What is international ecommerce?
International ecommerce, often referred to as internationalisation or cross-border ecommerce, is the selling of goods online in international markets. The growth in smartphone adoption, social media penetration, and the emergence of new technologies and eCommerce capabilities have allowed retailers to grow faster with more universal appeal.
In addition to mature markets where online shopping has become the norm, a growing consumer culture in untapped developing countries has created a new customer base to offset an increase in local competition due to the growth of online marketplaces like Amazon, eBay, Asos and Etsy.
According to Pitney Bowes, over 75% of retailers who currently have no international activity, plan to implement cross-border strategies with the technology to enable this growth within the next year.
Offsetting competition is a big plus, but why should retailers make this a priority? Let’s take a look at the benefits.
Benefits of cross-border ecommerce
According to DHL, merchants who extend product offerings to international customers boost sales by 10-15%. Not only this, but cross-border commerce is projected to grow at twice the pace of domestic ecommerce - growing 25% annually through 2020. This will take cross-border annual sales from $300 billion to $900 billion in less than 2 years. Furthermore, Forrester predicts that 20% of global ecommerce sales will be made up of cross-border purchases by 2022.
By expanding their online sales internationally, merchants have the potential to build global brand reputation, become strong competitors in regions other than their homeland and the possibility to see huge increases in ROI.
Potential challenges of cross-border ecommerce
As well as a great number of benefits, there are various challenges that retailers selling online should be aware of.
Fraud, Regulations and Legislation
One of the biggest challenges when it comes to international ecommerce is the potential for fraud. This is often due to the fact that Card-not-Present payments are prevalent in online sales. In order to overcome this issue, it is necessary for ecommerce businesses to make the relevant calculations and ensure that the relevant authority is paid.
Tax varies from region to region, and can be a confusing factor for businesses who want to move into new territories. In the UK, Canada and many parts of Europe, VAT (Value-Added Tax) should be paid, and it is down to each business to ensure they follow the correct regulations.
The US has a more complicated sales tax system and should be carefully researched by businesses expanding into that area. This is due to the fact there is no national sales tax - instead, each state has its own tax laws.
Writing an address may seem simple, but there are actually more than 120 different address formats around the world. So, sending a letter to someone in Germany will require a different address format to sending a letter to a customer in the UK. For example, in Germany, the address begins with the street name, followed by the house number or name and then the postal code, the town or city and then the country. However, in the UK, the house name or number comes first, followed by the street name, then the town, the county, the postcode and then the country.
Tips for retailers going international
When it comes to internationalisation, there is no such thing as a one-size-fits-all approach.
Thinking global but acting local is extremely important for online retailers who are planning international venture. What is meant by this is the ability to understand the nuances between shoppers in different territories and catering for these nuances. It is not simply a case of deciding upon a country you would like to sell to and then getting started. Instead, it takes time and research into several key factors such as politics, religion, and lifestyle.
For example, what is the overall political stance of the countries you are hoping to sell to? Does your brand fit in with this?
What are the religions of the countries you are venturing into? Are your brand and products appropriate? What time of year do people celebrate these religions? Will this have an impact on when your products are likely to be bought? Will there be a specific requirement for them at certain points in the year?
Finding out why shoppers in different parts of the world buy certain products is also imperative to your success. Do people in certain areas want cheaper products? Are others looking for luxury? Do some want to emulate a particular lifestyle? These are all key questions to ask and to research before taking the step into a new territory.
Even countries that are next to each other can hold different beliefs and have differing preferences for online goods. This is also true of countries that share the same language. Just because their mother tongue is the same, doesn't mean their preferences are. So, marketing efforts should be centred around each individual country, keeping their culture at the centre of your plan.
Seasonality is a key factor to consider when it comes to cross-border ecommerce. If you are an online retailer selling clothes in various countries around the world, it is not a simple case of selecting the clothes you want to sell and marketing these in the same way globally. There are many things to consider. For example, it may be hot and sunny across Europe, but what is the weather like in Australia, and it may be rainy season in China, but what season is it in the US?
Seasons are not the only thing to consider either. There is also the matter of religious holidays and periods that see heightened ecommerce activity. For some, this may be Christmas, a time when many retailers offer discounts on the build up to the holiday and just after. However, in India a busy time for ecommerce companies is Diwali, a five-day festival of lights, which is celebrated by Hindus, Sikhs and Jains and takes place between October and November each year. In China, Singles Day is particularly important to online shoppers, and many retailers around the world are starting to see the benefits of offering Singles’ Day deals to their international customers. However, Chinese New Year is a relatively quiet time, with sales before and after the celebration, but generally not during.
Researching the differences between seasons in your chosen regions is vital if businesses want to succeed internationally.
Shoppers should be able to read your site in their own language. This reduces confusion and builds trust. Translating your site is a great step to building a stronger relationship with shoppers in different territories and improves brand reputation. Language is also essential when it comes to support. If a customer has an issue or question, they will undoubtedly expect a response in a language that they understand.
Foreign currency is an obstacle that can often throw online shoppers. Converting a cost that is presented to them into their own currency can be tricky if it’s one they are not familiar with. This can be frustrating and even off-putting, causing customers to abandon their purchase. A simple way to ensure that the cost of an item is clear to online shoppers is to integrate technology that allows customers to view the cost in their own currency.
Preference for payment methods varies across the globe. In 2017, according to the Capgemini and BNP Paribas World Payments Report 2017, 42% of global online shoppers preferred to pay by credit card.
Paypal, which is used by over 20 million UK shoppers each year, was a close second, with 39% of online shoppers opting for this payment method. Approximately 7 million businesses globally accept Paypal payments.
Debit card was the third most popular payment method, with 28% of shoppers opting to pay this way.
Digital wallet payments, such as those offered by Apple, Android and Samsung and Google, now make up 41% of all contactless payments, a popular and convenient choice both online and in-store.
Buy now, pay later services are very popular in countries such as Germany and Sweden. This means that the item is ordered online, delivered to the recipient and then, once the item is received , the shopper pays the total by invoice. This method allows shoppers to bypass that stage of the online checkout and instead wait to make their payments.
According to a recent Loqate report, 27% of consumers have had problems entering address details when shopping online. This is mainly due to the fact that forms can be long and complicated. By simplifying forms and implementing type-ahead address verification technology, friction in this stage of the checkout is significantly reduced. In fact, another Loqate report found that 84% of shoppers prefer type-ahead address verification over alternative methods. International address auto-complete creates a seamless customer experience, removing uncertainty for global shoppers and ensures that address data captured in online forms is clean and accurate.
In countries like the UK, mobile has become a popular choice for online shoppers, but the number of people using mobile in India, for example, is still not as high, though numbers are increasing. This means that having a site that provides the best possible experience, regardless of what device shoppers are using around the world, should be at the top of retailers' priority list.
As far as cross-border ecommerce goes, Amazon has certainly got it right.
They understand the importance of researching and taking time to truly understand the countries they want to sell in. Before they even consider beginning to sell, Amazon ensure that they know what shoppers in that region want, they get to know the cultures, languages and currencies, and they carefully consider seasonality.
Discover where Amazon fits into the top 30 retailers, and how these retailers are leading the way internationally in the Loqate International Retail Index.