International E-Commerce Offers Big Opportunities for U.S. Retailers
By CRAIG REED
With the advent of e-commerce, a literal world of opportunity opened up for international business expansion. E-commerce continues to grow at a rapid pace, outstripping traditional retail channels. U.S. brands in particular are benefiting – they are hugely popular around the globe, currently commanding all 10 of the top spots in the Interbrand Best Global Brands. Therefore, for many U.S. retailers, the question is not whether to expand internationally, but how to do so most prudently and profitably. As a follow on to our article Global Retailing: One Size Does Not Fit All, here are further insights and recommendations on the best countries to target for e-commerce expansion.
E-commerce Growth Continues Worldwide
Last year, we conducted an international e-commerce survey with ORC International that polled 10,000 respondents in 10 countries around the world. Ninety-three percent of consumers reported that they shop online – and nearly 50 percent did so in the last 30 days.
According to Forrester Research, online retail sales in Asia Pacific will continue to soar. The compound annual growth rates in the mature e-commerce markets of Japan, South Korea, and Australia will run 11 to 12 percent over the next five years while in the rapidly growing market of China, this growth rate will be 25 percent. Forrester also has projected e-commerce will expand at a compound annual growth rate of 12.2 percent across Europe through 2016.
With these numbers, there are countless opportunities for aspiring international e-retailers. However, for U.S. companies new to international e-commerce expansion, two groups of countries provide the strongest choices.
The Top Tier
Three English-speaking countries – Canada, Australia and the UK – offer the fewest barriers to entry, strong spending power, cultural similarities and an affinity for U.S. goods. Their consumers are familiar with U.S. brands and value U.S. quality. Also, e-commerce is thriving in each of these markets. These factors, along with market size and accessibility, make these a strong first choice for U.S. firms with plans to expand abroad.
Canada: Canada’s proximity to and excellent relationship with the United States makes it preferential from a shipping and logistics perspective. It has weathered the global recession better than most countries – and, more than four-fifths of Canadians in our Global Online Shopping Survey reported shopping online.
Australia: Australia is also a substantial e-commerce market. More than 90 percent of Australian consumers surveyed reported shopping online. Also, Australia is especially attractive for U.S.-based retailers since there is no duty on exports up to $1,000.
UK: The UK is the largest of the European e-commerce markets – with online sales expected to total more than 67.4 billion euros (U.S. $90 billion) in 2012. More than 90 percent of consumers in our survey reported shopping online and a full two-thirds said that they had made an online purchase within the last 30 days. Forrester estimates that by 2016, online sales will account for more than 14 percent of total retail sales in the United Kingdom. The UK also ranks among the top countries worldwide for ease of doing business, according to the World Bank and International Finance Corporation.
Emerging Market Opportunities
A number of other markets are demonstrating increased affluence and an affinity for high-end purchases. Russian consumers, for example, have recently been gaining considerable attention from retailers who aspire to help furnish their newly acquired real estate worldwide. However, perhaps the biggest emerging-market opportunity can be found in Brazil, where middle- and upper-income consumers typically shop for brands rather than bargains and appreciate the convenience of being able to shop online for goods from around the world.
Brazil: In Brazil, import taxes are very high. However, in-store markups for imports in Brazil are also high – so, for price-sensitive customers, online shopping provides an attractive alternative, even with added cost for shipping and taxes. For the majority, who are less focused on price, e-commerce helps to overcome other barriers including convenience and access to goods not available in stores.
Brazil is one of the fastest growing emerging economies in the world. In fact, there are projections that indicate that by 2015, Brazil will become the fourth largest e-commerce market. There is significant growth in the size and buying power of the Brazilian middle class. And, in Brazil, as across South America, the population skews younger than elsewhere in the developed world – across South America, almost one-third of the population is under age 30.
Key Factors for Building Successful International Online Shopping Experience
Market size and appetite are not necessarily enough to ensure international e-commerce success. In our earlier article, we provided a quick list of must-do items that consumers expect worldwide. Here is a quick recap – and some additional insights:
Make sure that pricing is consistent for goods across your website: Shoppers may want to see pricing in their own currency on product pages, but they are much more focused on making sure they aren’t getting gauged by being on a U.K.-version of your site versus a U.S.-version. Savvy consumers will compare prices across different markets by visiting web pages designed to serve different countries. While they may expect to face higher shipping and taxes on imported goods, they do not expect to find substantial variations in the base price.
Provide fully landed cost information at checkout: Consumers are more likely to be satisfied if all applicable duties, taxes and shipping costs are calculated and provided up-front during the buying process. In particular, watch for instances where taxes could be levied upon delivery. These types of after-purchase surprises are not appreciated by consumers.
Give consumers the option to select their own delivery method: Empower consumers to control their costs through choice of standard delivery (at lower cost) or expedited delivery (at higher cost). Spell out the time frame for each. Again, no surprises: ensure that supply chain and logistics are reliable, and be as forthright and accurate as possible.
Offer several payment options: Debit and credit card usage vary by country and custom so, whenever possible, offer both. Make it easy for consumers who wish to pay by electronic payment systems with PayPal or Moneybookers.
Choose cross-border e-commerce solutions that require minimal set-up and integration: Proven solutions that offer consistent, proven, high-quality services will help to ease market entry and ensure success.
Best-in-class providers:
Minimize up-front investments by delivering the necessary technology and services.
Offer a single cross-border platform that allows retailers to guarantee their international shoppers accurate landed costs.
Provide fraud protection, translation and currency conversion and, most importantly, reasonably priced shipping options.
Excel in international nuances, such as an ability to capture and verify international addresses.
Taking the Next Steps
For any market your business is considering, be sure to perform a careful analysis of the potential for your products and services, the infrastructure requirements and the availability of partners who can help you provide consistent high-quality service and delivery.
Craig Reed is vice president of e-commerce solutions at Pitney Bowes Inc.