OSS/IOSS in all EU countries. Usually, if you are a business in an EU member state, you can register to OSS and become a VAT subject country.
Non-EU dropshipper who sells to EU customers will need to select one EU state in order to register for IOSS. You’ll also need your tax number. The system will then distribute VAT per country to each non-Union IOSS file.
We recommend that English-speaking people register for IOSS at the Irish website, which is entirely in English. You should be able to show proof of sales in the country you are applying for a VAT number.
A fiscal registry might be required if you register for OSS and IOSS. Talking to your accountant or tax professional about this is a good idea. This will help you adhere to EU and national laws.
Which EU Country Should I Register for OSS
If your business is established in an EU country, then you can register for OSS there. You can register for IOSS in one EU country if you are an eCommerce company that is not located in the EU.
If you are VAT subject in an EU country and have stock in a warehouse you must continue to register there.
Do I need to register for IOSS as an EU seller with EU customers?
Yes! It is always safer to be on the safe side. We have already stated that VAT will become mandatory for all EU consumer transactions starting July 1, 2021.
Dropshippers who sell to the European Union should register for IOSS in any EU country. Then, they can start charging VAT. This will allow you to avoid having to register in every country.
*Warning: If you are a non-EU dropshipper and have inventory stored in any EU country you will need to remain a VAT subject there after these reforms.
You can cut down on paperwork and red tape with the IOSS scheme. This does mean that your product prices will need to go up. It can be difficult to adjust your pricing depending on what product category you are in.
Think about the financial implications of VAT being collected at the point-of sale. You can think of clever marketing strategies and importing products that have a higher profit margin.
What Transactions Does the EU VAT Rule Apply to?
We expect the new EU VAT rules to apply to these B2C transactions starting in July 2021.
- Cross-border (distance), sales of goods and services within the EU (from EU suppliers, deemed suppliers).
- An established EU business in the country can sell goods and services domestically to one EU country.
- Distance selling of goods and services to EU countries by third country (non-EU)
Is the EU VAT Regulations Good or Bad?
Non-EU dropshippers may feel less free and might suffer some monetary losses, but the purpose of these new EU VAT rules are to modernize and simplify VAT Europe wide.
One of the most important aspects of these new VAT rules, is the One-Stop Shop (OSS) scheme. This allows businesses to register for a single number of VAT and to file VAT in one EU country.
These new VAT rules are supported by those who claim that no VAT exemptions will be beneficial to the public budgets of EU countries. The European Commission also plans to stop VAT fraud by making these rules. It remains to be seen how it will all unfold.
Is it possible to have a dropshipping agent help me comply with the new EU VAT rules?
Yes. A dropshipping agent will be able to advise you about the best practices for staying legally safe and in compliance with the EU VAT regulations.
Is OSS/IOSS registration mandatory?
We strongly recommend you to use the new OSS/IOSS schemes, even though they are optional.
If you do not register for OSS, and begin charging VAT at POS, customers will need to pay customs or the courier agent in order to receive their order. This is not a good situation for your business.
If your EU micro-business has earned less than EUR10.000/year in the past two fiscal years, you won’t be able to register for OSS. You can still be subject to local VAT authorities in this instance.
What length should I keep my VAT records?
You must keep all documentation and transactions relating to VAT from the past ten years in order to comply with EU VAT rules. They are not usually required. You are required to keep them on hand in the event that authorities request them.
How do you keep customers happy with the new EU VAT rules?
We recommend being transparent about all charges and VAT to retain customers.
Cookies can be used to locate your customers and localize your website. This will enable you to calculate VAT at your POS using the local VAT rate.
The new EU VAT rules are generally a positive thing. But product supply chains can be complex, with often many parties involved. The question is, are we ready for this shift? It will be fair for all.
The new EU VAT rules will be in effect within a few months. It’s time for you to review your supply chain and adapt your eCommerce business model.