If you live in Jersey and have more than an ounce of entrepreneur in you, then you’ve probably come across the term LVCR or Low Value Consignment Relief. The UK press term it as a tax loop hole but basically it’s an EU law that was constructed so that the different EU nations would not have to collect VAT or (GST) on low value imports from non-EU nations. This was because the cost of collecting this tax would outweigh the actual tax revenue collected.
What this means for us is that in places like Jersey, Guernsey and Hong Kong, local retailers can dispatch goods to EU customers without charging them any of the tax they would need to pay if they bought locally or elsewhere in the EU. The maximum cost of the goods varies between the different EU nations but is currently set at £18 in the UK. The law is being exploited by the likes of Play.com in Jersey. They were one of the first to jump on the idea of selling CDs and DVDs to the UK from the island. These items are perfectly priced to take advantage of LVCR, as well as having all the properties that lend themselves to Internet retail. Many other companies have joined the bandwagon with memory cards, iPod accessories, batteries, cosmetics and flowers being amongst the more successful products.
So how can you take advantage of LVCR?
Unfortunately, a lot of retailers have already embraced LVCR and the products that best fit the below criteria are saturating the market. However, as new products are developed and the habits of online consumers mature, new opportunities will arise. If you can spot these before anyone else then you could be onto a winner.
Characteristics of a great LVCR product
Under £18 for each individual item, or whatever the LVCR limit is for the EU country you are selling to. The close to £18 the better as the better the returns. Of course you can sell multiple items as long as the total cost of the items within the envelope is under the LVCR limit.- Non perishable items that can remain in stock for long periods of time and be posted out without worry of damage.
- Small and lightweight so as to keep postage costs down.
- Branded or easily searchable by name or product code. This is great when competing by price. Many online shoppers now use product comparison searches like Google Shopping especially when they know exactly what the product is they want. If they sort by price and you show as the cheapest then you’ve made the sale!
- Conducive to high volume sales. Because the items are relatively inexpensive, you will need to sell in mass quantities to make a good profit. While the web is great for exploiting niche markets, you may only be making a pound or two mark-up on each item so you’ll need to sell tens of thousands to make a business out of it.
Useful Links:
LVCR on Wikipedia
Basel Group LVCR legal specialists
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