Consumers have become increasingly savvy when it comes to comparing goods and services online and knowing where to buy what, and often look outside their own country’s borders to get the best deal or that specific service that is not available in their country of residence. Therefore, online merchants are expected to sell and deliver their merchandise across the world, resulting in the global expansion of their business. A lot has been written on this subject and, as always with (relatively) new phenomena, there is a lot of contradicting information out there. That is why eMerchantPay have put together a list of what they feel is paramount for any merchant to know when thinking about expanding their business across borders.
1. Cross-border e-commerce makes up 21% of the total global online trade
This year, the global online trade is expected to grow to a whopping $1.4 trillion.Cross-border e-commerce accounts for roughly 21% of that. Time to get yourself a slice of that pie, we say!
2. 12 countries make up 80% of the world’s cross-border shoppers
Successful online merchants know when to enter into newly emerging markets. Successful payment service providers know what these emerging markets are. Canada is the world’s leader when it comes to cross-border shopping; 37% of the world’s cross-border shoppers reside here. The other countries that are responsible for the aforementioned 80% are Australia, the UK, Hong Kong, Germany, Singapore, Japan, Brazil, Switzerland, United Arab Emirates, Kuwait and France.
3. E-commerce thrives in struggling economies
During 2010 and 2011, the Greek online market has been continually growing by 40-50% and both Spain and Italy show a respective growth of 18% and 16% annually1. This surprising trend has not only been seen in Europe, but all over the world. According to the findings of the Credit Suisse Research Institute’s latest Emerging Consumer Survey, the “total annual online retail sales across our surveyed markets – Brazil, China, India, Indonesia, Mexico, Russia, Saudi Arabia, South Africa and Turkey – could reach up to 3.5 trillion US dollars and impact companies across multiple sectors, including retail, finance, security and technology.”
4. Payment preferences on a global level
Cross-border online shoppers still prefer to pay with a credit card. But since credit card transactions are prone to fraud and not very anonymous, a plethora of alternative payment methods have been developed over the past few years. PayPal is the most popular alternative payment method by far on a global level and it allows consumers to complete transactions in their own currency. Moreover, it has a very popular buyer protection policy, which makes people feel safe when shopping online. On a local level, other alternative payment methods are sometimes preferred. Make sure you offer the preferred payment method in the country you are targeting to maximise your chances of succeeding.
5. One size doesn’t fit all
Do your due diligence before targeting markets outside your own country’s borders. Cultural differences as well as economic or social discrepancies can and will ruin your chances of becoming successful abroad. You need to know the market you are targeting in and out before entering. If, for example, your company name has the number 4 in it, consider changing it before expanding to China or Japan; there the number 4 sounds the same as the word for ‘death’ and is therefore considered unlucky and will hinder your expansion.
6. Attracting local partners will help you with your globalisation
Having a knowledgeable, local partner that will help you in the targeted region is every bit as important – if not more – than doing your own extensive research. A local will know about the culture, social structure, payment preferences, local business customs, consumer preferences, logistics and infrastructure, legislation and lots of other things that you won’t be able to read between the lines of the most elaborate report. A local partner can also help you to customise your product and marketing strategy if necessary. Engage a local (company) and prosper.
7. Physical goods also dominate cross-border e-commerce
It’s a known fact that physical goods represent a larger percentage of general e-commerce volume than non-physical goods like music files, plane tickets and software. This holds true also for cross-border e-commerce. Physical goods dominate this field as well.
Clothes, shoes & accessories – $12.5bln Health & beauty products – $7.6bln Personal electronics – $6.0bln Computer hardware – $6.0bln Jewelry, gems & watches – $5.8bln
8. Multilingual customer service enhances customer loyalty
Consumers respond well to being addressed in their own language and will value your company higher when you put in the effort to do so. Don’t just run your web site’s content through Google Translator, hire local translators and proofreaders to make sure that your content is the best it can be. However, if you were to be expanding to 50 countries for example, it would be very expensive and time consuming to localise your content. In that case choose one of these 10 languages that are most used online:
English (800,6 million users in 2013)Chinese (649,4 million users in 2013)Spanish (222,4 million users in 2013)Arabic (135,6 million users in 2013)Portuguese (121,8 million users in 2013)Japanese (109,6 million users in 2013)Russian (87,5 million users in 2013)German (81,1 million users in 2013)French (78,9 million users in 2013)Malaysian (75,5 million users in 2013)
9. The future is mobile
In the fast-moving world of cross-border shopping, mobile transactions via smartphones and tablet devices are rapidly gaining ground. In 2013, the combined cross-border mobile shopping markets of the USA, the UK, Germany, Australia, China and Brazil was already worth $36.4 billion, accounting for more than a third of all cross-border online shopping in these markets. By 2018, their total value will have increased nearly threefold to $106.4 billion. Across the surveyed markets, almost eight out of 10 (76%) cross-border shoppers said they wanted to make more mobile purchases, transactions and payments in the future3.
10. The most obvious steps in cross-border trade are easily overlooked
It seems laughable, but you would be surprised at how many merchants have failed their cross-border ventures because they overlooked some of the most obvious steps. For example, if you want to offer your goods or services abroad, make sure you offer international shipping on your web site. Also confirm that you are ready to receive cross-border payments and that you adapt your products and services to appeal to your targeted audience. Last, but certainly not least, offer only relevant local information (if you are targeting Spain, refrain from talking about all your events in Australia, but make a special offer for a Spanish national holiday) and adapt your web site’s interface to local customs (when expanding to Arabic-speaking countries, don’t forget that they read from right to left instead of left to right.)
Cross-border e-commerce in the European Union
1. Trades within the EU are actually not cross-border trades
Even though the countries within in the EU are separate entities and trades between countries would therefor fall under the definition of cross-border trades, online trades that occur between a consumer and a merchant that share a language and a border or that share a currency are not strictly considered cross-border trades. For example, when a German consumer buys a raclette or fondue set from Austria, it is not considered a cross-border trade, because not only do Germany and Austria share a border and a language, they also trade in the same currency; the euro. But when a British consumer was to buy some Greek pottery online, it would be categorised as a cross-border trade, because the Greeks and the Brits don’t share their border, language or currency, even though they are both part of the European Union.
2. Despite its overall economic state, the online market in Europe continues to grow strongly
It is no secret that the European economy has been struggling in the last couple of years. You couldn’t tell that from the steadily increasing numbers associated with cross-border e-commerce however; more than a third of global cross-border sales come from the EU. Countries that were hit hard by the recession, like Greece, Spain and Italy, show annually increasing growth rates when it comes to e-commerce.
3. Card, banking, Internet and mobile penetration is high in the EU
This has created the perfect environment for e-commerce to thrive in. EU citizens prefer shopping from the comfort from their own home via their desktop, tablet or mobile phone instead of braving the craziness of a busy department store on a Saturday.
4. Preferred payment methods in the EU
Generally speaking, Europeans still prefer paying cash: a whopping 92% of Europeans prefer this payment method to other payment methods. The second most popular – and most relevant for us in the online payment industry – method in the EU is paying with a debit or credit card: 72% of Europeans whip out their card for all kinds of payments, be it to pay for a cup of coffee in a café, ordering clothing online and everything in between. Even though traditional payment methods are still popular in the EU, alternative payment methods are rapidly gaining ground and companies offering these alternative payment methods are popping up like mushrooms. In general, EU consumers prefer PayPal when it comes to alternative payment methods, but on a local level, these preferences shift to iDeal in the Netherlands, Przelewy24 in Poland and teleingreso in Spain, for example.
5. Marketplaces are important for cross-border e-commerce within the EU
One of the reasons for the increasing popularity of e-commerce in Europe is the continued growth of marketplaces offered by multinationals such as eBay. However, local players like Dutch Bol.com have also sprouted out across Europe and increased their footprint across several countries. And for good reason: with 250 million people looking to shop online in Europe, the continent is ripe for e-commerce success. Thanks to the strong traffic that they attract, marketplaces offer a real opportunity for merchants to boost their conversions. What’s more, the relative ease of setting up on a marketplace lets retailers get visibility in a foreign market without investing too much time or money. And can you blame them? According to a recent study by Forrester Consulting, 82% of the world’s consumers have already shopped for products abroad, but for the most part they prefer to buy on global marketplaces with strong reputations.
6. E-commerce legislation is partly decentralised in the EU
Even though the EU presents itself as a unity and there are overarching rules when it comes to e-commerce (see #8 and #9), each individual country also has its own specific set of rules pertaining to that country alone. For example, in Germany there’s something called “Abmahnung”, a written warning you could receive when your e-commerce store doesn’t follow the German law2. An example of an overarching law is that, according to the EU Directive on Consumer Rights, ‘Confirm’ or ‘Buy’ buttons on a merchant’s web site must contain a text that makes it clear to the customer that once they have initiated the transaction, there are obligated to finish it, i.e. pay.
7. The 55\+ age group is an untapped source of wealth
In most (Western) European countries, this age group outnumbers other age groups and they have some money to spend. The only problem is that people in this age group are very concerned with credit card fraud and identity theft. Smart marketing campaigns focused solely on this age group and highlighting the convenience, transparency and safety of online shopping and thus whittling down the objections raised to online payments within this age group, can be extremely profitable for an online merchant.
8. Two-Factor Authentication is mandatory from August 2015
In December 2014, the European Banking Authority (EBA) released guidelines on securing online payments across the EU. One of those security requirements includes the use of ‘strong authentication,’ which the EBA defines as the use of multifactor authentication. With a deadline of 1 August 2015, EU companies must start researching and deploying two-factor authentication solutions. The EBA defines strong customer authentication as the use of two or more of:
something only the user knows (password)something only the user possesses (smartphone or token)something the user is (fingerprint)
According to the EBA, the guidelines are based on the technical recommendations issued in 2013 by the European Forum on the Security of Retail Payments (SecuRe Pay), which is comprised of several central banks and supervisors of payment service providers.
9. The Online Dispute Resolution (ODR)
This year, the Online Dispute Resolution as a regulation comes into force. This is a pan-European platform, which will be run by the European Commission, through which consumers can post any complaints about cross-border transactions. The complaints are then forwarded to the national Alternative Dispute Resolution Service (ADR), where one exists. The aim is to promote cross-border trade within the European Union. In addition, there is a Directive around ADRs that each country has to implement, ensuring levels of independence, provision of an alternative to using the courts for the settlement of disputes, while at the same time not removing a consumer’s right to recourse through the courts. It may be obligatory for businesses that trade with consumers to be a member of an ADR or to fund complaint handling coming through the ADR. The full details of this are yet to be decided, but it is expected to come into force shortly after the ODR Regulation.
10. Fraud is a fact of life
This is especially true for cross-border merchants, because cross-border payments have significantly higher fraud rates than domestic payments. There are no specific trends in fraud per EU member state, but globally fraudsters are making a shift toward targeting mobile payments. Your local payment service provider will know all about the trends in their country and have the fraud-scrubbing tools in place to protect you and your customers.
Cross-border e-commerce in the USA
1. Mobile commerce is rapidly gaining ground
With mobile penetration being as high as 110% (there are more phones than people!), a tablet penetration percentage of 34 and 166 million smartphone users1, this is not a surprising trend. The US appears to be adopting the shift to mobile commerce, or m-commerce, at a faster rate than other countries. M-commerce is projected to represent 27% of total e-commerce sales in the US and 16% of retail e-commerce in 2015.
2. Hottest mobile retailers
As we have mentioned, mobile commerce is growing quickly. Internetretailers.com has conducted a research and put together a list of the 10 hottest mobile retailers that create the most awesome user experience by deploying technologies and strategies – both on mobile commerce sites and in apps – that make the most of mobile. Take a page out of their book if you want to be a successful mobile retailer.
Aerolife.com – “cool use of responsive design”Ebags.com \+ apps – “fun to shop because of Tinder-like handbag sorting tool”Ebay.com \+ apps – “is estimated to rake in $34 billion in global m-commerce sales this year”Fanatics.com \+ apps – “they hired Groupon m-commerce pro David Katz to drive the company to a mobile-first mind-set”Peapod.com \+ apps – “it’s finishing work on a groundbreaking, mobile-first, responsive design site that uses those APIs as the foundation, so any device can connect to the Peapod hub”Ruelala.com \+ apps – “merges consumer data from desktop, tablet and smartphone activity and uses that data to run campaigns that target shoppers by device in real-time”Target.com \+ apps – “is leading the way in using mobile, especially apps, to enhance in-store shopping”Threadless.com \+ apps – “app-only store available to Apple users that enables customers to spontaneously create custom T-shirts that say (just about) anything”Walmart.com \+ apps – “the Savings Catcher feature detects lower prices at other retailers and restitutes the difference via e-gift card”Webundies.com – “with responsive design, a single web site adjusts to the size of the screen the visitor is viewing, all from one code base and one set of web content”
3. Top online retail categories in the US
The same trend that we have noticed both globally and more locally in the EU, is also noticeable in the USA: physical goods dominate the e-commerce market as opposed to non-physical goods like software or plane tickets.
Apparel & footwear – $37.2 billion Media products – $24 billion Consumer electronics – $23.5 billion Housewares & home furnishings – $7.2 billion Consumer appliances – $6.7 billion
4. Biggest online e-retailers
It is quite interesting that Amazon.com, the only retailer that trades exclusively online is almost at the bottom of the list of biggest online retailers. Brick and mortar retailers who found their way on the digital highway, like the almighty Wal-Mart and Kroger, have spectacularly surpassed Amazon.
1. Wal-Mart $334.3 billion 2. Kroger $93.6 billion 3. Costco $74.7 billion 4. Target $71.3 billion 5. The Home Depot $70 billion 6. Walgreens $68 billion 7. CVS Caremark $65.6 billion 8. Lowe’s $52.2 billion9. Amazon.com $44 billion 10. Safeway $37.5 billion
5. Location, location, location
A good merchant has great merchandise and services. A good payment service provider knows who is looking to buy that merchandise and those services. According to Traxpay.com online merchants that hail from the USA sell mostly to these countries (percentage of cross-border sales):
China – 84%UK – 70%Australia – 69%Germany – 48%Canada – 33%The Nordics – 24.9%France – 10%Spain – 10%
6. Canada, eh?
Even though we have mentioned here that sales to Canada “only” accounts for 33% of total cross-border sales, there is great potential in the Great White North. Due to its proximity to the US and the lack of a language barrier, a lot of Canucks travel to the US and are therefore very familiar with American stores and brands. This results in Canadian shoppers not only wanting American goods and services, but also raises the demand for inexpensive shipping and relatively low import costs. If you would like to venture abroad, but stay close to home, Canada is the way to go! This is what you need to know about Canadian shoppers:
The vast majority of shoppers are women (85 percent), at a median age of 41.7 years.45 percent of Canadian online shopping goes to US and international sites (a third to the US), with average annual purchasing approaching nearly $1,100 per shopper.Canadians are night owl shoppers, spending big around 5:00 – 6:00 pm and peaking between 11:00 pm and 1:00 am, especially on Friday nights where spending takes a major spike up at 11:00 pm.
7. Preferred payment methods in the USA
If you think that Americans like their credit cards, you’re right on the money! An impressive 40% of Americans whip out their credit cards for just about anything. Debit cards are a little less popular, 29% of US citizens use their debit cards for payments. Whereas alternative payment methods are booming in the EU and some parts of the rest of the world, Americans don’t much care for them; only 18% of Americans uses alternative payment methods when shopping online. All the way at the bottom of the list, we find prepaid and gift cards at 8% and store branded credit cards at 5%2.
8. Major acquirers in the US
An acquiring bank (or acquirer) is a bank or financial institution that processes credit or debit card payments on behalf of a merchant. The term acquirer indicates that the bank accepts or acquires credit card payments from the card-issuing banks within an association. The US’s major acquirers are:
First DataChase Paymentech VantivElavonGlobal PaymentsHeartl and WorldPay TSYSBA Merchant Services Citi Merchant Services Wells Fargo
9. E-commerce law in the USA
A number of federal, state, and international laws now govern e-commerce, which can involve complex contract and tax issues, security, and privacy issues. Because technology changes quickly, the laws regulating it are new and developing.
In the United States, the proposed Uniform Computer Information Transactions Act (UCITA) intends to bring uniformity and certainty to the laws that apply to information technology transactions, just as the Uniform Commercial Code does for the sale of goods. UCITA would create a uniform set of rules to govern such areas of e-commerce as software licensing, online access, and other transactions in computer information, but it has been controversial because of its potential to weaken consumer protections, and instead of becoming federal law, has only been adopted in two states, Virginia and Maryland.
10. Trade takes time
The complexity of the US trade process can present some significant challenges for global businesses. It involves 47(!) federal agencies and the US Customs and Border Protection (CBP), and has largely relied on manual data entry and paper-based records. This is both time-consuming and costly. In 2014, CBPprocessed more than $2.4 trillion in trade and approximately 26 million cargo containers . As you can imagine, it takes CBP quite some time to sift through 26 million cargo containers every year. That is why we recommend merchants to observe a realistic delivery time when delivering goods outside the US in order to avoid disappointed customers and the chargebacks and other fees that are associated with them.
Because the current import and export system is so time consuming and costly, the CBP – led by President Obama’s Executive Order for streamlining the export/import process for America’s businesses – is enhancing its import and export processing system and moving from paper-based and legacy system requirements to faster, modernised and more cost-effective electronic submissions. The Automated Commercial Environment, or ACE, will become CBP’s primary system through which the international trade community submits import and export data required by all federal agencies.
That Executive Order set December 31, 2016 as the deadline for completion of a government-wide, automated “Single Window” approach for streamlining the movement of cargo in and out of the United States.
Cross-border e-commerce in China
1. China’s isolationism
Around the time that our era began, China was one of the most prolific trading countries in the old world due to the Silk Route. Then – after centuries of being highly successful – around the 15thcentury, China became increasingly isolated under the Ming Dynasty. They didn’t start trading with the outside world again until the beginning of the 19th century. But why did China shut itself off from the rest of the world? Some possible explanations for the isolationism:
China was (and is) a huge country and was self-sufficient; everything they needed was right there.The Confucian system discouraged mercantilism.The imperial system considered itself the centre of the world and the focus of the heavens. When foreigners came, they gave tribute and fealty to the Emperor; the outside world came to them, there was no need to go out.It was a reaction to a quite extravagant and costly period in China’s history, which was a major blow to their finances.
Luckily, now China is open for business again and they are taking the world by storm.
2. China is the biggest retail e-commerce market in the world
Due to the Western markets saturating, China has now outperformed the US in total e-commerce sales; $296 billion and $263 billion respectively. Because of the explosive growth rate at which China is adopting cross-border shopping and trading, China’s cross-border e-commerce trade is projected to reach $1.1 trillion by 2016*. The Pet Shop Boys would probably disagree, but “Go East”!
3. Alibaba & Taobao
The Alibaba Group is a group of investors that owns a huge number of e-commerce web sites like Aliexpress.com and Alibaba.com. Their biggest web site however, is Taobao.com. For foreign merchants looking to expand their business to China, joining Taobao is a great first move to test the waters, because Taobao delivers on its promise: “There are no items buyers can’t find, there are no items sellers can’t sell.” And with over 7 million merchants, 334 million shoppers and $79,3 billion in gross merchandise volume in 2014’s Q4, Taobao is not only Alibaba’s most successful marketplace, it’s the biggest online marketplace in the world! (Which we at eMerchantPay find rather surprising for a company whose online content is exclusively in Mandarin. Foreign shoppers and merchants needn’t worry though; numerous web sites are dedicated to how to shop on Taobao in English and some savvy Chinese entrepreneurs have jumped in the gap and act as “agents” between Taobao and non-Chinese speaking shoppers.)
4. How may I help you?
When Westerners send an email to a merchant’s customer service, they would be quite happy to get a reply within a couple of days or so. Not in China though. There, customer service representatives are trained to respond immediately. This quote from a veteran e-commerce CEO in China summarises it well: “In China we consider the customer service team a key part of the sales conversion activities, while in Western e-commerce it seems like an administrative cost to be minimised. Here, if your customer services do not respond immediately, the consumer will take their business elsewhere. You could say consumers are a bit spoiled here that way.” Shanshan Li, CEO Wiseline Corporation Limited.
So, when your customer service caters to the Chinese market, make sure it’s on point!
5. Payment preferences
Traditional card payments are wildly unpopular in China; only 1% of shoppers shop with international credit cards. Most consumers use Unionpay Cards, Alipay, Tenpay and Chinapay1. Foreign merchants wishing to offer their goods and services in China are wise to offer these local payment methods to ensure trade.
6. Made in China
Did you know 85% of the world’s artificial Christmas trees and 80% of toys are made in China? That’s why they are called the world’s factory; they produce most of the mundane, everyday stuff that everybody around the world uses, from cement to clothing and from electronics to Christmas trees, apparently. The enormous amount of available labourers, the low wages and the somewhat looser attitude towards complying to strict rules and regulations, give China the competitive edge to offer the lowest prices and keeps companies worldwide coming back for more. But, let us not forget that China is not just the world’s factory; it’s a super powerful consuming power in its own right as well. You don’t become the world’s number 1 retail market (see #2) without your residents spending a good amount on shopping…
7. E-commerce legislation in China
Since China’s booming e-commerce trade only became booming a couple of years ago, it took the government quite some time to implement rules and regulations pertaining to online trading. One example of the “new” (we say “new”, because in the Western online society these rules have been around for years) rules and regulations is obligating the merchants to provide their resellers and customers with contact information, which makes it easier to contact suspected counterfeiters – a common problem in China. Another rule is that customers are now able to return goods within seven days without reason, as long as the purchases are in good condition, with exceptions for customised products, perishables, etc. Even though these rules and regulations might seem obvious to Westerners, China laughs last. Not only are the returns significantly lower than in the rest of the world at only 8%, regulating the online trade will only make China a more formidable opponent than it already is.
8. The People’s Republic of Mobile
“Go mobile!” is hardly something Sun Tzu would have cried out on a battlefield, but for the modern day battlefield that is online trading, it will prove sound advice to those who seek to improve their conversions. According to eMarketer’s recent estimates of retail sales around the world, China’s retail sales through mobile devices will reach $333.99 billion this year. That is a hefty 85.1% more than last year. Equally impressive, the mobile sales account for 49.7% of all retail commerce. Go mobile, get rich!
9. Most popular cross-border purchases
It’s interesting to see that preferences shift together with geographical locations. We have seen that in the EU and in the USA physical goods like watches and media products are preferred over non-physical goods, like music. In China, the consumers also have a preference for physical goods from well-known Western brands, but the products the Chinese prefer are slightly different from the products that Westerners order online*:
Baby milk formulaSkin care productsHandbagsWomen’s clothesBaby food
10. The international playing field in China is still wide open
Western merchants with cross-border aspirations often dismiss the Asian region as a potential business destination, deeming it too complex and unwelcoming to foreign players. Merchants prefer to focus on regions with cultural similarities and preferences. Moreover, due to foreign merchants not understanding the cultural nuances that exist within China, many have failed to penetrate this huge market. Aggressive Western marketing campaigns are actually counterproductive since the Chinese consumer responds best to a different type of marketing tailored to their culture, language and lifestyle. The merchant that dares to venture into China and honours Chinese customs and traditions will rise like a Phoenix out of the ashes of his predecessors.
Source : gomedici.com