What is Driving Cross Border Conversations with Balthasar Wyss of FlavorCloud
Balthasar Wyss is the Vice President of Customer Success and Operations for FlavorCloud, a leading cross-border international shipping company that helps your brand go global. Prior to joining FlavorCloud, Balthasar was the senior director of partner marketing and business development at Avalara, which is a leading provider of sales tax and compliance solutions. He also worked at Microsoft Corporation as a director of channel strategy and partner marketing.
Balthasar holds a master's degree in social psychology and business administration, holds a PhD in mass communication from the University of Zurich in Switzerland, and is a postgraduate fellow in behavioral sciences at the Swiss Federal Institute of Technology in Zurich.
In this episode…
With the rapid globalization of the world economy, it has now become easier for businesses and individuals to have things ordered from across the border. It offers convenience and competitive prices both for consumers and sellers, but it does pose some problems for those who facilitate the trade.
Balthasar Wyss, VP of Customer Success and Operations for FlavorCloud, says that there are factors to consider when doing cross-border trading; the most important of which is compliance and trade policy.
Tune in to this episode of Sales Tax and More, as Balthasar Wyss talks about why cross-border trading has become increasingly popular, trade policies and compliances to remember, and the challenges of cross-border trading particularly in times of crisis.
Here’s a glimpse of what you’ll learn:
What is considered cross-border trading, and why is it becoming very popular?
The two types of cross-border trading and how broad is its scope
The challenges and things to look out for in cross-border trading
What people need to know about compliance and trade policy
Why merchants should find an expert from the cross-border industry and the right Harmonized System Codes (HS Codes) for their products
The difference between Delivery Duty Paid (DDP) at checkout and Delivery Duty Unpaid (DDU)
Balthasar Wyss explains why he advocates for DDP
The biggest challenges faced by merchants selling cross-border
How to get in touch with Balthasar Wyss and FlavorCloud
Resources Mentioned in This Episode
Balthasar's email: balthasar.wyss@flavorcloud.com
Connect with Michael
Sponsor for This Episode
Sales Tax and More assists companies and their trusted advisors like CPAs with sales tax needs. They offer consulting and research, registrations, returns, and so much more. Over the years they have assisted thousands of sellers both foreign and domestic with their tax issues in the United States and in Canada.
Episode Transcript - Audio Version
[0:10] Intro: Welcome to Sales Tax and More, your go-to resource for all things state tax-related. Now, here is your host, Michael Fleming.
[0:26] Mike: Hi, Mike Fleming here, founder of Sales Tax and More and today's co-host of the Sales Tax and More podcast, where we talk about everyone's favorite topic, sales tax. Of course, sales tax is everyone's favorite topic. But we've decided to have guests, who are experts in their fields, who could speak about subjects that are of interest to our entire audience. And today, we've got a great guest. But before we introduce him, I want to introduce you to Ellie Moffat, my co-host. Ellie, you want to jump in here and say hi.
[0:58] Ellie: Yeah, absolutely. Hi, everyone. Very excited to be here today. We have a great guest today. I just want to do a quick introduction for Sales Tax and More. Sales Tax and More is a full-service consulting and solutions firm. We have a really great team here of experienced tax professionals who are very dedicated to fulfilling all of your state tax or related needs. So we do a lot of returns, registrations, consultations, research, and like our name states more. So if you have questions about our services, please reach out to us. You can do that at emoffat@salestaxandmore.com. So back over to you, Mike.
[1:40] Mike: Oh, thank you very much, Ellie. So today's guest is Balthasar Wyss, and he's the Vice President of Customer Success and Operations for FlavorCloud, which is a leading cross-border, international shipping company. And to sum it up, they have the services that help your brain go global easily. So prior to joining FlavorCloud, Balthasar was the Channel Strategy, Business Development, and Partner Manager at Avalara, who's a leading provider of sales tax and compliance solutions. And that's where I met him. And I immediately liked him. He's a really great guy. But he also has a great positive approach to problem resolution, so he's a great outside-the-box thinker, and talks about smart. He's got a master's degree in Social Psychology and Business Administration. He's got a PhD in Mass Communication Science from the University of Zurich in Switzerland. He's also a postgraduate fellow in behavioral sciences at the Swiss Federal Institute of Technology in Zurich. I mean, Balthasar, you make me feel a little bit less than here, you got all of this? All of these degrees, I mean, we, actually I’m just giving you a hard time. But thank you very much for being on today. And, you know, we're hearing more and more about cross border. And this is a subject that I think our audience really wants to hear about, you know, right away, I thought of you. Who better than you to tell us about cross border? So what exactly is a cross considered cross border? Let's start there.
[3:30] Balthasar: Hi, everybody, and thanks a lot for the introduction, Mike. I really appreciate it and love working with you, and Ellie, and your team. So fantastic collaboration. Cross border, it's a simple thing, is a shipment of goods or service from one country to another. Say somebody in France purchases some shoe or some other item from a merchant, there's a warehouse in the United States, or Mexico or in China or wherever that is. That's the simple thing cross border. Shipping from one country to another.
[4:12] Ellie: Thank you. Oh, yeah, thank you so much for that, Balthasar. Really, I think another question we have here is what is driving the cross-border conversation in the first place? Why is everyone talking about it? Why is this a hot topic?
[4:27] Balthasar: Well, I think it's a good way to start with a consumer who's at the heart of all of this. People buying abroad essentially. And as the world is becoming smaller and smaller, and more connected and connected, it is much easier these days to buy something and have it shipped from far away. So that is really what's driving it. If you do a little bit, then click down on it, there are some trends which really make cross border an interesting topic, and in the minds of everybody. Um, so first of all consumers on the internet have more and more choice, right? They can go buy in the physical world, they can go to a store, or they can go online. And online, you find millions of merchants selling their items. And so they really want to have a choice. Today, it's an expectation. You don't have just one item or one store you can go to, but you can go to anywhere and buy and compare. So, the choice is a big topic. And that drives cross border because you may find one item that you like from a different country, and then you want to buy it from them. The second one is kind of like around convenience, right? There's a lot of consumers who rely on easy shipment to receive it the next day, or within a few days at the doorstep. Um, you can, you know, we, I mean to click, purchase it and so on. So all these things are on convenience are really important. And as the world gets more connected and, in some sense smaller, and where you can buy everywhere, it also becomes more convenient to buy abroad. I mean, think about 50 years ago how difficult it would have been to buy an item, somewhere in a distant country today with the internet, it's a piece of cake. And the third, I would say,
[6:23] Mike: I was just gonna, you know, interject here, you know, convenience. That's what we hear a lot about, too. It's such a big factor. And even personally, I don't ever go to a mall anymore. I do all my shopping online. Convenience. So you're hitting the nail right on the head there. Didn’t mean to interrupt you, though, what's the next big factor?
[6:46] Balthasar: Yeah, the last one I've mentioned. So we have a choice, right, that the consumer expects to have a choice, convenience, the second one, and the third I want to mention is kind of like the infrastructure which I've already alluded to that there’s a quick delivery, and easy and simple. Again, this was very complicated 10 years ago even, right? And now it's become super easy to ship from anywhere to anywhere really because the infrastructure has improved and the globe, the world has become a global mall if you will. And with the internet and the channel carriers are becoming more sophisticated, and delivery mechanisms become more sophisticated. So it makes it actually possible to have that cross-border trade.
[7:33] Ellie: Yeah, this makes a lot of sense to me too, Mike. When I'm, I love to shop online. I love to have a lot of choices. I love for it to be convenient, and I want it to all get to me quickly. So this, I mean, it makes perfect sense. So how big is cross-border trade right now? I mean, obviously, it's growing a lot. You mentioned 10 years ago, it was non-existent, more or less. So how big is it right now?
[7:59] Balthasar: Yeah, it's a good question. I think it's a good idea to separate two types of cross-border in the grand scheme of things. One is a wholesale or business to business, and then business to consumer. We, at FlavorCloud, focus on business to consumer, so I'm talking a little bit about that. Although I will say business-to-business cross-border trade is actually bigger, still, than business-to-consumer. But it's massive, business to consumers. Depending on the study you look at and the report you look at, it's in the hundreds of billions. Some even say it's already reached a trillion. But it's, like, anywhere between two to three billion a day. I mean, it's an amazing number two to three really, two to three billion a day consumers shop abroad, whether that's Americans here, based United States shopping, international or vice versa, somebody in Europe or in Asia, or in South America, shopping anywhere else in the world. So it's massive. And I'll give you a few more stats to show you how incredibly big this has become. There are studies showing that 70% of consumers make at least one purchase a year abroad, meaning cross country. So they buy an item that is supplied from a different country. And another data point that might be interesting to you, to your audience - 67%, all right, two and three, um, spend about 10% of their monthly shopping budget cross border. So that that that percentage of buying abroad, as things become more connected and easier to shop, is rapidly growing. So these are stunning numbers, and this happened literally in the last few years, as the infrastructure has been bailed out, and obviously with the internet together. And companies like Shopify and big commerce who really enable anybody to become emergers and sell and sell globally, with a click, right?
[10:15] Mike: Absolutely. And, you know, we knew that this was, you know, a big opportunity. We're hearing about it all the time, and you've proved that point. I'm gonna play devil's advocate a little bit. You know, we understand that there's a great opportunity, but what are the key challenges? You know, what do you going to look out for?
[10:36] Balthasar: Yeah, it's a good, very good question. And they all challenge this cross border is very, very complex, which is good for us at FlavorCloud because we simplify and automate that, right? Just as you help your customers simplify and automate sales tax, we do the same for cross-border. Um, again, I would sort of mention a few points here in terms of challenges. I mentioned the infrastructure has become better, but it's still a challenge. In the hundreds of different carriers, with different terms, and different ways, and in some allow you to ship hazardous items, some don't, some only deliver in certain zip codes, and so on. So the whole infrastructure, and the physical infrastructure that is, is still very, very complicated. I mean, think about what it takes to ship a parcel, say, from the Philippines, or from Bolivia, to the United States. How many times it changes, going on a plane, or going on a boat, and then getting to the local carrier, there's somebody scanning it, and sending it to a distribution center, and from there, it goes on to to the destination. And so there's a lot of human handling still involved, although the infrastructure has become way, way, way better. So infrastructure remains a challenge, although if you take somebody like FedEx and DHL, they are amazing in terms of their delivery capability these days. The second thing, and this is something we hear often from merchants, is around cultural differences. So, we have merchants reaching out to us to say - Hey, I'm doing really well in United States, selling in all states and do wonderfully. Now I want to go international. How do I do that? How do I market to people in France or my home country, Switzerland, right? Do I need to use local currency? Do I need to translate everything? How does that work? So cultural differences matter. And we see this in purchasing behavior. There are countries that really like a good delivery. Japan interestingly enough, most people order express. Interesting, I don't know why that is, but they will order way more express than other nations do. So these cultural differences matter and merchants should pay attention to, in particular, in terms of how they're market to these different countries and audiences. And the last I want to mention, and that's at the forefront if you are just a little bit interested in politics, you have heard about all the trade policies and the tariff discussions that are going on right now, specifically with China, but with other markets, as well. Just there was an article in the Wall Street Journal who talks that India is next in terms of the trade and tariff conversation. So the trade policies change all the time. There are free trade agreements, other type of trade agreements, and as a result of that, the costs and the duties and taxes that have to be paid, if you ship something across a border is changing all the time. So these are sort of three things I think are tremendous, challenging, challenges for merchants - infrastructure, cultural differentiation, and then and trade policy. They are on the forefront of the merchants we talked to, and that's what we hear from them.
[14:08] Ellie: Yeah, it's, it really sounds like there are some big challenges that you've been going over. And it sounds like it's important for people to at least be aware of these challenges. So let's talk a little bit about compliance and trade policy. How, how should people who listen to this podcast be thinking about this topic?
[14:27] Balthasar: Well, the most important thing I would say is, you know, duties and taxes and being compliant, it's not a nice to have, right? It's mandatory, it's a requirement, just like in the United States, if a state collects sales taxes, and you meet their minimum requirements, which you guys can talk about much better than I do, then you have to pay. It's not a nice to have, right? So that's the starting point. Um, unlike other things, you might be compliant. Otherwise, you will not be able to ship cross-border. And then I would look at different types of cross-border. There are really two categories that are critical here. One is taxes, right? You pay taxes, just, you will pay taxes on, within the United States, so domestic purchases or sales. And then the duties. Duties apply when you ship an item across borders. And it does not always apply, interestingly enough. There's what's called a de meanies value, so a minimum threshold, if you will, that most countries have in place. To give you an example, Hong Kong, if you ship something to Hong Kong, for free, no duties. If you ship something to New Zealand, anything below 1000 New Zealand dollars, which is about 650 US dollars, you don't pay any duty taxes, right? And so on every country has sort of different minimum thresholds. But for most countries, at some point, you will have to pay. And then the next question is who's paying? You know, typically, the merchants don't want to carry that cost, so the consumer pays it. And there are two ways to do that. You either can pay that at checkout, when you purchase online, good, or upon delivery when you receive the shipment. But duties typically apply. So that's sort of, in a grand scheme, the compliance that you have and that consumers and merchants have to deal with.
[16:51] Mike: Balthasar, there's one other thing that I think you left out there, you know, so make sure that the person you decide to talk to knows what they're talking about. We get asked these questions all the time, and I just have to tell people - Hey, unfortunately, I can answer just about any question you have about state taxes here in the US, but you know, you've got to find someone like yourself and FlavorCloud in order to answer these questions that you're covering right now.
[17:26] Balthasar: Totally. Good point. And I'll give you a specific example. In order to determine how much, if anything, is taxed and the duties apply, there’s a system from the World Commerce Organization, WTO, which they actually call Harmonized System, and every product has a Harmonized System code, HS code, and merchants need to know whenever they sell something, what that HS code is of the item, whether they sell shoes, bags, cosmetics, sports goods, or whatever it is. And a lot of merchants struggle with that, what HS codes do I use and put into my shopping platform to identify the correct duty? And so that's where accountants like Mike or us can be helpful. And I will say this, it's getting easier, in that, we are working, and we already have a system where we can auto classify items of merchants. But it's, on the surface it sounds simple, okay, I just pay a duty. But if you dig a little bit deeper, it is really complex. And they are a challenge, there's no question about that.
[18:43] Ellie: Yeah, you guys have both made some really great points here. I hope everyone's been taking note of these. So let's just, I mean really what else matters in terms of these duties?
[18:55] Balthasar: Well, I mentioned this, there are two concepts, right, where, and that's at the forefront of merchants mind. Either you pay a customer checkout. So when you go online, you find an item you like, you put it into checkout, and then you want to confirm your order, it gives you the shipping rates, plus the duty taxes. That's called DDP. Delivery duty paid. We generally recommend to do that, because then it's a better customer experience because customers only pay once a checkout. Once they have paid the duties at checkout, then the shipment just can be sent across the border to the customer, and everything is good. Now the other option is that, and some merchants do that, and I'll tell you a second why, is that they say - No, I don't want to collect duties and taxes at checkout. I let the customer pay when they receive the item. That's called DDU, is an abbreviation for deliveries duty unpaid, right, because you don't pay at checkout, you pay later at delivery. Now that has some issues and some benefits too I will say. The benefit is the cost at checkout is lower. So, therefore, the thinking goes by merchants that more customers will proceed with the purchase. So the abandonment rate of checkout is lower if you don't collect duties, because the cost of the purchase is less, right? However, it's a bit short-term thinking, because you have to pay no matter what once you deliver it, right, when we receive it as a consumer. And that's where the downside comes in. We see this happen from time to time where a customer receives the item and the carrier says - Hey, wait a second, before I can give you the package and you get your fantastic shoes, or bags, or whatever you buy, you pay me X amount of dollars, because you have to pay the duties and taxes. And then they turn around and say - No way. I already paid for that. And then they send it back and, guess what, the merchants have to pay for that return. Luckily, the FlavorCloud provides a full return solution, but still a cost because the carrier charges for that return. So there's a lot of thinking that has to go into this are, generally speaking, as I mentioned, we recommend to merchants to do DDP. The cost such as the consumer experience is better. And as a side effect, the cost actually built for the customer will also be less because we have pre-negotiated brokerage handling fees. So there's a side benefit of that, but that's sort of the options DDP and DDU, in terms of duties, and taxes, and to stay compliant.
[21:44] Mike: Okay, great information here. I'm learning throughout this entire podcast here. So, I'm back to playing devil's advocate. What else keeps online merchants awake at night?
[22:00] Balthasar: Well, there's a number of things that keep merchants awake. The first one I will mention is around conversion rates and checkout. I just mentioned checkout abandonment rates, right? I mean every conversation with a merchant will include a question about conversion and checkouts rate. You know, how do I make sure if I put a lot of marketing dollars into, you know, promoting my store and my product, how do I make sure that I not only get prospects to my website, but they convert at a high rate, so that many people, as many as possible, convert and purchase. And I’ll just gives you a number, the average conversion rate is actually very low. It's about two and a half percent. So hundreds people coming to a website, only two and a half percent proceed to checkout and to purchase. And think about what that means if you just get that conversion rate off by two or three percentage points, you double your revenue, right? So conversion rates are really important, and then have a good checkout experience as well, so that stays really low. To give you another data point, the checkout abandonment rate is around 30%. So, people who select an item, because they like it, they typed in their address, and they were ready, kind of, to purchase, still three out of ten, once they’re in the check out in the cart, they abandon that checkout and don't proceed to complete the order. So that's quite interesting. So that's one thing that merchants really think day and night about - conversion rates and checkout abandonment rates. The second thing I would say is around the supply chain. And that's particularly the case more recently with all these tariff conversations, and then with the coronavirus that has created a lot of disruption for people. You know, Where do I get my order? Where do I manufacture my products? What if the terrorists are being raised for China? Should I move to a different country like Costa Rica, or Mexico, or maybe even Colombia, which we see happening. So thinking or considerations around the supply chain and making sure that whatever is sold on the website is actually available and can be shipped is a is a big consideration. And that's not just, you know, which country I'm shipping for or manufacturer from, but also do I have one warehouse or multiple warehouses? Because they're people expect to get their purchases within a few days, right? And so you have to optimize, sort of, your warehouse and an inventory infrastructure as well. The third thing we hear a lot is around, sort of, shipping rates. Obviously, that's a cost to the merchant, and the merchant won't pay themselves. They typically make sure that the customers pays. In the end, even if they offer free shipping, or discounted shipping, or flat rate shipping, still, somebody has to pay, and usually it's the customer in the end. And so they are looking always for great shipping rates they can provide, but still have a reliable network of carriers that they use, because they want to make sure that the path actually gets to the customer, because otherwise the experience for the customers not very good. And then the last thing I want to mention is around custom clearance. A lot of merchants tell us they struggle with that. You get the parcel through customs as the ship cross border. There can be customs clearance issues, and not just related to duties and taxes. There are certain items that can be important and others cannot. And to give you an example, sometimes it's almost random. In Spain, you cannot import chocolate. Don't ask me why, I'm a big chocolate fan being from Switzerland. They don't allow imports of chocolate. And so you need to know all these things as a merchant, and so merchants really struggle with that and they need help on that.
[26:28] Mike: All right, well, thank you very much for coming. You're obviously on top of all of this, so if our listeners want to follow up, they have any follow-up questions or want to know more about FlavorCloud, how do they get in touch with you?
[26:44] Balthasar: Well, the best is to just reach out. They can reach out to me on contact@flavorcloud.com, or to me personally balthasar.wyss@flavorcloud.com, or they just can go to our website flavorcloud.com. We're happy to help. We love cross-border. We really are a team of experts in this area love, now I'm personally not a big shopper, but I love the idea of international. Enable everybody to ship from anywhere to anywhere. I think that's absolutely critical. And take all the pains away you know from creating the international shipping label, to the customs documents we produce all this automatically do have tracking numbers from the carrier, and to get great carrier rates, taken all that care so that merchants really can focus on innovating on product development on selling and focusing on what's essential for their growth. That's what gets me excited.
[27:45] Mike: Great, and we can tell. So thanks again for being on today's episode of the Sales Tax and More podcast. We’ll look to have you back in the future here. And for those of you who do need help with their state taxes, whether it be income or sales, go to our website, www.salestaxandmore.com. We got lots of free resources out there lots of services and solutions to help make your life a lot easier. And that's the end of today's episode. We thank you all for listening. Hope to see you soon. Bye Bye.
[28:23] Outro: Thanks for listening. Be sure to click subscribe and check out all of the resources we have out on the web.