U.S. e-retailers who ignore the global market might find themselves left behind
By Nick Ogden
In Amsterdam, 18-year-old Greta logs on to a British web site, orders the latest CD by eminem, and pays for it in gilders, using a Dutch debit card issued by her local bank. Her cousin Hans visiting from Germany, surfs a consumer electronics site, where he reads a review of a hot new game released in Japan, but not available in European stores. Hans switches to a Hong Kong-based electronics retailer, finds the game, puts it in his shopping cart, selects deutsche marks as the currency he wants to use, and views a real-time digital receipt that lists the full final cost in his native currency. Hans confirms the purchase and orders the game sent to his home in Dusseldorf.
Multiply this scenario a few hundred million times—expanding to include all age and demographic groups buying every type of product and service online—and you have a graphic image of a bold new trend in international e-commerce: a truly global phenomenon that permits buyers and sellers the world over to meet and do business online in virtually any language and currency, with ease, precision, security and reliability.
Unfortunately, the world’s mightiest e-commerce player, the U.S., is ignoring the greater global market opportunity.
Most U.S. web-based retailers flatly refuse to transact with consumers outside the country. A handful go partway, forcing customers to play currency roulette, a game where you buy in dollars, then wait until your credit card statement arrives to see how much you paid in your own currency.
America’s nonchalance toward the global e-commerce market may cost it in the long term. While U.S. e-retailers are ignoring international customers, aggressive competitors in Europe and Asia are picking up the slack, adopting secure, multi-lingual, multi-currency transaction solutions that make online shopping user-friendly for consumers from Burundi to Bath, England.
These savvy global e-commerce marketers could capture the lead in offshore markets, and they won’t stop there: American consumers hungry for access to international goods will be an equally attractive target for the e-retailing leaders of Europe and Asia.
Dominance is shifting
The U.S.’s indifference to global markets results in part from its pioneering role in e-commerce and in part from continuing success at home. At present, U.S. e-retailers control 75% of a worldwide e-commerce market estimated at $657 billion by Forrester Research. This dominance, however, is almost entirely based on in-country sales.
This indifference is also, surprisingly, the result of the revival of b2c companies. Prematurely pronounced dead, e-retailing is coming back. Companies such as FTD.com and Priceline.com have been the surprise winners of the 2001 stock market, reaping stock market gains of 200-300% since the first of the year. With all this domestic success, they might ask, why bother with customers in other countries?
The answer: Soon, market dominance will shift. Forrester believes that by 2003, global e-commerce will skyrocket to $6.8 trillion. While the value of the U.S. e-commerce market will rise significantly, its share of the global scene will plummet to 47%.
To grasp how U.S. e-retailers put themselves in this dilemma, it’s important to understand and overturn notions about purported ubiquity of e-commerce. The common assumption is that e-commerce is universal, that you can shop anywhere online with a credit card, irrespective of your nationality or home currency. The reality: The web may be global, but e-commerce is not. Currency translations and concerns over fluctuations remain a major stumbling blocks. Shipping, too, is an issue.
Of the top U.S. companies selling online, virtually none price products in currencies other than the U.S. dollar. Only a handful link to separate regional sites translated into other languages. Does it matter? Absolutely. Online shoppers must be comfortable with the experience, confident that the amount they’re quoted for a purchase is indeed the amount they’ll be billed, or else they’ll abandon the transaction.
So why haven’t U.S. retailers embraced selling in foreign currencies? One impediment may be fear of currency fluctuations that dip into margins. If the retailer quotes prices in local currencies, the company takes on the risk. But if prices are posted in U.S. dollars only—and the customer agrees to buy—then the purchaser is liable for fluctuations.
Given the potential for ballooning charges, it’s little wonder that bad experiences abound for consumers. Those who get sucked into the currency-float crap-shoot soon find out that the amount quoted in U.S. dollars on the day of purchase may not match the figure that shows up on the bill. Currency fluctuations and unspecified charges can lead to invoice creep, in which the charged amount is significantly more than anticipated. It only takes one such event to sour a purchaser for good.
Stymied
Many non-U.S. consumers never get that far in the transaction, however. Even where universally-accepted credit cards such as Visa and MasterCard are available, not all nationalities favor them. For example, some 80% of Germans prefer to use bank debits. In most cases, U.S. web sites decline to accept offshore bank debits. End result: Most German consumers can look at goods on U.S. sites, but can’t purchase them.
But maybe that’s a moot point. When an e-retailer goes global, it must of course provide global fulfillment and ship overseas. Here, too, we are a nation of stay-at-homes. For whatever reason, more than half of U.S. e-retailers decline to ship out of the country.
Solutions exist that can help U.S. online retailers turn the tables and begin drawing healthy revenue from consumers in scores of other nations. The key step is a commitment to deploying web sites with multiple language and multi-currency capabilities.
Rather than take on the cost and trouble of creating a multi-currency solution, it’s simpler to use one of the proven global e-commerce transaction offerings. WorldPay, for example, offers multi-currency transaction solutions that can be added to your current web site, and can provide the means to set up a multi-lingual online shop via our Click and Build product. Foreign consumers who visit an e-retailer’s site can select the items they want, then use WorldPay to pay in virtually any currency the seller chooses to make available.
Eliminate the risk
Another advantage to using a third party: Elimination of currency fluctuation risk on both sides of the transaction. WorldPay, for example, processes every transaction within 24 hours and assumes all risk for currency valuation changes, taking the burden off merchants and buyers alike.
As these examples illustrate, global e-retailers take on the added responsibility of providing new levels of information. It is essential that global buyers know what to expect on cost and that they have options.
Shipping provides a case in point. A number of excellent European and Asian sites provide detailed information on shipping, allowing customers to choose the timeframe, and thus the cost, of receiving their order.
It’s not hard for U.S. e-retailers to follow suit. Third party solutions exist to provide consulting services and advice on how to prepare your business for international e-commerce. If you choose to hire a consultant to assist with international trade and export issues, the cost is worth the investment compared to the potential revenue increases that come with opening your business to the worldwide market.
Throughout the world hundreds of small, mid-sized, as well as large enterprises, have taken the first step toward becoming global e-retailing powerhouses.
Take Hong Kong’s Lik-Sang (www.lik-sang.com), an online electronics retailer. The company was founded in 1998 by Nils Ahlswede, who moved from Europe to Hong Kong to be closer to the technology he was selling. From the outset, Ahlswede determined that Lik-Sang would have an international focus, with heavy emphasis on selling to the U.S. and Europe. That meant making multiple language, multi-currency transactions a top priority. “With over 20,000 customers registering in the first year from around the world, it was essential that they could buy the product they wanted as easily as possible,” Ahlswede says.
No hurdles
Lik-Sang serves more than 150,000 subscribers through a multi-lingual site that supports a variety of European and Pacific Rim currencies. “Our prices are set in U.S. dollars, but the immediate conversion allows our shoppers to pay in a currency they understand,” Ahlswede says. “Shoppers select their local currency to view prices, which simplifies the buying process for them.”
Given that the U.S. is the largest market, should U.S. online retailers make the effort to sell abroad? Isn’t the U.S. share of the world pie big enough?
No, because as e-commerce matures it will grow more competitive and sophisticated, not less. Web-based retailers should not count on succeeding by doing business as they did last year or even last month. E-retailers who are in it for the long haul must plan on expanding beyond their borders.
