Owners of a web shop can quickly increase their potential by starting to sell across the border. That’s logical: there are always more potential customers abroad than within your domestic market.
A lot of cross-border e-commerce is already taking place, of course. Among the numerous studies showing this, a 2013 study by PayPal nicely illustrates the so-called spice routes of today.
Source: PayPal. See also: www.paypal.com/passport
Exact data on cross-border e-commerce is however lacking, partly because of varying definitions. What we do know is that there is a lot of unused potential within the EU. In the long term this will damage our economy, especially since purchases from amongst others the US and China are on the rise.
Unique product and best price? Investigate your international potential
Consumers simply have two reasons to buy a product coming from far: they want the best price or they desire a unique product. These two drivers equal to two axes to classify a company’s cross-border potential.
In this quadrant, three of the four groups should examine their international ambitions. Additionally, of course, a company’s product type determines its cross-border potential.
Traditional e-commerce products such as consumer electronics or fashion are obviously suitable for cross-border e-commerce. These are products that have a relatively high value with respect to the weight and the size of the product. For complex products, such as products with an industrial B2B character, other e-commerce objectives might be more feasible. For instance, lead generation for a local sales team.
Wondering what country to start in? Always start by investigating if you are already in pole position for certain countries. Perhaps one of your neighbouring countries is a natural option. Maybe your web site already is attracting visitors from abroad. On the other hand, some countries might by default not be possible because of contractual agreements with local distributors.Cross-border e-commerce in 5 steps
If you want to explore the e-commerce opportunities in foreign markets, there are many issues to address.
1. Adjust the content of your site to your target country
If you choose to focus on a specific country, look critically at both the sales and service pages of your web site and adjust them where necessary. Identify country-specific items of your site and adjust them where needed. Do your web forms, for instance, include some special checks that block the form to be filled out for foreign addresses or phone numbers?
Many sites still confront their visitors on the homepage with a flag to choose from in order to move forward. In the worst case, the visitor's flag is not there. The site’s visitor will leave immediately, then, not recognising his or her flag. Where possible, you should route your visitors automatically to the country and language specific content. This can be done based on browser settings or use of geo direction services.
If your product pages are translated to attract foreign customers, you have an implicit commitment to also provide multilingual customer service. This might mean that some parts of your site or web shop are or are not displayed. For example, when your site shows a customer service phone number, consider a local phone number for your target markets. When you offer live chat, determine whether this is also feasible for other time zones.
2. Which trust mark is the strongest?
‘Trust’ is an important issue for e-commerce in general - but of increased importance when you are trying to sell to customers abroad. Consumers feel less protected against fraudulent foreign sellers. There are numerous ways to increase trust in your company, including the use of so-called trust labels.
Many trust labels within the EU have a rather national character, supported by national organisations. It might be a good strategy to obtain each of these (often very strong) labels if you are focusing on just a few single countries. Alternatively, you might want to consider a widely known commercial trust label like Trusted Shops.
3. Local payment options are a 'must'
In 2015, a study by the European Commission on e-commerce showed that about 60 percent of all consumers cancelled their order during the purchasing process because the seller did not offer their preferred (domestic) payment option. Operating a web shop based on credit card or Paypal payments might get your start quickly, but in Belgium consumers prefer to pay with Bancontact and in the Netherlands the dominant payment option is iDeal.
Larger retailers also need to realise that the euro might be the dominant EU currency - but not the only currency. Buyers and sellers both prefer not to be surprised with ‘hidden’ costs, so a lot of sellers now consider implementing a so-called dynamic currency conversion service. These type of services offer a real-time binding exchange rate that show customers exactly what they have to pay in their own currency.
4. Cross-border logistics
Often, delivery represents the only physical contact that customers have with their company. Pure e-commerce players already know this for years.
Cross-border delivery, however, usually lasts longer and cost more. Additional options are often also more limited. Track and trace, for instance, is less accurate. Delivery options, such as choosing a specific delivery window, are usually not available. Since customers want to trust that their package will arrive on time, this might limit your cross-border sales seriously. Within the context of the EU Digital Single Market, several initiatives are currently being undertaken to increase transparency in logistical services.
Regardless of the numerous constraints, it is important to understand what the preferred delivery options are in your target country. Do your customers prefer to receive their goods at home, or to pick up their package at a local collection point? In some countries, consumers expect delivery to be free of charge. Such considerations you need to keep in mind for your business model.
You might opt for one fixed price for delivery to all European addresses outside of your home market, for instance - versus a calculated cost-based delivery by parcel, by destination. The first option will possibly cost you a large profit margin on a number of orders - while the second option will probably cost you a large number of abandoned shopping carts.
Unfortunately, delivery also means that a part of the orders will come back. For both your domestic and your international e-commerce activities it is important that you have a clear return policy that complies with all applicable local laws. Additionally, you should try to provide a return address within the customer’s home market.
5. VAT and other regulations
When a company based in the EU sells goods to a private individual in another country, the company should comply with the local tax regulations.
The European Union has about 75 different VAT rates and there is a difference of 10 percent between the lowest and highest rate. The rules for cross-border e-commerce VAT can be categorised into three groups: e-commerce sales to consumers in the EU, e-commerce sales to other companies in the EU and e-commerce sales outside the EU. Additionally, for each group the distinction should be made whether it is a sale of goods or services. Typically, your accountant or local tax office should be able to explain you the rules that apply in your specific situation.
Besides the complex VAT legislation, companies should comply with other applicable regulations, for example on privacy and data security.
Each company with international ambitions should start today by registering the relevant internet domain names in their potential target markets, if they are still available.
When you are already having a website, analyse your Google Analytics to see if you attract visitors from specific countries. When you are already selling cross-border, analyse your visitor’s behaviour also specifically per country.
(This post was originally written in Dutch by Stefan Vermeulen for Bloovi.)
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