9/01/12
Online shopping is catching on around the world, and that offers opportunities for North American web retailers that learn the ropes, country by country.
Internet Retailer
While U.S. e-retail sales grew last year at a solid 16.1% rate, according to the U.S. Department of Commerce, the growth rates were higher in other areas of the world where e-commerce is less mature. In Europe, e-retail sales increased 18.2% in 2011, according to the U.K.'s Centre for Retail Research; in Latin America, the growth rate was 34%, says web research firm eMarketer; and China's online retail sales grew nearly 54%, the country's Ministry of Commerce says.
What that means is that consumers around the world are growing accustomed to shopping online. And, given the popularity of North American brands, there are plenty of opportunities for web retailers based in the United States and Canada to increase their revenue by selling to consumers in other countries.
Cashing in on this potential bonanza, however, requires building brand awareness in the countries being targeted, flawless logistics, gauging the competition in each market, crafting localized web sites that speak to international shoppers in their native languages, offering competitive pricing and catering to consumer product preferences in each market. Not many retailers can do all this on their own.
"There are a lot of countries in Europe and Asia where online sales are very robust, but many retailers need a partner that can help them with global infrastructure and reducing the barriers to entry through local knowledge of international markets when it comes to online shopping trends and building brand awareness," says Max Niclas Bense, international business development manager for Hermes Europe, a provider of supply chain, sourcing, transport logistics, e-commerce, fulfillment and consumer goods distribution solutions.
And while North American e-retailers may be tempted to dip their toes in international waters by selling first in a handful of countries, some experts argue that a retailer can better spread its global expansion costs by targeting many countries.
"A site looking to expand internationally is faced with many of the same operational and financial challenges, whether they are opening their doors to one country or globally," says Craig Turnbull, CEO of Bongo International LLC, which provides online payment, fraud screening and logistics software for online merchants expanding globally. "Our view is that companies should expand internationally to all countries, taking advantage of all the traffic driven to their sites, given that the operational challenges are largely ubiquitous. Retailers that open up to the top 10 countries only get access to 60% of global e-commerce sales. Why would a retailer want to limit their sales opportunities to a few countries when they have just developed their global sales infrastructure?"
Speak their language
The starting point for a retailer to sell globally is to identify the country where a shopper resides so it can translate content into her native language. Adding geolocation software to its web servers enables a retailer to detect the Internet Protocol address of the device accessing the web site to trace its country of origin. Once the shopper's country is known, the web server can automatically display a version of the retailer's web site with content in her native language.
Yet, as effective as geolocation is in identifying the country where a shopper resides, retailers need to remember it is not foolproof. "Geolocation software is not always 100% accurate, so retailers should also give visitors the option of self-selecting their country of origin in case content is initially served up in the wrong language," says Bobby Frank, CEO of BorderJump, which provides duty calculation, shipping, logistics, returns and payments software for retailers selling internationally.
Proper language translation plays a critical role in global e-commerce by removing the communication barriers that exist from country to country and making consumers feel more comfortable shopping at a site that's in their native language. When it comes to site translation, however, there are many ways retailers can manage the process.
"A good place to start is by translating top-level navigation and customer service pages, then attacking content and product descriptions," Frank says. "Sites that rely heavily on product images also tend to be very effective since the visual impact helps buyers overcome the language barrier."
Retailers typically have two options when it comes to translating content on their sites. They can either use an automated translation program or they can hire a language specialist to perform the translation. While automated translation is far less expensive than hiring a translator—it costs between 5 and 10 cents per word for automated translation compared to 22 to 28 cents per word for human translators, according to Turnbull—the approach comes with risks. Translation software provides generic translations that can show a lack of understanding for the local dialect and culture.
Alternatively, retailers can opt to use automated translation programs for product pages, which are accompanied by an image that can clarify the translation if it is slightly off. A translator can then be used for more critical data, such as navigation tabs, frequently asked questions, contact information, checkout, and return and shipping policies, Turnbull says.
Local rules
Some retailers, to save on translation costs, may take the chance of leaving product pages in English in the hope that many shoppers will be able to understand the description. But that option is not always available, as some countries require web sites be translated.
"By law, France and Poland require that all business-related information and documentation on web sites be translated to the local language," says Hermes Europe's Bense. "Translating a web shop according to the needs of respective target groups is especially a big issue in the European market, where there are 27 independent member states that differ by their languages, business habits and marketing cultures."
Once a retailer has translated its web site, it needs to localize it, which means taking into account cultural nuances within the target market that can influence a consumer's purchasing decision. That includes creating promotions specific to a country that rival those offered by competitors and tailoring product selection to local consumer preferences.
"Localization extends even to the look and feel of the web site," Bense says. "In China home pages are packed with much more information than home pages in Europe, which have a clear structure and less information on the landing page. Prices can also vary by country, so using a standard price can put a retailer at a competitive disadvantage in some countries. It is always to a retailer's advantage to localize their web site as much as possible."
Because consumer product preferences will vary by country, understanding consumer buying habits is a critical element of localization strategies. For retailers, that means tracking the pages and products viewed on a per-country basis and using that information to adjust their best sellers or heavily promoted products accordingly.
"U.S. retailers use the same strategy at home, so overlaying this data on their product catalog is not a big leap," says BorderJump's Frank. "Retailers also need to be aware of products that are not readily available in a certain country, but are in high demand, so that they can market them hard."
Import restrictions
Tailoring a product catalog to a specific country also means weeding out items that local governments prohibit from being imported, as well as items the U.S. government doesn't allow to be exported. For example, gambling devices cannot be imported into many Middle Eastern countries. Nor can cosmetics be shipped to Russia or food products to Australia.
"Import restrictions can be set according to religious, consumer safety, environmental and security concerns," says Bongo's Turnbull. "In the U.S., the Commerce Department's Export Administration Regulations provide controls due to concerns ranging from national security to crime control. Retailers are required to screen their products to ensure they don't violate U.S. export laws."
Just as proper translation and tailoring product selection to consumer preferences are essential to a retailer's success globally, so too is building a brand identity around the world. With only a handful of truly global brands in e-commerce, such as Amazon.com and Nike, it's not enough for most retailers to rely on traditional online marketing channels to build a global brand identity. Instead, they must also use local offline marketing channels, such as print advertising and direct mail.
Taking the time to learn which offline marketing channels most effectively reach consumers goes a long way toward building brand awareness. "Retailers entering a new country need to think of their brands as a new entity with which consumers are unfamiliar and create multichannel brand awareness strategies in advance of their entry to the market," Frank says. "In South America we have found good success with in-store point-of-purchase ads for our clients."
BorderJump provides international marketing services, real-time landed cost calculation, global shipping and logistics, customs clearance, international payment processing, foreign exchange management, fraud protection and export compliance.
Marketing mix
When building a brand identity, retailers must remember that no single marketing campaign will play effectively in every country. In China, for example, fashion shows sponsored by apparel retailers help build brand awareness and drive web site traffic. In Switzerland, personalized mailings work well, Bense says.
By creating brand awareness through offline marketing, retailers can drive consumers to search engines to find out more about a brand. Those search queries can lead more traffic to a retailer's home page or landing pages. "It is recommended to use a mixture of offline and online marketing to build brand awareness and drive site traffic," Bense adds.
Bongo suggests that retailers structure their search engine optimization, pay-per-click, display and social strategies by language, as opposed to by country. Marketplace initiatives, such as selling on Amazon.com, and advertising initiatives typically will be more successful if retailers keep them focused to a country or region, Turnbull says.
Duty is rarely free
While getting an international shopper to the checkout page is a necessary part of making a sale, a retailer still has a lot of work to do once the shopper arrives there. One of the biggest obstacles to completing an international sale is accurately calculating the customs duty that must be paid on the items a consumer is buying.
Consumers don't like surprises when it comes to duty. Improperly calculating duty at checkout will result in the customer paying the balance due upon delivery of the item, which can irritate her to the point she refuses delivery. When delivery is refused the retailer not only has to eat the cost of return shipping and refunding the customer's money, it also loses a sale. Not calculating duty at checkout also could prompt a customer to abandon her shopping cart.
"A large percentage of international returns are because of unexpected duty charges at the time of delivery," Bense says. "Providing clear, accurate information on the amount of duty and other taxes to be paid at the time of checkout prevents that problem."
Headquartered in Hamburg, Germany, the Hermes group consists of 12 multinational companies that provide sourcing, transport logistics, fulfillment and distribution of consumer goods. Services also include web site design and payment processing. The company operates more than 16,500 Hermes ParcelShops across Europe where online shoppers can arrange to pick up their packages and drop them off to be returned to the retailer. The parcel shops are located near residential areas and along typical commuter travel routes, and are open well into the evening.
Payment methods
While accurately calculating duty at checkout helps facilitate successful sales, so too can catering to local payment preferences. Many cross-border shoppers prefer to pay with these alternative payment solutions as they are more familiar to them and more likely to be what they have in their wallets.
In Russia, for example, cash on delivery is a popular payment method. In China, Alipay is widely used. Alipay is an online payment platform created by online marketplace Alibaba.com. Consumers fund their accounts using a debit or credit card, a money wire transfer or online transfer from their bank account.
"Identifying the local payment options with the greatest penetration by country and offering those that shoppers are most likely to use, in addition to credit cards, will help boost transaction volume, because local payment options expand the base of customers with which retailers can do business," Turnbull says. "Retailers don't have to offer every local payment option, just the ones that are most commonly used."
In addition to providing shopping cart solutions and shipping services to international e-retailers, Bongo services more than 3,000 retailers with a support team spanning three continents and that speaks 12 languages.
Shipping challenges
Once an order is placed, retailers want to ship the item to the customer as quickly and cost efficiently as possible. To hold down shipping costs, it is recommended that retailers ship items in bulk to a specific country and reduce the dimensional weight of their packages as much as possible.
Dimensional weight is calculated by dividing a package's cubic volume by a number set by the carrier. Carriers charge by dimensional weight because large boxes fill up their vehicles and containers more quickly than smaller ones, which increases their costs. Using excess packaging material, which adds to unused space in a package, is one of the biggest culprits for retailers getting hit with dimensional weight charges.
A retailer can also save by shipping many packages at once. "Shipping in bulk on a daily basis versus one package at a time is much cheaper on a per-package basis and can produce significant overall cost savings on shipping fees," says BorderJump's Frank. "It's also in a retailer's best interest to package an item as efficiently as possible to reduce the package's dimensional weight."
BorderJump operates package consolidation hubs in Newark, N.J., and Miami where retailers send their international orders for bundling and final preparation for delivery to the customer.
It is also recommended that retailers do not offer express shipping on international orders to further hold down shipping costs. "Express shipping is a very expensive option that cuts deeply into margins," says Hermes Europe's Bense.
By paying attention to such key international sales practices as language translation, local brand-building strategies to supplement online marketing initiatives, and offering local payment options and localized product selection, retailers of all sizes can successfully sell to the more than 95% of the world's population that resides outside the United States.
"As global expansion becomes a priority for retailers," Frank says, "those that offer seamless end-to-end shopping experience and delivery will be the most successful."