In the medium term, among others because of the always increasing price pressure, only the e-commerce companies with substantial sales will survive. Cross-border sale is therefore not an option, but a dire necessity to enlarge the market.
The opportunity of cross-border e-commerce is not being fully exploited. According to a publication of Eurostat late December 2017, only 7% of the companies with a web shop also sold cross-border in 2016. If your web shop is established in the United Kingdom, in Germany or in France (the three largest e-commerce economies of the EU), it is less necessary to also use cross-border internet sale. Nevertheless, you market will be more attractive for the foreign parties who are prepared to launch cross-border e-commerce.
TWINKLE, TWINKLE, LITTLE STAR
Each year, the e-commerce magazine Twinkle publishes a list with the largest web shops for each country. Since your connection to the Internet doesn’t stop at the borders, a lot of those web shops is coming from abroad. Players like Amazon and Zalando are slowly moving to the top, at the expense of many smaller local players.
Specifically in Belgium, that top has already been claimed by foreign players. Five CEOs of large Belgian companies, including Wouter Torfs of Schoenen Torfs, therefore published late 2017 a letter, in which they incite the Belgian consumers to choose for Belgian retailers. If you, as a Belgian, for example buy through the American Amazon, money leaves the economy.
Unfortunately, Mister Torfs forgot to mention that the buying agents of Schoenen Torfs themselves travel to foreign countries to purchase shoes there. Globalization is nothing new, and we shouldn’t try to stop it with a letter. You should participate in globalization, to be able to play a role of importance tomorrow.
THE DIGITAL SINGLE MARKET
With 28 countries, 24 official languages and 10 currency units, the EU shines in mutual differences.
Ecommerce Europe estimates that the e-commerce industry in the EU will be worth over 600 billion euros late 2017. With a growth of 14 – 15 percent, the EU shows a bigger growth than the United States. In the 28 countries of the EU, there are for example in East and Central Europe some large economies left (such as Rumania, Ukraine and Poland), who are catching up.
The European Commission is working on a sturdy action plan, to boost the digital single market. The Commission aims for a better access for consumers and companies to goods and services across Europe, among others by e-commerce. Studies have shown that both the European SME and the consumer think cross-border internet sales are rather inconvenient. Obstacles are for example the unclear delivery times, a more complex return procedure and lack of clarity about the consumer rights.
Therefore, the European Commission investigates (for example) how the market can be stimulated more, by means of logistic changes. Furthermore, the new uniform European data protection regulation is a very practical step in the direction of a single market and last year, the European Commission also launched an online platform for alternative dispute resolution in Europe.
With a turnover of over 150 billion euros, Great-Britain is the largest e-commerce market of Europe. However, in 2019, the Brits will leave the European Union. Although the Brexit negotiations are in progress right now, the effect of the Brexit on e-commerce remains a guess, for now.
Despite the fact that we almost know nothing about the Brexit, you should – especially when the British market is important for your sales numbers – work on an explicit action plan around the British market, in 2018. In general terms, two opposing scenarios are mentioned, namely a soft Brexit (meaning that Great-Britain will join the EVA and remain a part of the European single market) and a hard Brexit (meaning that Great-Britain and the EU will negotiate about a new trade agreement, including possible supplements for cross-border sales).
Since the Brexit referendum was announced for the first time, the pound has been strongly devaluated in comparison with the dollar or the euro. If you sell from a euroland to clients in Great-Britain, your products have become more expensive. The other way around, this means an opportunity for the British web shops: their products have become cheaper when a straightforward pound-euro conversion is used. These web shops can ask the euro-clients to actually pay in euros, which makes the difference obvious.
The uncertainty associated with the Brexit has made Great-Britain into a loser in the short term. A number of large (American) companies already moved their European headquarters from London to the continent. If you are not selling in Great-Britain now, it’d be better for you, in most situations, to aim for other markets first, until there’s more clarity.
In 2017, we investigated, along with some other e-commerce experts, how the Dutch web shops should undertake their crossing to America. The results of the Shopping Tomorrow (an initiative of Thuiswinkel.org) research will be published in January on the Webwinkel Vakdagen. In addition, two companies received specific help during their first steps to the US.
The most important learning? While the EU consists of 28 different countries, the US consists of 50 different states. A one-size-fits-all approach only works for a few companies. Each state in the US is unique and there are also big cultural, politic and linguistic differences.
Amazon is for shopping what Google is as a search engine. Of every new internet dollar, no less than 60 cents go to the internet giant from Seattle. Therefore, many European companies start their sales in the VS through Amazon, out of convenience. Selling through Amazon offers the big advantage that you are instantly compliant with the local regulations. On the long run though, we advise companies to develop a proper channel, because you probably don’t want to be dependent on a middleman who is known to shamelessly introduce a private brand in product groups that run well.
EMAKERS advises the European e-commerce players to first expand within Europe. When you really want to aim for the US, you shall be confronted with numerous specific challenges, among which: the speed of delivery, the currency fluctuations of the dollar, VAT (locally organised in the US), and different time zones. For certain product groups, there can also be additional restrictions or prior approval that is needed by the local authorities.
FIRST THINGS FIRST
If you opt for an international expansion, the first step is to determine in which countries you want to sell. In that choice, opportunity, the presence (or the absence) of competitors and potential often have a key role. Therefore, we advise clients to take a look at numbers like the total value market, the growth of the market, the e-commerce percentage of the total retail, the number of internet users, the number of online shoppers and the average online spending per consumer.
Next, you develop an implementation and exploitation plan for each country or each market. Cross-border sales require specific attention for the follow subjects:
- The ‘locating’ of your digital offer: what do you have to adjust to your target market? Of course that often means that parts have to be translated and that it would be a good idea to make your offer available through a local domain name. But consider for example also local contact possibilities, make sure that your web forms don’t have specific incorporated checks that would block a foreign address or telephone number, etcetera. Guide the visitor of your site through his or her browser settings or geo direction services directly to the right language/country specific content.
- Providing local payment options is an imperative when you sell in a foreign country. Clients disengage their order because they are only offered to pay with credit card. Local payment options also often are cheaper than paying with credit card. As well as offering local payment options, it’s sometimes also a good idea to use the local currencies on the website itself. When you carry out a creditworthiness check for your local market, it’s possible that it won’t function well for foreign companies.
- The delivery time of cross-border orders often takes longer than with national shipments. That’s because the distance is often larger and most logistic players have a nationally organised organisation. Depending on the type of the product and the expected sales numbers, it’s therefore sometimes a good idea to be able to use a local stock. The preferences of the consumer regarding the delivery mode can also vary for each country, based on the local infrastructure. Because international delivery is normally also more expensive than national delivery, you should carefully consider whether you want to let the client pay (a part of) the delivery costs, and how that will affect your sale position. You also have to enable cross-border return shipments. If you ask your client to pay to send the return shipment to your headquarters, you will lose the least amount of money. However, the negative reviews will quickly follow.
- While the three abovementioned considerations are of a commercial nature, there are also some matters that you just have to respect. That’s (for example) the VAT and other regulations that you have to comply with. You have to know them well in advance, so you won’t contribute too much, won’t ask too little of your clients, or in some other way end up with a financial hangover. Within the EU, the regulations regarding the consumer rights have luckily been harmonised on several domains, and from May 2018, uniform regulations will apply, with respect to privacy and data protection.
Labels like those of BeCommerce or Thuiswinkel are worthless across the border. Commercial labels like those of Trusted Shops or Google Reviews offer a better alternative across the border.
Of course you have to determine a specific marketing strategy for each market. To monitor your efforts well, you should make specific dashboards for each market in applications like Google Analytics.