Selling to the United States can be a major challenge for international businesses looking to expand. The question is: what is the best approach for this market? Two common options are Cross Border and Advanced Inventory. In this article, we will explore the differences between these two models and how they can impact sales success in the US.
What is Cross Border?
Cross Border is a sales model that allows companies to sell their products to consumers in another country without the need for a physical presence. For example, you can serve American customers without having a store or warehouse in the US.
Under the Cross Border model, the company is responsible for the entire export and import process. This includes handling customs procedures, import taxes, documentation, and product transportation to the end customer.
One advantage of the Cross Border model is its flexibility. Companies can quickly enter a new market and test consumer acceptance of their products without making significant investments in infrastructure. However, it’s important to consider that costs may be higher due to import taxes and international shipping. Delivery times may also be longer, and managing reverse logistics can be a challenge compared to local sellers.
What is Advanced Inventory?
Advanced Inventory is a sales model that allows companies to keep their products in a warehouse in another country, enabling faster and more cost-effective delivery to the end consumer.
The key advantage of Advanced Inventory is the reduced waiting time for customers. By having a local warehouse in the US, the company can offer shorter delivery times, making it more competitive with local sellers. Additionally, having better inventory management and improved reverse logistics processes enables businesses to meet the demands of the American market more effectively, leading to a more competitive operation.
Positive Points of Cross Border and Advanced Inventory:
Now that we have explored Cross Border and Advanced Inventory in detail, let’s consider their positive aspects.
Cross Border simplifies the import and export process by eliminating the need for local storage and distribution. This results in reduced investment and costs related to inventory, logistics, and infrastructure.
It also allows companies to test products in new markets without significant initial investments, enabling evaluation of product acceptance before fully expanding.
Advanced Inventory benefits from delivery flexibility, shorter delivery times, and higher customer satisfaction. It also ensures product availability, avoiding delays in delivery and lost sales.
Negative Points of Cross Border and Advanced Inventory:
While Cross Border and Advanced Inventory have their advantages, there are also some negative aspects to consider.
Cross Border can result in less competitiveness compared to companies with local inventories and production. Longer delivery times, higher costs, and lack of familiarity with local culture and preferences can affect the company’s competitiveness in the market.
Logistical challenges such as longer delivery times, higher shipping costs, and complex customs procedures can compromise the efficiency of the transportation process, impacting the customer experience.
For Advanced Inventory, significant financial investment is required to establish and maintain stocks in different regions. This involves costs related to space rental, inventory management, labor, and equipment. Opening a company, dealing with taxes, and customs issues in each country can also be bureaucratic hurdles.
Introducing new products becomes more challenging as companies need to sell existing inventory before introducing updates or different products in a specific region, restricting flexibility and agility.
Which Option is Best for Selling to the US?
The choice between Cross Border and Advanced Inventory depends on the specific needs, goals, and timing of the e-commerce business.
Cross Border may be a viable option for companies starting to sell to the US with a smaller sales volume. It allows for quick market entry and testing of demand.
Advanced Inventory is an interesting option for companies that have a planned project and investment for developing operations in the US.
Many companies choose a hybrid approach, combining Cross Border and Advanced Inventory. They may start with Cross Border to test demand, and if there is significant demand, establish a warehouse in the US to improve logistics and customer experience.
Import taxes can be managed using De Minimis for both personal and commercial importation. Personal importation allows customers to buy from your website and have the product shipped to them under Cross Border. Commercial importation involves exporting to another company. It’s important to understand the exemption limits for import taxes in the US.
Conclusion
In conclusion, both Cross Border and Advanced Inventory are valid options for selling to the US. Each has its advantages and disadvantages, and businesses need to carefully evaluate their needs and goals to make an informed choice. Understanding the country’s culture, technical product issues, certifications, shipping costs, taxes, average order value, sales volume, and competing products is essential in the expansion process.
Using tools like GlobalD that centralize all the necessary information for intelligent e-commerce expansion to the US is recommended.
