#162: Why Entering New Markets Is The Best Thing For Your Ecommerce Business

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Claus Lauter: Hello. Welcome to another episode of the E-Commerce Coffee Break. Today we want to talk about a topic where I know very, very little about, and that's a good thing. We wanna talk about how to enter new markets and why this is the best thing for your e-commerce business. So we are talking about internalization, about heading out to new countries, new markets with your brand.

Therefore I have Bryce Cressy on this show. He is one of the partnership manager of z.co and z.co is a company that helps merchants with that. Bryce currently not only runs the partnership division there, but he also has a strong background in strategy and finance and addition to his professional pursuit, price is a sports fan and loves to play a variety of sports in his free time.

And he's also avid lover of the African wilderness and enjoys spending time in the nature. So he's living as I do in South Africa and I can't fully understand that. So let's dive into the topic and welcome price to show. Hi Bryce, how are you today,

Bryce Cressy: I'm doing fantastic, thanks. How.

Claus Lauter: Bryce, a lot of brands are successful in their local markets, in their domestic markets, and then at some point they want to go international and that is not as easy as one might think.

So there's a lot of things that have to do with compliance involved, , technical things, administrative things, and so on, I have never been through that process, so we need to really start from scratch. Coach me through as a brand that has the first idea of going international.

What should be the first step for them and , in which order should they proceed?

Bryce Cressy: There are tons , of steps to , that process of international expansion, but the very first one I'd say is ensuring that you actually know the market that you want to expand into. For instance, , you're an US based e-com seller.

, you've had fantastic success in your local market, , but you're not quite sure how your products would fare in another market. The best thing to start with is , the product research aspect. So understanding which market is best for your product. There's loads of different tools you [00:03:00] can use. If it's an Amazon seller, , we would use, Jungle Scout or a Helium 10 or a , but there's loads of even marketing tools you can use to understand where you are getting interest from, in which country you are getting interest , , for your product. You can use, , an advertising tool such as Sam Rush to understand. Where the visits are coming from in which country for your brand.

Because naturally, , if you are a e-commerce brand and you are only selling in the us, most of , your demand may be probably coming from the us but you might not realize that you are getting. A, some loads of visitors from , the uk, from Germany who are interested in your product, it may not just be available in their countries as of yet.

So I'd say product research is , the first element you have to look at. And then assuming , what markets you want to get into, I would certainly recommend the next step is understanding. , what compliance restrictions there are in that new market for your product? What we are very well aware of, and I think a, common misconception , for e-commerce brands is that their [00:04:00] product, if it's trading and it is compliance in a local market, that it won't have any problems going into a new market.

Often, every country is different with its compliance requirements, , and will have to be treated as such. let's say food supplements in, the US is regulated by the fda, , but in the UK and the eu. , it's regulated differently. You'll need a responsible persons for UK and EU businesses, you'll need a food business operator.

There's, different, , compliance regulations and requirements that you need to think about when moving into a new country. And I guess . The second thing to that is you've got your product compliance and you've got your entity and tax compliance that you need to think about. Naturally there's a ton of things that come down the line, but some things that can take up to a couple months , to get sorted out.

One of those being a voucher registration or a tax registration in a new country. If you're wanting to launch in Germany, Next month, for example, but you have no import numbers, you got no VAT numbers. We can say your products are compliant, that's okay, but the fact that you don't have the imported [00:05:00] VAT numbers means you're not gonna be able to compliantly, import your products and start selling those products in Germany as of yet.

, just because of that registration can take anywhere up to three months to come through, which could be three months of lost sales if you didn't know that that is something that you needed to get before the time. ERI number, , that's a number and e o r I number in the UK and eu that is needed for, import requirements.

, that can. Anywhere from a week to two weeks to get, it's not that bad, but the VAT number, that is certainly something you need to think about. , and then the import requirements. Will I need an entity or will I not need an entity? As you can imagine, an entity set up can be quite complex. It can be quite admin intensive.

It'll require you to pay salaries in that country to have directors in that country. That can be quite a mission , to handle for certain marketplaces that they're trading on. As an econ brand, you may need an entity set up in that country. If you're trading through your own web shop, if you're a Shopify seller, , if you're an Amazon seller, if you are selling through, , big Commerce or Magenta, You won't need to set up an [00:06:00] entity in the country that you're selling into.

If you use an import of record or a merchant of record to get your goods into that country, naturally, I would probably sway more towards the imports of record side, , just because it's what we do at z. , but in a nutshell, for those listening who don't actually know what an importer of record is, it is a, a legal entity that has physical.

Presence in that country of imports that is liable for the imports, that is liable for payments of duties and taxes that is liable for the audits that happen on imports and any injury that happens from use of the products in that country. So it is basically the person who's going to be responsible legally for those products.

Without ever taking physical ownership of those products. In a nutshell, we've got the, tax registrations that they need to think about, the product compliance, , aspects. Are my products compliant going into that new market? Is there a market demand for my product? what will I do from an entity perspective, , to be compliant for import?

Those four steps. If you've got those covered, then [00:07:00] I'd say you are ready to enter into that new market.

Claus Lauter: Yeah. That shows already our listeners that this is not an easy process to go through, and I think a lot of people who did drop shipping from Alibaba, for instance in the past, they think it's very easy cause it was sent from a single item was sent from China to literally every country in the world.

Now with this process. What's a minimum volume that you need to think about before that really makes sense to go into in your market? Do you have any experiences on that from your merchants?

Bryce Cressy: , I would say when testing out a new markets, , our merchants and brands, they tend to send smaller shipments to test the demand.

Because you can see demand from a numbers perspective. , you can see a historical demand, but you won't really know the demand of your product without sending a test shipment. And usually that test shipment is around a hundred. , we found import value anywhere from $1,500, , to about $2,003,000.

That's a good test shipment. , and then once you rarely start ramping up and you see the demand, , anywhere from [00:08:00] regular, , I would say every month or every two months, over $10,000 in import. That is what we see most often from someone who's tested the market with a hundred seen success and, , now is really going for it.

But naturally, it, does depend on , the demand element, , how many units you're looking to sell in a month, but I'd certainly say around a hundred , should get you a good test of your demand in that markets.

Claus Lauter: So once you have tested the waters and you want to go ahead and you said there's certain steps in there, depending which route you go, which will take weeks or even months to get them done and set up, once , you are in this process, , what kind of, timeline would you recommend for people really, or for merchants really , to start thinking about in a country now we talk about the volume.

Let's talk about the timelines.

Bryce Cressy: I would say, depending on the country, at least three months in advance to start the processes throughout, getting your product compliance, , start with your tax registrations and then start finding a provider that you can use. [00:09:00] To ship your products. , cuz all of the, once you've kind of got the product compliance, the import compliance, and then the shipping done operationally, you are able to get your goods into that markets.

but that can take, Around three months. If you've already got your tax registration, then it's less than two weeks that you can get your goods into that new market. But I'd certainly say don't give yourself anything less than three months to, at least from start of investigation into that new markets.

I'd say that's a good timeline, it does depend on the product , that you are looking to sell. Because we've had some medical products that are going to be sold into the US take up until a year to get compliant with the F D A, , which can be quite tricky, especially if you're wanting to start selling as soon as possible.

So I'd certainly say, depending on your product, , I'd say about three months. But listen, we've had longer, we've had shorter,

Claus Lauter: Okay. What are the risks overall if you don't do it the right way?

Bryce Cressy: , , you can get your, your products.

Stuck at the border easily. If you rush things, if you prepare customs [00:10:00] documents incorrectly, , if you don't have the correct labeling, , if your packaging is a marked correctly. Especially in Germany, if you don't have, , e P R compliance, which e p r it stands for?

Extended producer Responsibility. That's green packaging. They're very, very heavy on that. , if you're not VAT compliance, you can get fines, , from the tax authority, which naturally hurts your bottom line. , stuck shipments can cause loss of sales, which can again, hurt your bottom line.

Your products can get destroyed at customs, which again will hurt your bottom line for you to, , restock that inventory. , but then there's also. The opportunity cost miss of not selling in that market or trying to, , if your competitors get in three months before you, then that's possibly three months of lost sales in that market that you could have possibly, gained that market share back.

So from a risk perspective, it's defines from a VAT perspective, it's, , stuck shipments, it's destroyed inventory, , and lost.

[00:11:00]

Bryce Cressy: Yeah, I

Claus Lauter: know personally of a Amazon seller that, , got 50,000 euros of goods destroyed because they were missing out on one document, so that was very painful for them.

Now we already can see that you need, , a team behind you unless you have, , the right people on board, , in your own company. So probably we're talking about lawyers, accountants, and other professionals, and that's exactly where you guys help with. Give a bit of an overview. [00:12:00] What's your role in this whole process and how can you help Shopify merchants there?

Bryce Cressy: We function in a way that we take over. Their trade and expansion for the merchant.

So we'll handle everything from warehouse to warehouse, picking up at their manufacturing hub, as well as working with, , the best three PL partners around the world, , to get their goods from their supplier. To the N three PL that will be fulfilling their orders around the globe. So we handle that process by organizing their freight, , and organizing the shipments for them.

So we'll physically move their goods, we'll get the products compliant. We have a team of, , attorneys. That are very knowledgeable about the in-country, , product compliance laws and regulations that are needed in order to sell compliantly into that markets. , they will work with you as a consultants, your business, , to make sure that all your labels are correct, to make sure you have the correct markings, to make sure that you have the correct representation in that country just on an entirety, making sure your products are ready to go in that market.

Then [00:13:00] when the goods get to the border, We will pay the juicies and taxes on your behalf. We will do the customs clearance. We will provide support, , for any structure shipments that occur. If they hadn't used us from the start, which is again, not what I recommend. , and we will physically, once it's cleared customs, we will act as that final mile delivery to the three pl.

And naturally we, we allow Shopify. To start selling in a new market because we act as the importer of record. So we are legally held liable for everything that happens with the import and customs clearance without physically taking ownership of the goods. So we give the Shopify notion the ability to trade into a new market rather without having physical presence in that market.

And without having to go through the admin of paying salaries, of setting up entities, , with having a distributor or selling b2b, which is then again, hurting their margins. So we really give them the ability to attack that D two C markets with the best margins, , with an all-in-one [00:14:00] seamless solution to get their goods into that market.

we don't do the, product research we can support. We've got partners for that as well, but, We do everything else from admin. We really do the stuff that no one a really wants to do. , the non-sexy side of selling DTC , is certainly what we specialize in.

Claus Lauter: Okay. Talking about warehouses, , that's always a topic for itself.

Basically. A lot of people use Amazon warehouses, , and other people just find a supplier in the country. Do you help with both of them? And what are the pros and cons?

Bryce Cressy: We work with numerous different three PL partners. So we work with three pls that only do D two C fulfillment. So only will for full directly same consumer.

We work with three PL providers that prepare, , pick and pack the goods for Amazon FBA centers. Those F B A prep providers are. , providers that store bulk inventory just because of , the poor, , Amazon stock limits these days. And then J Feed Amazon whenever new inventory is needed, and then we can deliver to Amazon F b a centers around the world.

I'd say the, the [00:15:00] pros with Amazon F B A is that it's handled all for you. , it links seamless. All you need to do is get the goods to Amazon and they'll do everything. They'll deal with returns. They will, , deal with performance. So that is really one of the benefits, especially because with, if you sign up for the, the Pan EU package , for F B A, , it means that Amazon can move goods , around Europe, which I mean, there are that complications that come with that, but from a convenience perspective, , it is allowing.

Those kind customers in the EU to get local fulfillment, which is fantastic for customer experience. , and in the end, for reviews for an Amazon seller. , for a Shopify merchant, three pls. The pros is customization that you can get from your packaging, from your fulfillment.

Sometimes it can be a bit pricier, but then again, with Amazon's rising fees, it's soon gonna be very much the same. what you're getting with three PL is you're certainly getting a lot more customization. You're getting more ownership for that fulfillment and more control over that fulfillment. , as well as.

I'd certainly [00:16:00] say more niche areas to get into from a country perspective, cuz Amazon, f b a is not available everywhere. , it is dependent on what the brand's looking for.

Claus Lauter: Yeah. Amazon is getting more expensive. I just saw that they have increased their prices and it's like 50% of your margin goes to Amazon if you use all of their services now@z.co.

, which countries do you, you serve? Is it globally or are there specific main markets that you're active?

Bryce Cressy: From a VA perspective, we are active in, I'd say about 60 countries around the world. We can get VAT registrations and do VAT compliance and VA filing. , from a full-scale import perspective, we are, , active in Mexico, in the United States, in Canada, in the uk, throughout the eu, in the uae, Japan, Australia, Singapore, , South Africa.

A few more to be coming soon, but those are the major markets at this stage. It should be most major e-commerce marketplaces we're able to import into. It's the , the top 20 around the globe we can certainly help with.

Claus Lauter: on the pricing side of things, obviously it's, not for free because you have a lot of experts involved in this whole process.

Give a bit of an idea what [00:17:00] surprising structure, what can emergent expect when they go get.

Bryce Cressy: We've got two services. The first service is the, import compliance service, and that is the freight, the customs clearance, and the import of record that is charged on a per shipment basis. Shopify Motion will be able to create their own shipment and quote themselves using our technology.

And that is generally a fixed fee per shipment of $250. Plus, , a percentage, depending on the country ranges from 1% to 5% of the import value. , and that is for per shipment basis, and it's regardless of how big your shipment is. So we do cater it to the more premium experienced Shopify, Amazon, , merchants out there.

Our pricing is. , relating to that type of target clientele that we work with. , so it could be, , , a hundred unit shipment might be a little bit, , pricey on the margin side, but when we have our merchant shipping hundreds of thousands of units on a monthly basis, It's very affordable and for per [00:18:00] unit , it's probably not even 1% of a margin.

, and then our other service, which is the trade compliance that is getting you ready , to trade into other countries, that is the VAT compliance and the product compliance. And that is a monthly subscription service that they would sign up for. , and that is all inclusive, , between 150 to $700 a month depending on the nature of services required, depending on the complexity of the product.

Naturally, if you're selling clothes into a new market, there's very little compliance, then we price as such. But if you're selling medical devices or , ointments or creams, which have seriously high product compliance standards to , adhere to that is a little bit more expensive. Just cuz you're taking up more of.

product compliance team, , attorneys times on a daily basis.

Claus Lauter: Okay. So if I'm, somebody's approaching you, what's the, kind of the onboarding process? What are the steps before you can really get started with helping the

Bryce Cressy: merchants? , the general process is, They will come to us for assistance, either with, from our perspective or a [00:19:00] customer's perspective.

We will, , at step one, jump on a call with them to understand what their actual requirements are. What country are they looking to go into? What do they currently have on record? What research have they done, , and what documents do they already have? Then we see, okay, you want to go into this markets, this is what you're gonna need.

This is how much it's gonna cost for our services. This is what we can do. These lines, we can get you there. That is more of a consultation period. Once all of that is agreed, once they know what country they want to get into, they're happy with our pricing, they're happy with their requirements, they've got the correct documentation required to expand.

Then we go into an onboarding phase, which is when our account management team really jumps on a call with them to understand their business gets and know them. And really plug in all the gaps, not only from the services that we provide, but also the services that our partners provide. Something that they may not have thought about in advertising, driving traffic to their store from a funding perspective, from a product sourcing perspective, so something that you are very skilled in [00:20:00] yourself class. , so we will understand and problem solve every aspect of their. , and then once that is done, we create the final shipment for them. And once they're happy with that, then our, our freight providers pick their goods up get their goods to the customs.

We get notifications throughout the process. They'll be able to check their shipment on our app, once it is drops off at the warehouse, it's out of our hands. And then the next step would be the VA returns and the VA filing process, which is usually done on a monthly or a quarterly basis, depending on the country.

, but it's minimal touchpoints , along the way. We do not bombard them because it is a managed service. The touchpoints that we make with merchant is as infrequent as possible cuz we understand that a merchant is really doing a million things at once. if we can do everything ourselves, we.

But they are always, , handheld through the process. They always know what's going on. from an onboarding perspective, it's basically getting to know the customer and entrenching ourselves as part of their business.

Claus Lauter: Makes perfect sense. From my experience of 20 plus years as entrepreneur, I only can say find an expert on doing that.

On tried on your own. As I [00:21:00] said, the implications if you're doing it wrong, can be very costly. So where can people find out more about.

Bryce Cressy: , they're welcome to run throughs our websites, , which is www dot z, , dot co z spelled z w e.co. They're also welcome to find me on LinkedIn, , Bryce Crei, , b r y c e c r e s s y.

Or email me further@brycecz.co. That's b r yc e c z.co. They should find everything that they need.

Claus Lauter: Excellent. I will put the links in the show notes as always than you. Just one click away. Bryce, thanks so much for giving us an overview of the complicated compliance process of opening a new market.

It's worth looking into it a little bit deeper for every merchants and get in contact with you and then start selling somewhere abroad and not trying it on their own. Thanks so much for your time.

Bryce Cressy: Thanks Claus. Appreciate