In its second-largest acquisition, Amazon buys the company for $970 million.
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Steps to global sales
One common thing that Art.com and other retailers have learned is that it pays to take careful steps to international growth, launching tools and strategies that make sense for each market served. While some strategies like currency or language translation tools make sense for multiple markets, there are other strategies, in merchandising, for instance, that may be more suitable for individual markets.
With its dedicated web sites in Germany and Japan, Eddie Bauer found that German and Japanese consumers have distinctly different tastes and needs. In addition to creating different sizes and styles for the Japanese market, it also developed and shipped more dresses for Germany and more casual dressy lines for Japan. "These are examples that led to good sales and conversion rates," Staudinger says. "Just taking what we do in the U.S. may not work in foreign markets. The key is to address localized needs, but to come across with a consistent brand appearance."
Those details count, retailers say. International sales took off gradually at AllPosters.com, but every step it took to improve service to customers led to significant increases in sales, says Tristan Money, vice president of marketing. "Each time we did something, we had a sizzling impact on sales," he says. "The volume was small initially, but when we compared growth to the prior year, it was astronomical." For example, sales to Europe spiked after the retailer began displaying posters and prints in metric sizes.
Foreign distribution center
AllPosters.com, which ships to more than 30 countries, is opening its first foreign distribution center this month in the UK to better deal with national rules on cross-border e-commerce transactions throughout Europe as well as to better serve customers, says Money, a native of Great Britain. Putting a retailer in the best position regarding foreign duties and taxes can be a complicated matter, he adds. While operating a physical facility in the UK requires the U.S.-based e-commerce retailer to collect sales tax from UK customers, it`s worth it to build a more consistent experience with local shoppers, he says.
Without a local physical presence, a U.S.-based online retailer might be inclined to leave it up to foreign customers to settle sales tax remittances with their home governments. That kind of situation may go on without causing a stir among customers or government tax collectors if the retailer transacts only a few sales in that market, but once it hits higher sales volumes, it can attract attention from the local government and upset customers who have to pay extra fees on top of sales tax rates that can range from 15% to 25%, Money says.
"The larger you get in a foreign market, the more attention you have to pay to these things, because you can`t expect every customer to pay the taxes at their end," he says, adding that having a UK-based distribution center will also make it less expensive to ship across other European borders.
Apart from legal concerns, the UK distribution center will support AllPosters.com`s ability to sell more expensive products, such as picture frames to go with the posters, Money says. "Poster art is an easy product to ship internationally in poster tubes," he says. "But if we up-sell the art with frames, it becomes expensive to ship."
Shipping costs have also been one of the major challenges at Art.com. It has cut shipping costs by consolidating shipments through FedEx to take advantage of bulk shipping rates, while streamlining its warehouse to assure that shipments go out as quickly as possible.
One of the more challenging aspects of international sales is deciding which payment options to offer targeted markets--a decision that can affect the amount of transaction fees a merchant pays as well as the comfort level of foreign shoppers.
Although major credit cards Visa, MasterCard and American Express are widely accepted in international markets, consumers in some countries prefer local payment methods. Many German consumers favor debit cards, for example, and many French consumers prefer the Carte Bleu credit card. "If a web site is without a Carte Bleu payment option, a lot of French consumers will say it`s not a French site," says Ashwini Narayanan, director of product management for CyberSource Corp., provider of payment processing and fraud prevent services.
In addition to offering payment options most attractive to local consumers in foreign markets, retailers can also take steps to lower their card transaction fees and their exposure to payment fraud, experts say. By maintaining a local physical presence in a foreign market, whether it`s a warehouse or an office, a retailer can benefit from lower credit card interchange rates--the rate that transaction acquiring institutions pay card-issuing institutions and the floor for all discount rates. In the UK, for example, the Visa credit card interchange rate for a $100 ticket would be $1.65 for a U.S.-based merchant without a local presence, but $1.30 for the same retailer with a local presence, according to Wells Fargo, which offers international merchant acquiring services.
Retailers also need to work out a way to check fraud in foreign markets, where fraud prevention techniques can operate differently from in the U.S. Address verification procedures common in the U.S. are not always as effective in other countries, Narayanan says. In the UK, she notes, the password-based Verified by Visa and MasterCard SecureCode systems for entering credit card information are more effective than address verification, because the postal system grants individual residents the flexibility to change their address numbers.
One of the best means available to merchants of securing payment transactions is direct money transfers from a consumer`s bank account, an option that more European banks are offering, Narayanan says. She adds that CyberSource is working on a service that will let European consumers log onto a merchant`s bank`s web site to process direct transfers from the shopper`s bank account.