How Landed Cost Can Cost You Customers - Will's Whiteboard
- Value Added Tax
- Mar 18, 2016 | Will Frei
If you're selling internationally, getting landed cost right can have a big impact on how many customers you acquire and keep. Watch this video to learn more.
Hi. Welcome to Will’s Whiteboard. I’m Will. An awesome thing has happened in the last couple of years where the Internet has opened up global trade for up-and-coming online retailers, but a lot of online retailers don’t realize that landed cost could be costing them global customers. What is landed cost, and how can you get it right? That’s the subject of today’s video.
Okay. So, landed cost has a simple definition. It’s essentially the total cost of your product or shipment of products when it hits the doorstep of your international customer. This can include some things you’d be familiar with from domestic sales like the cost of the product or products or the cost of shipping. But it might also include some things that are foreign to you.
For example, have you ever seen one of these? No? This is a harmonized tariff code that comes from the US for men’s jeans, and you actually need to find this code in order to get the right duty rate to ship men’s jeans into the US and to make sales there. Now, not all businesses realize they need to do this, and some businesses that do find it too complex, and they don’t quite get it right. And this gets to the heart of why landed cost can cost you customers.
Let me ask you a question. Let’s just say you had a customer that was ordering men’s jeans. Maybe you’re in the US, and you’re selling to the UK. What does that customer really want? They want the jeans, right? They don’t want to have to mess with this thing at all. But if you get it wrong or if you don’t charge them the duty rate or something else that goes into landed cost, all of a sudden, they may have to deal with it. They could get a call from the transportation provider like UPS saying, “Hey, we’ve got a shipment here, but we need to figure out tax. Can you help us do that?” Talk about a crazy customer experience. They might even reject the shipment at that point.
Or if you don’t have some components of landed costs, if you don’t handle it clearly during the checkout process or somewhere on your website, people might abandon your shopping cart or your site thinking, “I don’t know if I trust this. I can’t really get a sense of what the tax is here.” So it’s critical to get landed cost right if you want to engage in global trade. Now, the good news is that just as technology has really opened up global markets for growing e-commerce retailers, technology can help you figure out the components of landed cost.
Avalara’s LandedCost can find the correct harmonized tariff codes for you, which by the way, aren’t the same from country to country, and you can automatically do duty rate calculations on your behalf, dramatically simplifying the work that goes into figuring out what the landed costs is, so you can give your customers a great experience. That means that with Avalara, you don’t have to focus on all of that, but you can focus on the one thing that’s really important, growing your business across the globe. Thanks very much. I’ll talk to you next time.