As new regulations regarding the VAT tax on products from outside the EU come in place on July 1, e-shopping from China may soon become more expensive, and thus much less profitable. Starting this summer, the so-called “small shipments” with a value of up to EUR 10 will also be subject to VAT.
The new regulations are meant to modernize the B2C e-commerce activities by overcoming the barriers to cross-border online sales and making the competition between EU and non-EU companies more fair and balanced. For the moment, Romanians who buy goods from outside the EU do not pay VAT up to a limit of EUR 10, while those between EUR 10 and EUR 150 are duty free but subject to VAT. The current regulation of online cross-border trade has reportedly led to a significant loss of revenue and a severe impact on the budgets of the EU and its member states, giving non-EU traders an undue advantage.
Romanians and cross-border e-shopping
Last year, Romania became the EU leader regarding the growth pace of e-commerce, although only 45% of the internet users have shopped online. The e-commerce market reached EUR 5.6 billion and marked a 30% YoY growth. Yet, while most Romanians prefer to order from domestic e-shops, many are attracted to cross-border platforms too, due to low prices and good offers. According to a study conducted by iSense Solutions for GPeC, a third of Romanians prefer to shop online from shops in China (27%), EU member states (23%) and the USA (4%). Moreover, AliExpress ranks second in the top marketplaces preferred by Romanians, right before Amazon. Although prices may be more competitive on such platforms, the new VAT regulations could add a lot to the initial cost, thus making cross-border shopping less profitable for buyers, but more beneficial for local online shops which could successfully fill in the gap.
”Taxing purchases from the Far East can be a great opportunity for Romanian retailers who are trying to reach customers online. Although it will be easier for them to compete on price, it should not be forgotten that buyers also take into account other elements. A new type of consumer has emerged now – the Lazy Conquerors – for whom shopping is not limited to just clicking the “buy” button, but is the whole process. For them, this experience extends to other aspects, such as attractive loyalty programs or an extended warranty”, explains Dawid Rożek, the CEO of ZEN.COM, a European fintech company that offers a payment gateway, as well as a payment card and an app for B2C and B2B, including enterprises.
Higher customer expectations
Customers’ expectations grew along with the e-commerce market. For instance, most European consumers feel that the maximum delivery time should be about three days, when buying a product online. On the other hand, the popularity of East Asian marketplaces with long delivery times shows that Romanians are able to lower their requirements if they get something “extra” in return – whether it will be a low price or the possibility of recovering a part of the amount paid in the form of cashback.
Romanian e-sellers can therefore compete not only with the price or delivery time incomparably faster than their Asian counterparts, but also with an interesting offer related to purchases in their store. These could be the way to taking over customers from the Far East giants.
”Today’s e-consumer is a conscious, intelligent person who knows how to compare prices without limiting the needs only to the most cost-effective offer’, says Dawid Rożek. – ”A customer ordering from China so far, in a Romanian e-shop will not only need an equally attractive offer, but also an efficient service. Romanian e-commerce may become as attractive as its Asian counterparts. To a large extent, this may depend on the openness to new payment solutions”, added Dawid Rożek.
Cheaper but better – Filling the niche
”Increasing the attractiveness of the e-shop offer at a time when other Romanian e-businesses will fight to occupy a niche after Far East marketplaces is an investment worth attention. After the golden era of cheap shopping from China, attracting the customer’s attention will consist in showing the customer the general level of profitability of the purchase in a given e-store compared to other offers. In the conditions of competition – primarily in terms of prices – it will be crucial for many to maximize or at least maintain the consumer’s experience at a good level”, Dawid Rożek predicts.
A permanent subscription at a low price or immediate withdrawals to the seller’s bank account are just a few of the ways to maintain the balance between the attractiveness for the customer and the profits for the e-shop offered by the ZEN.COM payment hub. Thanks to dedicated packages, the innovative solutions of this fintech player, already present on 31 European markets, prove themselves particularly well in small and medium-sized enterprises.