EU VAT system, Corona
The shopping experience is being transformed by Covid-19. 90 percent of people in Germany at the beginning of the pandemic said that they would avoid stationary shops, postpone unnecessary purchases and buy as much as possible online. 50 percent of customers ordered products online that they had never bought online before. They most frequently purchased food, household goods and toys. Online shops that offered food, drugstore items or medicines recorded the greatest growth. According to Statista, the mail order business across all sectors achieved a 24.1% increase in turnover in April 2020.
After online retailers initially scaled back their forecasts and had to contend with delivery difficulties or production problems, they are now much more optimistic. Fashion mail order company Zalando, for example, is expecting a sales increase of between 10 % and 20 % in the current second quarter. Home & Living online sales Westwing (Source: dgap.de) is reporting an increase in demand of about 80 % in the second quarter.
The victims of the change in customer behaviour are department stores such as Galeria Karstadt Kaufhof, whose situation has become even more acute due to the Corona crisis and which have now announced numerous store closures following the insolvency proceedings applied for in April. Even before Corona, Karstadt-Kaufhof had not succeeded in attracting more and above all new customers. The bans on opening stores in recent weeks did the rest.
Challenge as a digital opportunity
With the aim of reaching new customer groups, companies are also discovering Corona as an opportunity and are investing more and significantly faster in the digitalisation of their processes. According to a study, retail companies in Germany, the USA and Great Britain are planning to expand their digital offerings. In addition to setting up online shops or selling on digital marketplaces, the focus is also on their own mobile apps or the increased use of artificial intelligence. More than half of the decision-makers for marketing and e-commerce services will rely on digital technologies in the future to improve their business activities.
First steps into online trading and expansion into Europe
Marketplaces such as Amazon and eBay are not only benefiting from the change in purchasing behavior through higher overall sales, but are also successfully recruiting stationary retailers. Since the sellers have suffered some drastic losses in their core business, they are now venturing into e-commerce with the help of the platforms. This is easier than setting up their own online shop and taking care of the entire sales process, according to the argument of Amazon & Co. And this is how retailers are also venturing into other growing markets such as Poland, Romania or Bulgaria.
However, merchants should not disregard the VAT rates applied to cross-border sales of their products. If current VAT rules are not applied, this is always at the expense of the trader. In individual cases, such errors can also threaten the existence of the business.
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