The coronavirus pandemic has impacted the way we go about our daily lives. Pretty much every activity has been moved online. With the e-commerce sector already doing well before the pandemic, it has got a huge boost after the pandemic hit.
Economies all around the world have taken a hit but e-commerce has just brought in more and more profits because of the social distancing norms which have deemed staying in as the safest option to survive the pandemic. So, most people have decided to use e-commerce websites to fulfill their daily shopping needs. Online searches for delivery options have doubled in the time of the pandemic and most people do not mind paying delivery charges so that they can avoid risking infection.
For the elderly and the sick, the contactless delivery options have made it easier to do their weekly shopping. They can just order whatever they need and the products will be left at their door which saves them the effort of going out to get groceries while keeping the delivery person safe as well.
The e-commerce EU VAT is applicable on all online sales and purchases made within the European Union. This has led to more tax collections through online purchases while the taxes from every other kind of purchase has slumped because of the hit the economy has taken because of the pandemic. The online purchases have shifted from luxury goods to necessities like groceries, food items and daily essentials. The speed of delivery of the goods has also had to be increased because of this. If the time for delivery for food and other groceries purchased online is days or weeks then most people will prefer to risk it and step outside their homes to make purchases.
How the e-commerce EU VAT works?
To function as an e-retailer within the EU, business owners have to register and get a VAT number. Following this, they have to sign a VAT declaration which entails that they must indicate on the invoice of purchases how much VAT has been collected and they must deposit the said VAT amount on every transaction. This is for information of both the consumers and the Government.
For help with registering and if you have any specific VAT requests, we suggest you to talk with a professional accountant such as accountingbolla.com.
If you are importing goods into the EU through online purchases then some extra taxes apply. The first set of taxes are payable when the product enters the area of the European Union and the next is payable once the good reaches the destination country. If you are exporting goods from the European Union to outside the limits of the EU and are intended for customers who are not citizens of the EU then you are exempt from paying these taxes.
A case study on the changing e-commerce trends in Italy
The economy has slumped all over Europe and four in every ten European households have seen a reduction in their total income. So, the purchasing capacity of the people has reduced. But there has been a breakthrough for online shopping, especially online grocery shopping. A PwC study shows that most Europeans living in urban areas chose to order through groceries online. This number was especially high in countries like Italy where the pandemic hit very hard.
During the pandemic, 31% Italians living in urban areas chose e-commerce websites as their primary channel for shopping for groceries. 70% preferred to buy more groceries online than stepping out to buy them from department stores or local markets. An overwhelming 85% have decided to continue doing their grocery shopping online even after the pandemic ends and things go back to normal.
This is a strong indication that food retailers must extend to their customers the option to purchase their products online as well. But the pressure to provide free delivery is stopping many small scale food retailers from taking their business online. PwC also has found that customers are willing to pay delivery charges on the condition that the products are delivered to them from one to six hours of ordering.
The rise in demand for online purchase was not the same for all product categories. While the demand for personal protective gears like masks, hand sanitizers, groceries and other necessities increased, the demand for luxury goods like formal clothing, sports gear and travel equipment dropped sharply as people chose to stay in confinement because of the fear of contagion.
Big online retailers like Amazon made tremendous profits ever since the beginning of the pandemic. Following this example, many smaller retailers have started extending their products and services on online portals. So, it is safe to say that online retail may be the way forward. Local sellers too are starting to sell their products and services online so as to compete with multinational online businesses and they seem to be reaping the benefits as well. So, it has been a win-win for everyone.
Since the pandemic is here to stay at least for a little while longer, contactless purchases and deliveries are the way to go until the risk of infection subsides. So, we will probably see only an increase in the number of online purchases. But the question remains whether it will continue after the risk of infection is gone and things have gone back to being normal. Though statistics say that a huge number of people would continue to make purchases online it remains to be seen what actually happens.
Once the economy recovers and people have higher purchasing power again the kind of things that are bought online may shift again to focus more on luxury goods instead of essentials and hygiene products. But the availability of local retailers online may also affect the purchasing pattern of the people. It will be interesting to note these changes as the risk of infection slowly decreases and people are more comfortable with stepping out of their homes. It remains to be seen if all kinds of shopping becomes more online focussed in the future.