Cross-Border Complexity Impacting Businesses' Ability to Grow

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09 Jul, 2024, 09:02 GMT

More than 8 in 10 (82%) business leaders surveyed say that cross-border complexity impacts their decision to sell to new markets
Three quarters (75%) of consumers that have experienced 'surprise' custom duties costs, taxes and complex regulations will reconsider shopping with that same business again
Almost half (49%) of consumers that have faced shock fees will refuse delivery of a package with hidden costs altogether

DURHAM, N.C., July 9, 2024 /PRNewswire/ -- Avalara, Inc., a leading provider of tax compliance automation software for businesses of all sizes, today published new analysis exploring the impact of cross-border complexity on businesses and consumers globally. The findings reveal a complex compliance landscape and a disconnect between consumer expectations and the realities of cross-border commerce.

Cross-border complexity impacts growth for all businesses

Overall, 82% of businesses surveyed around the world indicated that cross-border compliance complexity impacts their decision to sell into new markets. Customs duty and import calculation, trade restrictions and payments and shipping complexities are the factors of cross-border compliance causing the biggest challenges for businesses. High-growth, high turnover businesses are impacted more severely by cross-border compliance: while only a 27% of businesses with turnovers under £100,000 cite customs duty and import calculation as a challenge, this shoots up to almost half (49%) of businesses with turnovers of £100,000-£999,999.

Business challenges directly impact consumer experience

The difficulties businesses face in cross-border commerce directly translate into frustrations for consumers. The top reasons shoppers abandon their online carts when buying internationally include: expensive shipping, lengthy delivery times, and final costs, including duties and taxes, not properly displayed at checkout.

Businesses often underestimate the impact of these factors. For example, while 55% of consumers cite shipping costs as the number one reason, they abandon their cart, only 40% of businesses believe this is a critical factor.

Further exacerbating the problem is the prevalent use of Delivered at Place shipping by businesses. Almost three-quarters of companies surveyed employ this method, which leaves customers responsible for customs clearance, duties, and taxes. 30% of businesses surveyed globally exclusively use this approach, despite it being a key pain point for consumers.

The consequences of these practices are stark. Nearly 3 in 5 (58%) consumers report experiencing unexpected customs duties charges upon delivery, with half of those who buy cross-border products describing these costs as "shocking." This lack of transparency has a significant impact on customer loyalty and satisfaction. Three-quarters (75%) of surveyed shoppers say they reconsidered future purchases from a business after this experience, and nearly half (49%) say they refused the package altogether upon delivery.

Businesses turning to AI to unravel complexity

Younger shoppers are much more likely to purchase cross-border. Around two-thirds of both the 16–24-year-old (63%) and 25-34-year-old (68%) age groups surveyed have made international purchases in the last year, compared to only 41% of shoppers over the age of 55. Of those who made an international purchase in the last twelve months, younger consumers are almost twice as likely to experience surprise costs upon delivery compared to older consumers.

Businesses are increasingly using AI-enabled technologies to manage both an increasing consumer appetite for international shopping and their cross-border compliance requirements.

52% of businesses surveyed globally are leveraging AI and automation technologies, with a further 26% aiming to do so in the next two years. The highest rates of adoption among businesses surveyed are in India (64%), Brazil (63%), and Denmark (60%). Businesses in the U.S. (39%), Mexico and Australia (both 44%) have been the slowest to adopt new technologies, according to Avalara's survey results.

"The disconnect between seller practices and shopper expectations leading to hidden costs can damage the cross-border commerce experience," said Craig Reed, GM, Cross Border at Avalara. "In an era where international e-commerce is becoming increasingly prevalent, especially among younger consumers, businesses that fail to adapt risk being left behind. Solutions that support international growth and deliver a superior customer experience are key to building a business fit for the modern, borderless digital economy."

Avalara provides an end-to-end platform to address cross-border tax compliance — from tariff code classifications to customs duty and import tax calculations and more. To learn more about how Avalara automates cross-border tax compliance requirements for businesses, visit avalara.com.

About Avalara

Avalara makes tax compliance faster, easier, more accurate, and more reliable for 41,000+ business and government customers in over 75 countries. Tax compliance automation software solutions from Avalara leverage 1,200+ signed partner integrations across leading ecommerce, ERP, and other billing systems to power tax calculations, document management, tax return filing, and tax content access. Visit avalara.com to improve your compliance journey.

Methodology
The research was conducted by Censuswide, with 8,242 consumers (1023 in the UK, 1033 in the US, 1077 in India, 1059 in Brazil, 1003 in Australia, 1021 in Canada, 1026 in Mexico and 1,000 in Denmark between 10.05.2024 – 16.05.2024 and 4003 18+ senior business decision-makers within businesses / retailers that trade and / or sell goods cross-border per market US (500 respondents), UK (500 respondents), India (500 respondents), Brazil (502 respondents), Australia (500 respondents), Canada (500 respondents), Mexico (501 respondents), and Denmark (500 respondents) between 13.05.2024 – 24.05.2024. Censuswide abides by and employs members of the Market Research Society which is based on the ESOMAR principles. Censuswide is also a member of the British Polling Council.