Allie Olson is the co-founder of Indiesew, a curated ecommerce site offering “sewing patterns for the modern woman.” With Indiesew Allie and her business partner, Steve Herschleb, are working to promote independent sewing pattern designers and create community among women who love to sew their own clothes.
Allie carefully chooses the designers and patterns that are sold on the site with an eye toward quality, style, and ease of use and Indiesew itself communicates those very traits. Steve coded the site to be both beautiful and intuitive and he’s done an outstanding job. The site is top notch.
Allie Olson and Steve Herschleb, founders of Indiesew, say the site is ready to for the VAT changes beginning January 1.
I’ve had my eye on Indiesew since their launch in May, but last week they really made my head turn when Allie announced that they were now completely prepared to handle the new EU VAT changes. Beginning January 1 everyone selling digital goods online will have to comply with an incredibly complex web of new tax laws applied to customers in the European Union. The changes are deeply concerning for micro businesses like PDF pattern sellers and could potentially be crushing. Several of the big ecommerce platforms have released statements indicating that they’re not prepared to comply including Big Cartel, Squarespace, and Folksy while others haven’t made a statement at all including Etsy, Shopify, and Craftsy.
Yet here was Indiesew, a small company with just two people on staff, fully prepared and ready to go. I got in touch with Allie to ask if she might tell us more about her vision for the site and how she and Steve tackled the VAT challenge so nimbly. Here’s Allie:
Indiesew is a Community of Modern Women Sewing Their Own Clothes
About a year ago, I approached my former classmate and now co-founder Steve, about an idea I had to create an online sewing community. Being a lifelong sewist and recent sewing blogger, I had found the online sewing community to be somewhat disjointed, engaged with a few different sites, but not all congregated on any single platform. This was especially true of the community of modern women sewing their own clothes.
In a few weeks, Steve and I had honed the online sewing community idea into a less polished, albeit strikingly similar, version of the Indiesew you see today. In January of 2014, Steve set to work developing a prototype while I worked on our aesthetic, courted designers and gathered feedback from potential users.
In March, both Steve and I dove in headfirst, and started working on Indiesew fulltime, not accepting any other freelance jobs to distract us from our end goal of making Indiesew a success. It was, and honestly still is, one of the most terrifying decisions I’ve ever made.
By May of 2014, Indiesew was ready to be unveiled and we officially launched to the public on May 20th with about twelve patterns in our shop from four designers. Now, as we’ve just passed our six-month site anniversary we’re featuring nearly 80 patterns from over 30 designers from around the world, and we’re adding several new patterns to the shop every week.
A One-Stop Curated Shop for Digital Patterns
What’s most exciting is that we’ve struck a chord with women who were previously really frustrated with the current options for searching for digital sewing patterns. A one-stop curated shop for sewing patterns was much needed in this sphere, and we’re so happy to provide it. But we’re still working to improve our site and provide more value to our customers. We ask for feedback constantly and are exploring some exciting new channels for our products.
And Then There Was VAT
About a month ago, amid Handmade Holiday planning, we were tipped off to the changes to the Value Added Tax (VAT) procedure that would affect any business that sells digital goods to the EU countries starting on Jan. 1st, 2015. For those not familiar with VAT, it’s similar to sales tax except it gets charged at every step in the supply chain. With sales tax, it’s only charged to the end consumer. Currently, VAT is calculated based on the seller’s location, but starting next year the VAT must be calculated based on the buyer’s location. This means that any business selling digital goods to EU customers must charge VAT and file quarterly VAT returns. Unfortunately, there’s no minimum threshold for small businesses and we must process VAT even if we sell just one pattern to a single EU customer. It became immediately apparent that there was no other option but to deal with the updates and do it quickly.
Currently, only 6% of our sales are to EU customers. But as with every small business, we rely on every single sale to keep us in business for one more day, week, or month. So Steve and I discussed the new policies, looked at some software available to deal with it, and realized that this is something we could deal with in-house, without a problem.
(I should preface this with the fact that Steve is an outstanding developer, and Indiesew is so extremely blessed to have his skills on our team. Without him, we’d likely be paying a company like Taxamo a lot of money to handle the VAT updates for us. Luckily, that’s not the case.)
Thankfully, the EU created the Mini One Stop Shop (MOSS) so that we only have to send our VAT tax returns to one entity instead of to each EU country. We applied for our MOSS application and Steve set to work coding up a new system that would identify a customer’s location based on two or three data points (IP address, billing address, and phone number) and charge the appropriate tax rate. The tax rates for each of the 28 EU countries range from 15% to 27%. The new VAT rules come with fairly stringent reporting requirements, so we also had to rework our databases to make sure we collect and save all the required information. Finally, the rules require specific information to be included on our invoices, so we needed to update our online receipts and the ones we email to our customers. In two days, Steve had the new system fully operable and compliant with VAT policies.
Indiesew is VAT Compliant and Ready for January 1, 2015
We’ve notified our designers that we’ll be fully compliant with the VAT updates on January 1st, and a few of them have told us they’ll be sending their EU customers our way. In this instance, our ability to react quickly to changing policies has been entirely beneficial. Because Indiesew is just Steve and I, we’re easily able to sideline other projects for a day or two to take care of something urgent like this. We’re not at a point where our daily operations or our organizational structure inhibit us from implementing new processes immediately and with little pushback from other decision makers.
Being Small Means Being Nimble
I think that’s why companies like Shopify or Etsy might be hesitating in releasing statements on their response to the updates. They are both successful companies but they may have significant organizational inertia that makes it tougher to react quickly to changes like this. Plus, these companies handle ecommerce for many thousands of different sellers that may or may not be affected by the upcoming EU VAT changes. Complying with the VAT reporting requirements alone needed significant changes to our IT system, and I can only assume that it will be much more of a challenge for established companies with more complex systems.
But for every independent maker who sells their items on their own sites with ecommerce plug-ins, or through Etsy or Craftsy, I hope these organizations are working on their own solutions. It’d be tragic for the small maker, who relies on every single sale to support themselves and their families, to shut down their EU sales because they simply don’t have the technical skills or resources to respond to the changes.
No doubt, in time there will be an easy solution. Someone will develop an easy to use plugin to deal with the VAT updates, which I’m sure will be wildly popular. That’s what so great about entrepreneurship, the best solutions are created when a perceived pain is at an all-time high.
I really admire Allie and Steve for taking the bull by the horns and creating a solution that works for their site. I’m hearing stirrings of WordPress plugins in the words that can help with compliance for those of us with self-hosted shops. I do feel that Etsy is in error for not coming out with some kind of statement sooner, but I’m hopeful we’ll hear from them at some point. Necessity is the mother of invention and, as Allie said, the pain point is at an all-time high right now.