Comment: Crossing Boarders - Broadening your E-Commerce Options into new markets
Much has been said recently of the opportunity in emerging retail markets, especially where there are countries or regions that are less affected by recession or economic slowdown. By Stephen Berry, head of Computop UKThere are two key markets that I consider to be ‘low hanging fruit’ for UK merchants, although, a lack of confidence and basic local knowledge is stifling opportunity for international expansion.
According to Morgan Stanley, Russian e-commerce will triple in volume over the next three years from $12 billion in 2012, to $36 billion by 2015. They say that 2013 will be a turning point for Russian e-commerce which has been rapidly growing in recent years. In 2012 online retail in Russia made up $12 billion and accounted for 1.9 % of the total retail trade in the country ($670bn).
It is a similar story in China. According to China’s online shopping giant Alibaba, two hundred and forty-two million Chinese shop online, and they’re expected to spend $265 billion in 2013. eMarketer has also recently revealed that China is the primary driver of growth in the APAC region which is set to surpasses North America to become the world's No. 1 market for B2C ecommerce sales.
However, despite the low risk nature of eCommerce, the confidence needed to expand into new markets comes with knowledge and experience. What I hope to do here is share some of my expertise in international payments to help online retailers who are considering selling their goods overseas, but don’t know where to start.
Develop a simple strategy for processing international payments efficiently and securely and above anything else, remember the key to international success is localisation. Here I outline the core considerations needed for international expansion of a retail store online…
I’ve said it before and I’ll say it again – think local. Local language, local culture and behaviours, local currency and local payment methods. The shop and product descriptions need to be adapted for local habits and Chinese consumers have a number of cultural traditions that should be taken into account. In addition to this, appropriate adjustments must be to address the local government / legal landscape in China.
Communication Channels and Marketing
Consider the right communication channels with your customers. For instance in China QQ instant messaging is more important than e-mail for target groups below 35 years. Check the importance of different channels. Especially in countries with low broadband penetration, mobile shops and mobile payment options are vital success factors. Unlike in Europe, having a ‘mobile shop’ is considered a key success factor in China. You will find other little differences when conducting business in China too. For instance, don’t expect Chinese consumers to respond quickly to e-mails – it could take weeks.
In countries like China it may not be good enough to put up your own shop and online marketing. You should consider putting up a secondary webshop for special offers on malls like T-Mall in order to spread your brand message. However, don't just rely on malls because constant rebates would probably damage your brand. A good typical market entry strategy in China is to only sell special offers on marketplaces but sell a broader range of products at normal prices in your own Chinese webshop.
Imposing foreign currency on local customers abroad will bring down conversion and boost order abandonment. Always offer local currencies in every country. Your Payment Service Provider (PSP) should be able to provide settlement either in the local currency if you have a local entity or currency conversion if you need settlement abroad. Credit cards are popular in the UK and US, but in most other countries many consumers will abandon their baskets if they don't find popular local payment methods. For instance, Qiwi wallet and kiosk cash payments are essential in cash economies such as Russia. Trustpay and a direct connection to the Russian acquirer, like UCS, is also important because US or EU acquirers only cover 50% of Russian credit cards. This is because they lack a license of either Visa or MasterCard in Russia. With a Russian acquirer like UCS, a PSP can help merchants to cover 100% of the Russian credit card market.
Likewise, Chinese consumers have learned to love comfortable online bank transfers or wallet payments, such as Alipay and Tenpay.
Try to use local payment methods with payment guarantees for merchants in order to minimse the risk of payment default. If there's no payment guarantee for a payment method, setup the right fraud prevention measures with an experienced PSP.
While opening your business to overseas prospects raises the potential for more sales, it also increases the possibility for fraudulent behavior during the checkout process. The good news is that many payment methods have come a long way in preventing fraud and guaranteeing payments.
As difficult as venturing into the Chinese market might be for every western company, payment security is great in China because nearly every payment is guaranteed thanks to security features like reliable SMS authentication or online bank transfers being linked to card payments. In Russia payment schemes like Qiwi provide payment guarantees, too.
With PayPal, the global PayPal Seller Protection has been in place since 2010. It extends to international payments, making the method safe for use outside of the US. When the dealer submits the payment, and the shipping address is verified by PayPal, PayPal’s guarantee becomes unlimited for all payments worldwide. However, seller protection does not cover products such as intangible goods, tickets or services.
For expansion into the US and Europe, credit card companies have also made great strides in this area – but only up to a point. Options like Verified by Visa and MasterCard SecureCode are widely used and accepted. However, Verified by Visa and MasterCard SecureCode only cover fraud if delivery is possible within 7-14 days. When the card authorization expires after 14 days the payment guarantee is typically gone as it is after partial deliveries.
Clearly, preventing fraud and guaranteeing payments are critical, regardless of geography or payment method. This becomes even more important when you are conducting business over borders and across oceans. As an online retailer, ensuring you have the right payment solutions in place will help to minimise your risk and enable you to transact effortlessly, with confidence.
Ensure you get settlement files that include your own reference and invoice numbers and therefore allow a smooth reconciliation process in your accounting department.
Delivery and Returns
Find out what expectations local consumers have regarding delivery and return policies and setup the shipping process accordingly. Check the local law on return policies and establish refund processes for all of your payment methods.
Logistics, Tax and Tariffs
Other challenges that are easily resolved are logistics, tax regulation and tariff calculations. In order to save time and effort, retailers can work with full service providers like eShop World or Hermes. They provide tools and services that calculate duties and tariffs in an instance. Once you have these lined up, it is relatively easy to test how Chinese consumers will react to your products or services.
It has never been easy to reach out to new shores, however, the opportunity is there for the taking. It is low risk and minimal investment to test new markets. Provided the product fits the market, international economies promise a bright future and will be worth the effort for many retailers.