What is International Ecommerce?
International ecommerce is the business of selling products online to other countries or markets and is a key area of growth for many businesses.
With an ever-increasing range of factors, from digital tools to increased internet penetration, making operating globally easier than ever, many brands are testing out new markets with increased success.
To assist cross-border ecommerce brands to make a smooth transition into new markets, this guide will look at the most important areas of international ecommerce to excel in, to ensure a superior experience both for the retailer and shoppers.
Covering technology, infrastructure, marketing, localization, and customer experience, we delve into the essential components of a successful ecommerce website in order to help guide businesses moving into new markets through the myriad steps that will ultimately deliver conversions.
Growth and opportunities
In 2021, the global ecommerce market was valued at $4.8 trillion, with cross-border ecommerce valued at $826 billion.
In established markets such as the United States, the UK, and China, ecommerce has been steadily increasing. The US has seen a 7.7% increase in ecommerce spending since Q4 2020, the UK grew 54% YOY in 2021 and China’s ecommerce market is expected to reach US$3 trillion by 2024 (it’s currently US$2.1 trillion). In Europe, over 25% of ecommerce is cross-border.
In Southeast Asia, ecommerce has grown more than 62% CAGR (compound annual growth rate) since 2016 with the Indian ecommerce market predicted to touch $84 billion in 2021, up from $24 billion in 2017.
In emerging markets, Brazilian ecommerce sales are expected to grow to $17.29 billion by 2023, with fashion its largest segment, worth $5.5 billion. Indonesia is similarly expected to reach $16.46 billion also by 2023, with electronics and media its largest segment, but fashion a close second worth $2.63 billion.
Non-cash transactions are expected to exceed US$1 trillion globally by 2024, according to Business Insider’s Payments Forecast Book 2019 and ecommerce will nearly double its share of total retail in the same time period.
While card payments will increase due to US customers abandoning cash, mobile is a key growth driver comprising 44% of $1.9 trillion in ecommerce.
Expanding an international ecommerce business cross-border
With such strong growth opportunities available to online retailers and brands, many are moving into new markets due to increasing scope for additional revenues and decreasing barriers to entry. However, optimizing the business for international shoppers is a non-trivial endeavor, so a well-thought-out strategy is required.
Global ecommerce strategy
To facilitate an excellent shopping experience there are crucial factors to be aware of before committing to a new market. Buying an in-country domain and assuming everything that’s working well on the original domestic site will transfer over is unlikely to deliver the optimum results. Instead, researching each market individually is essential to the ultimate success as each region will have its own idiosyncrasies.
How does a business decide which markets to expand into?
The first metric to assess is the website traffic on the existing site to get a sense of which other countries the traffic is originating from.
Monitor traffic from other countries on the site, and gather data about how people shop, what products are popular in what markets, when there are peaks in traffic, and what is driving that traffic. Factor in bounce rate – maybe your brand name is the same as a different business in another country. Shoppers may be finding your brand instead of what they want so will bounce off your site quickly which will affect quality and data score.
The Pareto Principle, or 80/20 Rule, states that ‘roughly 80% of the effects come from 20% of the causes’ which suggests that 80% of cross-border sales will come from 20% of international markets. To drill down even further, apply the 80/20 rule to that 20% to find which are the best markets to enter.
After applying the Pareto Principle to the data, markets should be designated either ‘short-tail’ and ‘long-tail’.
Short-tail markets are the 3-5 international markets that will drive the majority of cross-border sales. Focusing efforts and investments on these markets will generate the best ROI in the initial rollout of a global ecommerce initiative.
Long-tail markets are smaller markets that when combined can be a valuable source of sales but can be developed once key markets are performing well with optimized solutions.
Marketing to international ecommerce shoppers brings its own set of challenges. Not least amongst these is local language and whether to translate the website. Research shows bringing shoppers to a site that is not in the same language as the ad they clicked will negatively impact conversions.
If translating the website, start with the primary language for the largest audience in that market. After that, advertise in that language, with local currency, and local unique value propositions such as free shipping, free returns, etc. A local shopping experience for the consumer is of paramount importance and is covered in more detail further in the guide. Briefly, localization comprises everything from language to currency as well as specifics around the checkout and special offers.
All aspects of marketing including email marketing need to be localized. Countries need to be segmented and marketed to differently depending on language and region. Consider how email habits apply in different regions and send emails on a schedule that the shopper is used to.
Additional tools include optimizing graphics and ad copy for each market, and using local social, search, and display networks where possible – such as Yandex for search in Russia and Sina Weibo for social media in China.
Learn the tastes, habits, preferences and segments for each market especially relating to seasonality, holiday trends and specific shopping days such as Black Friday or Singles’ Day. When converting shoppers making sure that pricing, shipping and returns are quick and easy to understand for each market will help immensely.
Providing an excellent international ecommerce experience
As an online retailer, there is a huge amount of work to be done behind the scenes that the shopper never sees. Here are three of the most important technology factors that will affect the shopper experience.
Moving from a domestic to a global deployment of the commerce platform, is a primary decision that will affect performance and downstream conversion. To provide a fast-loading experience on the website, a US company that wants to sell to shoppers in the UK, needs to have its servers as close to the shopper as possible, ie. in the UK or at least Europe. Sites that take longer than 3 seconds to load are abandoned by shoppers at a very high rate so retailers need to find a solution that they never had to consider in their domestic operations.
Operating in global markets opens the business up to new data compliance regulations and standards that may not have applied in the domestic market. For example, if a company is US-based, as long as it’s hosted in its home country, it may never have had to address data regulations previously. In Europe, businesses would be familiar with GDPR which puts some limitations around privacy, but many countries are now developing their own equivalent to GDPR, for which the expanding company must find solutions to be compliant.
Customs and Duties
Moving into markets means navigating customs and duties for each country and requires a much richer merchandise data set than a domestic market. For example, the business must be able to declare to a foreign government what the merchandise is, and where it originates from. These two pieces of data will affect the rate of duties that will be applied in each country. While these data sets could be managed manually, often companies will have hundreds of thousands of SKUs which would be bordering on impossible to manage manually so a tech solution needs to be found, to automate the calculation and declaration. Inaccurate calculations will negatively impact conversion if they are too high and inaccurate declarations will hit the retailer’s bottom line.
Steps to create an excellent ecommerce website
Entering new markets will require providing shoppers with an excellent experience from start to finish to improve conversion and increase revenues. There are several key factors to look at in order to do this – from language to checkout localization.
- Language localization
While translating your website to the local language is important – especially at checkout – it’s not necessarily the most important part of the ecommerce experience. This is because not all markets respond in the same way to shopping in a language other than their own. Scandinavian shoppers, for example, are happy to shop on English language websites, but other markets such as South America, expect to see a website translated into their language.
In addition, if translation is necessary for a market, make sure that the translation is localized, as countries speaking the same language will often have different words for the same product. For example, while most of South America, Central America, and Spain all speak Spanish, different words have a different meaning depending on which country they are in. As an example, “Saco” in Spain is a large bag that is generally used for potatoes, whereas in Mexico it refers to clothing and means “suit”.
Shoppers tend to prefer to shop in their own currency – or sometimes in a currency they can choose. Whichever way the currency is presented, make sure that it’s consistent from beginning to end of the shopper journey.
When setting a currency, be clear which currency it actually is as some markets, such as the US, Canada and Australia for example, use the same symbol which can cause confusion and affect sales.
For example, a Canadian shopper shopping on a US site will assume the price is in US dollars unless shown otherwise. This will greatly affect conversion as a price in USD is more expensive than in CAD and even more expensive for Australian dollars.
- Duties and taxes
Retailers agree that one of the most difficult challenges to navigate when expanding an international ecommerce business into new markets is calculating local duties and taxes and displaying fully landed costs for each market.
Shoppers should not have to pay anything additional on delivery and 60% of customers will abandon their cart at checkout due to unexpected costs. Also, shoppers who do face extra fees on delivery are less likely to make a repeat purchase.
While international shoppers expect to pay additional fees it is important to let them know the total cost right away – including shipping, insurance (if required), and duties and taxes.
An ‘in-country’ price is one that has been set for a product in a specific market. In-country pricing tends to result in better conversions because it represents a consistent price that doesn’t fluctuate, it’s in a format that is familiar to shoppers and it aligns the online and offline experience, if the retailer has a brick and mortar presence in that country.
An alternative way to manage pricing in different markets is to apply a currency conversion to the domestic price. This can work for markets where there’s not enough volume to justify the cost of maintaining a local price book. However, it is an inferior experience for the shopper, and doesn’t convert as well as in-country pricing. This is primarily due to fluctuating prices day to day, and inconsistent experiences from online to offline.
Different markets use different pricing models reflected in how prices are rounded.
These are all essentially the same price, but the convention varies from country to country and it’s important to present the currency in a way that’s familiar to the shopper.
Merchandising is an important consideration particularly if the product is seasonal – such as clothing. While this means that there are some technical issues to address in terms of making sure the right products are being offered in the right markets at the right time, it gives an excellent opportunity to the retailer to test new season stock in smaller markets or sell out of season stock to a market where it’s in season.
Culturally appropriate merchandise/images
In some markets, there may be cultural considerations to be aware of when selling merchandise. Keep this in mind when deciding what style of photos will be used to portray products.
- Checkout localization
Localizing the checkout experience might be the most important part of a successful international ecommerce business. Once the customer has reached checkout it’s important to do everything possible to prevent drop off at this point. The experience should be as frictionless as possible. Here are some areas focus on.
Optimize for mobile
Younger generations – Gen Z and Millennials – are leading the way with shopping on mobile, with GfK reporting 73% of Gen Y (or Millennials) reporting using a smartphone for shopping in the last 6 months. Gen X (age 39-53) is at 59% and Boomers (ages 54 to 72) are at 33%. Shoppers may still primarily shop on desktop in some markets, but they often start the shopping experience on mobile so it’s important to make sure it’s optimized.
Shoppers need to understand what they’re expected to do at checkout, so clear instructions in their local language is essential. Buttons such as ‘next’ ‘buy now’ or ‘checkout’ are examples of calls to action (CTAs) that should be localized according to shoppers’ language.
Local Address Formatting
Different markets will have different address formats. Don’t frustrate shoppers by asking them for address elements that are not relevant in their country. There is also an important connection between the quality of the address formatting and successful delivery so use address verification and auto-complete where possible. These features have the added benefit of reducing the number of taps to complete a checkout.
- Payment and fraud
If all the other parts of the shopping experience go well, the path to payment for the shopper should be straightforward. However as, in Q3 2020, ecommerce websites only converted 2.17% of visitors – down from 3.23% in Q4 2018, should be as easy for them to progress and then convert as possible.
To do this, it is essential to make sure the checkout experience feels familiar to the local shopper and offers payment options that are familiar to each market. For example, in the Netherlands, 57% of Dutch shoppers prefer to use iDeal. In Germany, 23% of ecommerce shoppers use an invoice/credit transfer method of payment, with 44% also reporting that they usually used PayPal.
A ‘local acquirer’ is an acquiring bank in the market or region the shopper is located. As global acquiring banks don’t always recognize local cards, and therefore might not honor a payment, using a local acquirer can help improve sales by up to 60%.
International online purchases can be subject to a higher number of fraud flags. However, these are often false positives based on a set of fraud rules that are too restrictive. This can negatively impact conversion and turn away shoppers that are genuine. To reduce this, actively managing risk and using advance fraud tools can help, as can understanding the fraud profile of each local market.
- Shipping, delivery, and returns
Research has shown that free shipping helps shoppers convert but can reduce margins if not applied correctly. Thankfully there are two ways to offer free shipping without impacting the bottom line.
One solution is to offer free shipping thresholds, where a shopper can avail of free shipping if spending over a certain amount. Alternatively, embed the cost of shipping into the product price. Although the final cost to the shopper will be the same, research has shown that a higher conversion rate will be achieved when offering ‘free shipping’.
Over 40% of shoppers cite unclear or expensive returns policies as a reason for cart abandonment, with an average of 81% abandoning mobile shopping carts, so facilitating easy returns is essential for building trust with international ecommerce customers. Happily, 95% of shoppers say they would repeat a purchase following a satisfactory returns journey, so providing an easy, transparent returns policy is essential.
Similarly, to free shipping, the cost of ‘free’ returns can be embedded into product prices.
- Customer Service
Online retailers need to provide excellent customer service so that shoppers will feel secure visiting their sites and ultimately convert at a higher rate. This comes with a unique set of challenges including multi-lingual customer care and making sure that there are agents available at business hours in diverse markets. Other ways to assist with customer service include providing toll-free numbers for each market where possible, multi-lingual online FAQs, tracking portals and chatbots.
Ecommerce trends to watch out for:
A major part of running a successful global ecommerce business is staying on top of the latest technology trends in order to provide shoppers with the best experience through every step of the customer journey. Technology is ever-changing, as is the way customers begin or continue their shopping journey, with an increasing expectation of seamless integration between devices and channels.
Here are some current trends to stay on top of, from research compiled by the ESW Product Strategy team.
M-commerce and mobile optimization
M-commerce, or mobile commerce, is the name given to purchasing on a hand-held device. With the possession and usage of mobile phones constantly increasing, it is essential that an ecommerce site is mobile-optimized. There are a number of ways to make sure the mobile experience is a good one for the shopper, leading to better conversion.
- Reduce pop-ups – if pop-ups are not optimized for mobile they may be difficult or impossible to close, if the ‘X’ is hidden, and will lead to user frustration and abandonment.
- Reduce taps- having too many reasons to tap, especially at checkout, is offsetting for the shopper. Try to use autofill for addresses and emails where possible and don’t capture unnecessary information such as date of birth or title (Mr/Ms/Mrs).
- Use mobile-specific express payment options such as Apple Pay and Android Pay.
Artificial intelligence (AI) is the term used for computer systems that can sense their environment, think, learn and act in response to what they are sensing as well as their objectives. Machine learning provides systems with the ability to learn and improve without being explicitly programmed.
Some of the areas that AI is being used to improve the customer experience include chatbots, fraud management, price optimization, and visual search.
- Chatbots – Retailers are increasing using customer services tools such as chatbots or virtual personal assistants to assist with a frictionless shopper experience.
- Fraud Management – Fraud is a particular problem with international payments, but machine-learning technology can help identify fraud as it happens and stop activity before damage is done.
- Price optimization –Machine learning can consider many products and optimize prices globally based on patterns from previous data.
- Visual search – AI can use image recognition to find similar products through uploading a photo and using AI to identify similar brands, colors, patterns and more.
Blockchain technology is essentially a series of ‘blocks’ made from digital pieces of information that have a number of functions. Blocks can store information about a transaction, about who’s participating in the transaction, and also store information that distinguishes it from other blocks.
There are a lot of opportunities in using blockchain such as providing an end-to-end supply chain solution to enable manufacturers to order, sell or trace, and pay for goods once they arrive at their destination.
Barriers to implementing include blockchain not being fully understood which can lead to a lack of trust. Also, there’s a perception that blockchain requires a high capital investment and incurs significant operational costs.
Headless commerce means using a headless architecture when developing ecommerce sites. The headless commerce approach separates the UI (or presentation) layer from the backend services, then connects the two through a set of web services.
There are a number of benefits to this, including flexibility around updating to the content layer without disrupting the business, and customization becoming much easier.
Using a ‘voice assistant’ such as Siri or Alexa to process voice orders is known as ‘voice commerce’ and is a way of shopping that is increasing in popularity as the technology improves and voice search becomes better.
Voice commerce is an excellent way for retailers to improve the shopping experience and increase conversions. Shoppers can use voice search to look for products, or voice re-ordering, which is popular as the shopper doesn’t need to see the products or do a comparison shop.
Providing excellent customer experience has always been important in the customer journey but operating on a global level means making sure that the experience is excellent across all markets and regions regardless of language.
There are several ways to improve the customer experience including simplifying the checkout process to decrease cart abandonment and localizing the shopping experience.
Implementing steps such as a one-step checkout, auto-detecting countries, and autofilling addresses will help immensely with the checkout experience.
Providing an excellent experience for the international shopper is the most important part of an ecommerce business, leading to greater conversions and higher revenues. By following the suggestions outlined above, expanding into international markets will be a much easier and more successful task.