Four European countries but just three EU countries
Sweden, Finland and Denmark are all members of the European Union (EU) which means that trading across country borders within the EU comes with no additional fees such as a country specific VAT and/or customs charges (import duties).
However, something that many advertisers may overlook, is that Norway is not part of the EU, which makes cross border purchases to this country liable for VAT and customs charges.
On all purchases amounting to more than €40 (NOK 350), a VAT charge of 25% will be charged to the recipient. There is one exception to this rule, and that is if you are importing literature for private use (which might be part of the reason for the high English proficiency in the country?). The VAT is calculated based on the total cost of the shipment, including the cost of the product, shipping cost, customs charges and domestic VAT from the country the product was dispatched.
There are likely to be two things that caught your eye in the above paragraph: Customs charges and domestic VAT.
Customs charges apply only to a few select product categories, according to the Norwegian Customs Service. The most common categories amongst these are food products, and clothing. On clothing, a general customs charge of 10.7% of the total shipment cost (product price + shipping) applies. This means that the same pair of jeans will cost at least 10% more if delivered to Norway compared to Sweden if the order is dispatched from within the EU. If the domestic VAT has been paid on the order to Norway, the customer will pay VAT twice and the total additional cost for this pair of jeans can be as much as 35%.
Interestingly, research shows us that Norwegians will gladly shop from the US at a similar or, in some cases, higher rate than they shop from the EU(1). Since Norway do not have the same cross border trade agreements within the EU as EU membership countries do, this could be part of the reason why Norwegians are more open to shopping from US-based brands. In fact, 26% of Norwegian online shoppers claimed to have shopped from a US store in 2017 compared to 14% of Finns, 17% of Swedes and 14% of Danes. In comparison, if you look at an EU country, like Germany for example, only 10% of Norwegian shoppers bought from the nation, whilst from the same country, 25% of Finns, 22% of Swedes and 26% of Danes made a purchase according to PostNord’s study.
Many Norwegians are aware of the customs and VAT charges on orders from foreign retailers. As the charge is very unpredictable since not all shipments are scanned and cleared through customs, customers usually prefer ordering from retailers who deduct the domestic VAT and quote the estimated customs cost already at the checkout stage of their website. Whether your business includes all relevant import charges at the checkout, or you take no responsibility for import charges, providing the customer with this information makes the purchase path more predictable for the customer and increases the brand’s authenticity, making the customer more likely to return.
@Ayla – Numbers and graphs attached for this section. 1
Omnichannel – Showrooming and webrooming
Perhaps you like researching products before you step out onto the high street, or maybe you prefer browsing first and then making your purchase from the comfort of your sofa, either way, you are omnichannel shopping in one of the two most popular ways. Webrooming (researching reviews and prices online before shopping in the store) and showrooming (trying the product in store before making the purchase online – be it to get the best price or delivery at your doorstep) have become the two main ways of shopping omnichannel.
According to this study examining the ecommerce habits in the Nordics, almost half of all Nordic online shoppers claim to practice webrooming whereas only around 10% of Nordic online shoppers state that they showroom. Contrary to what these figures show, many physical retailers are afraid that people prefer researching products in-store prior to completing the purchase online.
These figures show that consumers in these markets still prefer shopping in physical stores they are familiar with. This is despite the positive online shopping trends observed in the market over the recent years, but there is even more untapped potential in these markets from an ecommerce point of view. The dominance of webroomers will likely increase gradually with time as the markets’ online shopping habits mature, but retailers must do their part to not push consumers away from their digital platform into physical stores.
Throughout this mini-series I have mentioned a few key points to take into consideration, if you would like to enter the Nordic market with your ecommerce activity:
- Offer free returns
- Offer free deliveries
- Take into consideration the vast geographical size of the Nordic countries when providing delivery estimates
- Don’t translate your website (unless you have resources to do it properly)
- Give clear information about your import charge policy: Should the customer expect having to pay import fees, such as customs and VAT after placing the order?