Once, the streets of London were said to be paved with gold. Now virtual high streets are more likely to be paved with gold, as global cross-border ecommerce is forecast to reach $1 trillion by 2020. Uncertainty in local economies and fluctuating currencies lead businesses to look beyond their own horizons, as they seek to meet consumer demand, grow their operations and identify exciting new lands of opportunity. China, for example, has the biggest market for ecommerce in the world. In 2016, there were over 410 million shoppers in China who shopped cross-border, a number set to exceed 740 million in 2018, whilst India is the fastest-growing online retail market in the world, expected to grow to $100 billion by 2020.
Overcoming the complexity of global ecommerce
Extending your market overseas isn’t without risk though, and for ecommerce companies branching out into new regions and continents, it can seem daunting: adjusting for languages, currencies, buyer behaviour and seasonal shopping habits, shipping fees, taxes, regulations and duties as well as managing returns strategies can be hugely complex. And even when you have this under control, how do you let consumers know about your business? You need to devise a marketing plan and client contact strategy for an entirely new region, maintaining brand consistency across every market and taking translations and cultural predilections into account – we’ve all raised a smile at those ‘lost in translation’ marketing mishaps. For example, did you know that an umbrella or a pair of shoes make for bad gifts in China? Regarding the umbrella, ‘sian’ in Chinese means ‘apart’ and ‘separation’ and similarly the word for ‘shoes’ sounds exactly like a word for ‘bad luck’ or ‘evil’.
Today’s cosmopolitan consumers buy cross-border
Research shows there is a great appetite for consumers buying cross-border. A Pitney Bowes study shows that two-thirds of consumers have made a cross-border purchase, and 32% do so at least once a month. For some, buying behaviour is fuelled by overseas travel: 61% of shoppers in the Pitney Bowes study visited stores during their travels, and wanted to continue the experience by shopping online once they got home. With latest figures from Office of National Statistics in the UK showing an increase in overseas visitors for five consecutive years and the highest-ever figures for visitor spending at £22.1 billion, it’s not difficult to visualise the potential growth for your business.
So how do you maximise this opportunity and meet consumer demand in new markets with a low-risk approach? Our successful, high-performing clients take an integrated dual approach: they adopt a marketplace strategy; and they globalise their websites.
Here, we’re going to concentrate on marketplaces. From Amazon to Zalando, online marketplaces empower consumers by providing them with choice: they can shop whatever, whenever, wherever and however they want. It’s a powerful proposition. A study from the Ecommerce Foundation forecasts that online marketplaces will own nearly 40% of the global ecommerce market by 2020. 85% of ecommerce transactions in China and 83% in India occur on marketplaces. It’s not hard to see why.
Marketplaces open retailers up to an entirely new stream of consumers: those not familiar with your brand, with more allegiance and trust for a platform they are comfortable with, in their local language, and where their buying information is already stored for speed and convenience of purchase. It pays to know which marketplaces are preferred in which regions. We might assume eBay and Amazon have the broadest reach into new markets, but this isn’t always the case. Here are just a few preferred local marketplaces:
• UK – Amazon, eBay
• Germany – eBay and Zalando
• United States – Amazon, eBay
• LatAm (Mexico, Brazil, Argentina, Chile) — MercadoLibre
• India – Myntra, Snapdeal, Flipkart
• China – Tmall, JD.com
• Australia – eBay
• New Zealand – TradeMe
• Japan – Rakuten Ichiba
• Indonesia, Malaysia and the Philippines –Lazada
• South Korea – Gmarket
On which marketplaces should you set up your storefront?
Not all marketplaces will suit your brand: some are known for certain categories more than others, so you’ll want to factor that in to your decision. Marketplaces are evolving, albeit some faster than others: Tmall’s early roots were in food/baby products and morphed into a broader assortment of things, whereas JD.com had its roots in electronics. Myntra India has a strong fashion-focus. And both Amazon and Alibaba have announced expansion plans this year. It’s worth remembering that if a marketplace isn’t currently known for your category right now but has a strong growth strategy (backed up with clear marketing budget), that’s something to think about too, as it’s possible you might get a bit more attention from a marketplace that’s decided to focus on growing a category that you’re in. So don’t automatically discount it.
How are you going to ship items to your buyers?
Once you’ve decided where your business needs to be, you’ll need to determine how you want to ship, with considerations such as whether you’re going cross border or can fulfil in-country. Cross-border can actually be less risky because you don’t need to pick inventory to put in country that may or may not sell. But the downside is it can take longer for people to get their items and it is more expensive to the end consumer via cross border fees. If you do want to put merchandise in country, would you do it yourself? Or through a third party? You’ll also need to determine as a business whether you want to go wholesale in a marketplace or not. Not all marketplaces use a wholesale model – in fact, some of the biggest do not.
The customer experience
Marketplaces encourage feedback and seller ratings. The service you provide is more transparent and visible than ever. Cultural differences prevail here too. In China, for example, chat via Aliwangwang is common practice. It enables communication between buyer and seller pre-purchase – as important in the region as post-purchase support, as it’s common for customers to ask questions before they buy. Make sure your business can respond.
The finance part
Marketplaces often are responsible for charging the consumer, and this can be complex for a retailer. In some cases, it will require a retailer having domestic banking capabilities that support moving funds in and out of country. Think about how you will manage foreign exchange and currency changes. Consider also the preferred payments in different markets, as credit cards are not a universal choice for online shoppers: in Germany alone, shoppers use SOFORT, ELV, SEPA Credit Transfers, Giropay, PayPal, Visa, MasterCard, Klarna, Ratepay and Paydirekt. In China there’s Alipay, Tenpay, Union Pay, 99Bill, China PnR, Yeepay and Huanxun IPS amongst others. One in five Chinese people has a credit card, but they don’t use them to shop online.
Also, settlement periods vary widely from region to region. In Latin America, it’s not uncommon for settlement periods to range between 30-35 days.
You’ll need to consider the technology resources that you have available to support initial set up and ongoing support. Marketplaces will differ in the ways that they interact from a technology perspective. Do they use a file transfer process or a real time API? They also have different ingestion preferences: for example, one marketplace may consume all catalog data in a single feed, while others must accept a catalog feed with a separate feed to associate SKUs with size charts/maps. Just as important is the richness of the actual product data being fed to the marketplace. This is critical to success, and often a prerequisite for the marketplace. For example, some marketplaces mandate that merchants provide a “fabric” or ”material” attribute that describes the material composition. Take your time to work through these considerations because shortcuts can delay your onboarding process.
There are many other considerations when it comes to expanding your businesses through marketplaces. From revenue share and merchandising, to storefront design and marketing, each marketplace will do things differently. While this can be a barrier, global marketplaces remain a high-impact and intelligent route to new markets. The best way to start is by finding the right partner to help you optimize your reach across borders and bring your store to millions of new consumers.
Georges Berzgal is Pitney Bowes vice president EMEA, global ecommerce.Image credits:
- Pitney Bowes