70% of UK retailers say that the US is a priority export destination, according to a recent Tamebay survey. But their plans may be scuppered by a significant increase to the cost of shipping to the US, which comes into effect today – 1 July 2020.
Late last year, the United States Postal Service (USPS) threatened to withdraw from the Universal Postal Union (UPU) in a dispute over the low cost of international shipping – it was often cheaper for US consumers to have products shipped from China than buy them domestically. To appease USPS, the UPU said that it could set its own “terminal dues” – the fees it charges to other countries’ postal services for delivering international mail.
Those new rates have now kicked-in and Royal Mail have said that it expects the cost of shipping from the UK to the US to “increase by “more than 100%” on average. This is clearly bad news for UK retailers – do you risk deterring US customers by putting up your international delivery rates? Or do you absorb the price hike yourself and take a hit on your margins?
How can UK retailers respond?
There is a third option for UK retailers that want to sell online to the USA profitably – use a local fulfilment centre. In fact, if you’re currently shipping more than 137 orders per month from the UK to the US, it will probably be more cost effective for you to do so.
What’s more, you’ll not only save on the shipping costs – you’ll also give your US customers a better experience, with faster delivery times, no customs duty surprises and easier, cheaper returns.
So how do you get started? In this post, we show you the five steps you’ll need to take to use a US fulfilment centre, using our own location in Columbus, Ohio (pictured above) as an example.
1. Register as a foreign for-profit corporation
The first step is to register as a foreign for-profit corporation, which essentially gives you a licence to do business in the USA. In Ohio, you can do this by completing a 530A form, which requires:
- Page 1: Your existing business contact details
- Page 2: A Certificate of Good Standing, which you can get from Companies House
- Page 3: The details of an “agent” in Ohio, which can be our US fulfilment centre
- Page 4: A Notary Public, who should be local to you, to sign and seal a hard copy of the form.
Once you’ve returned the form to the Ohio Secretary of State, you’ll then receive your licence, enabling you to move on to step 2.
2. Register to collect and remit sales tax
Unlike in the UK, there’s no blanket Value Added Tax (VAT) in the US. Instead, different states have different rules around sales tax.
Usually, you’ll have to collect sales tax from consumers and pass it on (or remit it) to the state, if you have “nexus” there. And there are two types of nexus:
- Sales tax nexus: which results from having a physical presence in the state, including inventory in a fulfilment centre
- Economic nexus: which results from achieving a certain amount of revenue or orders from a state.
So if, for example, you hold stock in Columbus, while your biggest markets are Los Angeles and New York, you’ll collect and remit sales tax in Ohio, California and New York.
Tools such as TaxJar – which integrate with your shopping cart, calculate which states you have nexus in, and automate the collection and remittance process – can be useful. They also provide more detailed advice on how sales tax works, what the rules are in Ohio (and all other states), and how to register for a sales tax permit there.
3. Set up your local fulfilment centre
The next step is to set up a American fulfilment centre. There are a few things to consider when making the choice:
The USA is obviously a big place, so shipping nationwide isn’t as quick or easy as it is in the UK. Having a few US fulfilment centres can help, but it also adds complexity to inventory management. We opted for our Midwest location, as it enables 2-3 day shipping across North America (the bar set by Amazon Prime) from one central spot.
Managing your orders and inventory in another country, with a five to eight hour time difference, will be tricky, so consider this when choosing a fulfilment centre. Our cloud-based software and UK-based client success team have helped many retailers make the transition, and now provide ongoing support.
4. Send stock in bulk to the USA
Once you’ve chosen your US fulfilment centre, it’s time to send your stock to it in bulk. Using a freight forwarding company will remove a lot of the hassle of this. They can help with:
- Logistics: organising the transportation of goods to the US, whether from your existing UK stock or from a manufacturer in another country
- Customs: acting as the Customs Broker or Importer of Record (IOR), easing the path for your goods through customs and ensuring the correct duties are paid.
5. Sell, sell, sell
While you’re likely to be making some sales to the US already, once you’re properly set up, you can really turn your marketing engine on. Think about:
- Localising your store for American customers, with prices in dollars and sizes in US or imperial measurements
- Making the most of your local fulfilment centre, by promoting cheaper shipping, faster delivery and simpler returns to US customers
- Tuning your email and social campaigns to US culture, with its more direct approach, and numerous national holidays and discount days
- Ensuring you register and protect your trademarks and intellectual property in the US, as well as at home.
Ready to start selling online to the USA?
If this post has inspired you to build your US business through a local fulfilment centre, contact us and we’ll be happy to help. We can offer a free consultancy call to:
- Discuss your needs and future ambitions
- Tell you more about using our Columbus, Ohio location
- Put you in touch with accountancy, law and import partners, to help you make the move.