For ecommerce businesses, cross-border expansion has become more and more achievable and strategically important. Consumers from all over the world are not only shopping online with little to no regard for borders but eager to be able to access products not available in their own in-country brick and mortar stores.
Expanding internationally has never been easier than it is now, with many tools and software available to help businesses achieve their global expansion. When looking to expand cross-border, there are multiple factors that will influence its success – from shopper demand to choosing the best markets to expand into, and how to go about the process in a way that most makes business sense.
Here are six of the most important points to consider before expanding an ecommerce business cross-border.
1. Choose the correct market
When considering whether to expand an ecommerce business cross-border it pays to put considerable planning into the decision. It’s not as simple as offering shipping to new locations – there are a number of key elements to the site experience that need to be considered to have an exemplary experience for the customer and a successful expansion for the business.
Decide what countries to enter
The first question any online merchant needs to answer is “Which markets should I sell to?” Each market will have its own idiosyncrasies and should be considered accordingly. It’s wise to approach international ecommerce on a country-by-country basis and avoid implementing a one-size-fits-all solution. To decide what markets to enter a company should:
Consider the data
Assess your fanbase/followers on social media, and where they are located. Monitor traffic from non-domestic countries in your online store. Consider brand recognition in those markets where there is significant traffic. Has there been any promotion in that market, or how would consumers know about the brand? A high bounce rate in a given market could indicate that there is a similarly named business in that market, for which consumers are actually searching. Track traffic over an extended period, and if there is a sustained trend, then consider building a solution to convert that traffic into sales.
Apply the Pareto Principle to the data
Once there is a good sense of the traffic data, it’s time to apply the Pareto Principle – the 80:20 rule. Select the top 20% of the markets – 80% of sales will come from that 20%. Then apply the 80:20 rule to that top 20%, to really understand where the best ROI will come from. This means that approximately 60-65% of sales will come from approximately 5% of your markets.
Products must be appropriate for the season, and savvy retailers can leverage this as an opportunity to test new seasonal stock or sell off last seasons. Another option is to offer a mix, testing some new products and selling off old stock.
To optimize conversion, set prices at points that the market will bear in each country. Many merchants leave significant money on the table by not researching what the optimum price point is in each market.
Culturally appropriate merchandise/images
Give thought to the type of merchandise you can sell in any given country, and whether there are cultural considerations to be aware of, in particular in relation to the type of imagery used to display the products.
3. Pricing for new markets
Research has shown that shoppers prefer to shop in their domestic currency primarily or currency of their choice. Whichever option chosen, make sure to keep the currency consistent throughout the shopper journey, from product page to cart and check out.
Remember to indicate the relevant currency if the domestic currency uses the same symbol as another country – for example, US, Canada, and Australia all use the dollar sign, and a Canadian shopper using a US merchant’s site will assume the price is in USD unless it’s very clear it’s CAD. This can affect conversion drastically as a US$100 product is significantly more expensive than a CAD$100 one and this could put off the customer if there isn’t clarity.
Duties and Taxes
Most of today’s online shoppers know that there are additional fees that can apply when shopping with an international retailer, so they want to know the total cost right away – including shipping, insurance (if required), customs duties and taxes.
However, implementing and displaying a fully landed cost with everything included is not an easy task. In fact, import duties, taxes and compliance are some of the most common issues brands cite as significantly challenging aspects of implementing a global ecommerce strategy.
As a general guiding principle, shoppers should never have to pay anything on delivery – this represents a poor customer experience. A shopper that has to pay extra on delivery is less likely to make a repeat purchase, or even checkout in the first place – 60% of shoppers will abandon the checkout because of extra unexpected costs such as taxes and other fees.
Thresholds and Embedding costs
More and more, the price of shipping can be a big deterrent for online shoppers and research consistently shows that shoppers are more likely to convert if free shipping is available. There are two main ways to overcome this challenge. One is to use free shipping thresholds, where shipping is offered for free if the shopper is willing to purchase more than a fixed basket value.
Another method is to embed the cost of shipping into the product price itself while offering free shipping. Although the final price to the shopper is the same, our research has shown that by just indicating that shipping is free, a higher conversion rate will be achieved. Using this logic, it is also possible to make certain assumptions about the cost of returns and embed those costs into product prices, while offering a pre-paid returns service.
Payments are a cornerstone of a successful international ecommerce strategy. Shoppers want to pay with the same methods they use every day, online and offline, so it is imperative to understand those local preferences and offer a blend of payment methods that maximize market coverage while optimizing market gain. In essence, this means that adding more payment methods will not always equal more success. A payment method should only be added when it has a significant impact on either coverage or conversion.
For many markets, particularly mature markets, a blend of credit and debit cards, and a wallet such as Paypal, will give sufficient market coverage. In others, such as the Netherlands, if a merchant is are offering iDeal, they will be missing out on a very large segment of the market. Whether it be Alipay in China, Qiwi in Russia, POLi in Australia or Sofort in Germany, the key is to make the checkout experience feel familiar to the local shopper.
5. Delivery and returns
Something that often minimizes conversion or leads to cart abandonment for international shoppers is not having clear delivery options and returns policy. While international shoppers don’t necessarily expect next-day delivery from a cross-border ecommerce business, they may expect an option for faster delivery or reduced (or free) shipping. Additionally, shoppers want to see a clear returns policy and know that the cost of returns won’t be excessive.
Shipping – Speed vs cost
Give the shopper the option to choose a slower, cheaper service or an express service. Whichever they choose, shipping must be tracked in order to build trust with the shopper. Being able to consolidate tracking updates from multiple carriers in multiple countries into a single portal is a challenge, but one that improves the shopper experience.
Returns are a non-negotiable element of the international shopping journey. Building trust is critical to international sales, so decide how to handle returns and make the policy easy to find and understand. With more than 40% of cross-border shoppers citing returns as a reason to abandon their purchase, and 95% of online shoppers willing to repeat a purchase after experiencing a satisfactory returns process, providing an easy, transparent returns policy should be a priority for online retailers.
Ease of return
Once a shopper has decided to return an item, the process should be as easy as possible for them. Ideally, an online portal should be available, allowing them to find their order, select the items they want to return, and prepare and send the return order in a way that suits their schedule – whether that be through a collection, a postal drop-off, or an in-store return.
Cost of return
The cost of international returns is not trivial, but there are ways to mitigate the risk upstream. For example, merchants should offer local sizing on the product page, so that shoppers are more likely to choose the correct size according to the conventions in their country and less likely to purchase multiple sizes and return those that don’t fit.
A study by ContentSquare found that 59% of customers will not purchase from a foreign online store if the cost of the returns is high. Shoppers, regardless of location, want the ability to return an item without extra expense. Offering free returns is a great way to build trust with international shoppers and the cost of providing free returns can be aggregated and embedded upstream across all product prices, meaning that there is no significant cost in providing the service.
International online purchases are subject to significantly higher fraud flags than domestic purchases. This is a big issue for conversion as, in many cases, retailers are effectively turning away customers who have already purchased. Generally, half of the flagged fraud cases are simply ‘do not honor’, due to suspicion, as opposed to any real fraudulent issue. If a company doesn’t invest in sufficient fraud tools, then they will find that in new markets like Turkey, where they are not familiar with local payment methods, a huge percentage of cards are automatically rejected.
Retailers need to use a Payment Service Provider (PSP) that uses advanced fraud tools. Fraud tools allow retailers to use payment rules that monitor things like IP address, Card types, bin types, etc. These tools automatically analyze a set of variables and reject cards that are more likely to be fraudulent.