Checkout abandonment is a serious concern for most online retailers. Endless hours are poured into optimizing a site’s checkout process in order to deliver a streamlined flow with the highest possible conversion rate. However, when you start selling to countries across the globe, international regulations become a consideration and make the whole experience a little more complicated.
Beyond optimizing design to reduce checkout abandonment, changes must be made to online checkout forms to comply with various countries’ regulations. In today’s blog, we’re going to look at a few of the most common and peculiar regulations for ecommerce websites (specifically checkouts) in Europe and what you can do to comply.
Note: The contents of this blog should not be considered legal counsel. Although the contents of this blog have been thoroughly researched and fact-checked, you should seek professional legal help with any questions or concerns.
How to Reduce the Checkout Abandonment Caused by EU Value-Added Taxes (VAT)
In the United States, current laws regarding the taxation of online goods remain in flux and vary from state to state. The situation in the European Union is even trickier, especially for outside vendors.
Businesses operating from within the European Union may simply apply the VAT as required by their country of origin, which is a relatively simple system. However, businesses operating from outside of the EU must consider two things:
- In order to do business with consumers in EU states, your company must first register with one of the 15 member states.
- All orders must apply the VAT of the customer’s shipping address. This means that your store must be ready to handle dozens of taxation rates, which can be as high as 25%. To make matters more complicated, different categories of goods may have different taxation rates within the same country.
Additionally, you must list which products are being taxed at which rate. For example, in Germany, the general merchant VAT is 19%, while some products (including food and print media) are taxed at a reduced 7%. The customer’s bill must show the rate at which each product is taxed.
What does this mean for checkout abandonment?
The single most commonly cited reason for checkout abandonment is “additional charges.” If your site waits until the last moments of checkout to ask for a country of origin, the final cost may be as much as 25% more expensive than the sub-total–an unwelcome shock for most shoppers.
Although it may seem daunting at first, there are ways to comply with regulations and reduce checkout abandonment simultaneously. Use geo-location services to identify the location of each visitor. With this information, you can display an approximate tax rate on the product page or in the cart, leaving no surprises for checkout. Automatically detecting the country of origin will also slightly slim down the checkout process, helping to move customers through to purchase quicker.
Rounding Change at Checkout
Given the variable nature of currency value, arriving at a final cost can be a little bit tricky across borders. Consider the following scenario:
For simplicity’s sake, let’s assume that we’re selling a good worth $1 to a customer overseas. To make things even simpler, let’s assume that there are no taxes or shipping costs–the final cost at checkout is $1. As of October 21st, 2014, 1 USD is worth .786323 EUR. With some simple rounding, the cost in Euro comes to 0.79€.
However, let’s say we’re selling to a customer located in Finland, an EU member state. If the charge is being made to a credit or debit card (cards only account for 22.1% of Finland’s online purchases), then the total price is simply 0.79€. However, if the customer prefers to pay cash on delivery, then you must remember that Finland doesn’t use 1 or 2 cent coins, requiring that the total cost be rounded further to the nearest 5. In this case, the total is .80€.
While these currency exceptions are rare, they must be considered. Additionally, you must remember to explain these small changes to customers throughout the checkout if you want to reduce abandonment. Someone who sees the price jump, even a cent or two, may be spooked into abandoning. Remember: Transparency has a tendency to reduce checkout abandonment.
Checkout Terms and Conditions
Any online merchant with consumers based in the EU must acquire active confirmation of the terms and conditions of the sale. While shops in the United States can assume compliance from the act of purchasing, the EU requires that all customers actively click a confirmation box. Although this is a small fix and likely won’t have a big impact on checkout abandonment rates, it is required by law and shouldn’t be ignored. See Burberry’s example below for a look at a safe, thorough confirmation.
Using the Order Overview to Reduce Checkout Abandonment
It’s considered a best practice by most companies, but it’s a legal requirement in the EU to give customers an overview of their order information at the end of checkout. From here, users can edit their previous input and correct any misinformation before it’s submitted.
At first, this requirement may seem like it invalidates the one-page checkout model that’s become popular over the last few years — how can you give a shopper a chance to return and edit when the point is to keep things on one page? The example on the right from Shade Station demonstrates a nice workaround.
Having editable boxes run along the side of your checkout allows users to return to their previous information and make changes, complying with EU law. Additionally, giving users easy access to their information reduces the damaging friction that comes with faulty information.
This brief look at the quirks of European ecommerce law is a solid starting point for companies looking to expand into the growing European segment. No matter where you do business, however, making the most of your traffic is essential. For more information on reducing checkout abandonment and recovering lost conversions, contact UpSellit.
Written by Joe Rosenthal