Six Takeaways For Globalizing Your eCommerce Business
This article was originally published in Retail Viewpoints.
According to a recent report from McKinsey, China accounted for less than one percent of the global ecommerce market in 2008. Now, ten years later, its share is 42 percent. Comparatively, today the U.S. share of the ecommerce market is 24 percent, down a whopping 11 percentage points from 2005.
This is a telling sign – and perhaps a wake-up call – for businesses selling products and services only in the United States. But brands that ignore growing global ecommerce potential – outside of the U.S. – are doing major disservices to their bottom lines. Prospering businesses understand that, to get more eyes and hands on product and services, demand should not be stifled by borders.
For those brands ready to take their ecommerce businesses beyond the U.S. and into international waters, here are six takeaways:
Global Fulfillment and Logistics
Like plate spinners at the circus, this is a delicate balancing act. Costs for fulfilling and transporting products to consumers varies intensely by geographic area. Should brands pay for top-tier shipping and tracking – the kind where consumers are notified when the delivery truck driver sips his coffee? Or is something less robust, but more cost-effective, a better solution?
The Takeaway – Brands must account for the most difficult part of a package’s journey, the “last mile” – the leg of a product’s odyssey where it leaves a localized carrier for the consumer. Many global facilities do not have tracking or delivery confirmation capabilities, which may result in disputes and, ultimately, refunds and chargebacks.
Some customers want to talk through issues via telephone; others prefer email and chat exchanges. Consumer demand around automation and language vary by country. Costs for email ticketing and Interactive Voice Response (IVR) solutions are cheaper than live agents – but is it worth your customer’s satisfaction?
The Takeaway – Ensuring a healthy balance of both will likely lead to the most satisfied customers. Email ticketing is efficient, cost-effective and offers dynamic translation, while live agent support is robust and allows representatives to not only handle disputes (thereby limiting refunds/chargebacks) but upsell complementary products. Different strokes for different folks – just remember to optimize for your target consumer and your business.
International Banking and Merchant Processing
In a real estate transaction, buyers and sellers each have their own representation. Banking and merchant processing work the same way. One bank represents the consumer, one bank represents the brands and, sprinkled throughout, are payment companies such as Visa and MasterCard, each with their own rules, regulations, boundaries of operation, consumer demographics, etc. It’s a complicated dance. What’s the best way to ensure all parties know the correct steps?
The Takeaway – Ensuring success when different geographies, currencies and payment methods are in play is complicated, but the rule of thumb is that brands are much more likely to get approvals from domestic entities for domestic consumers. The worst scenario brands face is finding that consumers are interested in a product but are unable to purchase because of a decline by the merchant processor. Proper processing means less fraud, more sales and happier customers and better margins.
International Tax Implications
In June 2018, the U.S. Supreme Court ruled that states can impose sales tax on online purchases even if the business doesn’t have a physical presence there. Because it’s likely to affect small retailers more than big ones, what better time for U.S. brands to expand internationally? Those taking this route should be aware of a series of choke points regarding transactional tax, as other countries use a system of Value Added Tax (VAT). How is VAT different? What nations have additional import duties and tariffs?
The Takeaway – This should be a much larger discussion, but in general: know your product catalog, tariff code clarifications and jurisdictions. Investigate flat-rate pricing for tariff code determination and don’t rely on manual calculation or shipping company estimates to determine the total landed costs of shipments. That way leads costly mistakes and unhappy customers.
Products and Packaging Regulations
Like rules and regulations that accompany hunting and fishing licenses, it’s critical for brands to understand the product and packaging certifications required to enter a certain market. Do we need a CE certification in the US? What technologies require a UL certification?
The Takeaway – Get your products the correct certifications! Most reputable manufacturers know these certifications exist and will abide by them, but it’s the brand’s job to ensure these are followed. It sounds simple, but brands make mistakes because they’ve sourced cheap parts and materials and, instead of profiting, end up with heavy fines and costly lawsuits.
Marketing and Privacy Regulations
Does most of the internet-using public understand they’re giving a certain expectation of privacy away if they want materials and other content free-of-charge? How best to regulate this give-and-take?
The Takeaway – Brands should pay careful attention to the political and regulatory tea leaves. Major privacy scandals such as Cambridge Analytica or sea-changes such as GDPR force action, for better or worse, by organizations, advocacy groups and even states. Ensuring consumers are opting in to be targeted – they want to receive messages and marketing materials – and adhering to this – is the next big issue brands and businesses will face.