October 20, 2010, 11:17 AM

Beyond North America and Europe: Catering to online shoppers throughout the globe

The increasing popularity of international shipping has helped drive interest in global markets.

Lead Photo

Zia Daniell Wigder, senior analyst, Forrester Research Inc.

Most U.S.-based online retailers first look north when it comes to global expansion. Shipping to Canada is often an initial, relatively low-risk step into international markets. Europe generally comes next, with the U.K. being by far the most common first stop for U.S. online retailers.

Far fewer U.S. e-businesses have taken the next step to start serving customers in other global markets. The increasing popularity of international shipping and the rise of global e-commerce facilitators, however, have helped drive interest in global markets beyond just North America and Europe. Some companies have taken their global operations a step further and now operate fully localized sites for markets in Asia, Latin America and the Middle East. Below are a handful of trends emerging in less traditional markets for U.S. online retailers.

Japan: Big market, conservative buyers. Of all the markets outlined below, Japan is the most popular when it comes to U.S.-based online retailers. Some 9 of the top 50 online retailers in the U.S. operate an e-commerce web site for Japan—for retailers  like L.L.Bean, Lands’ End and QVC, it is the only Asian market in which they have such an offering.

Japan’s online population of 100 million and traditionally high online spending levels means it is still widely considered the world’s second-largest e-commerce market after the U.S. However, one of the biggest overarching factors in Japan’s online shopping market is that shoppers in Japan are relatively conservative in terms of how they shop and the information they’re willing to provide about themselves—in contrast to metropolitan China and Korea, the overwhelming majority of online shoppers in Japan are not comfortable putting any personal information online.

Japanese online shoppers are also increasingly price conscious, with less than one in five saying they’d pay more to avoid hassles. The McKinsey Quarterly, a publication of global management consulting firm McKinsey & Co., earlier this year documented changes in the new, more frugal Japanese consumer—the online shopper has become equally prudent in his or her purchases.

China:  Local services pay off big time. There are few countries in which localization needs to be as extensive as it does in China. Just as Baidu dominates the search market there, Alibaba Group-owned Taobao.com has managed to dominate the consumer e-commerce market, surpassing its western competitors and implementing a series of features that cater to local preferences.

Two notable examples of Taobo’s local services: First, buyers and sellers can connect using Taobao instant messenger, a tool that capitalizes on the popularity of online chat within the country and helps buyers ensure they are making the right purchase. Second, Taobao’s preferred payment method, Alipay, also part of the Alibaba family, does not release funds to the seller until the buyer receives the goods—the funds are put into an escrow account and released by the buyer. With such services, both Taobao and Alipay help alleviate concerns about online purchases and help convince online browsers to buy.

And payment localization doesn’t stop with Alipay—Amazon, for example, offers nine different payment options in China, including cash on delivery and payment through a local post office.

China is one of the most complex e-commerce markets to enter today—companies that don’t take the time to understand the complexities and nuances of the Chinese marketplace will almost certainly fail. Those that do understand it, however, will be able to speak to a market of 300 million online users who are some of the most engaged consumers in the world when it comes to creating and consuming content online.

South Korea: Consumers highly engaged online. South Korea’s online marketplace is often overlooked in Asia, as both its online and offline populations are dwarfed by those of Japan and China. However, like in China, online consumers in South Korea are incredibly engaged online—close to half of online consumers in Korea post product reviews regularly online as compared to less than a quarter in the U.S.

Digital goods are a major driver of online purchases, with three times as many users in South Korea buying digital music and video as in Japan. Additionally, both men and women are active buyers of digital goods in South Korea, in contrast to either Japan or China, where these purchases still skew male.

And when it comes to searching and buying online, just as in China, local players lead: Naver dominates search while Gmarket, now majority owned by eBay (joining eBay’s local offering, Internet Auction Co.), leads in the online retail space with a combination of retailers and individuals selling online. Gmarket’s site is highly tailored to local preferences.

Internationally accepted credit cards, however, remain by far the most popular online payment method in South Korea, meaning online retailers do not have to integrate local payment methods as they would in a market like China.

Australia: On the radar screen of expanding e-retailers. Despite Australia’s geographically concentrated population, high broadband penetration levels and sizable disposable incomes, Australia’s e-commerce landscape has been quite slow to develop. Big national retailers like Harvey Norman were slow to embrace the online channel, leading to the development of significant cross-border, foreign-based e-commerce.

While estimates of cross-border e-commerce span a wide range, a recent study by Nielsen Online indicated that some 43% of online spending in Australia was going to international retail e-commerce sites. Indeed, eBay is one of the few U.S.-based players to offer a localized offering for the country, although a variety of U.S.-based online retailers ship to Australia.

Retailers should not, however, mistake the lack of large players for a backward online experience. Many of the small or online-only retailers in Australia have implemented best practice features on their web sites—not surprisingly, a number are surfer-oriented such as Rip Curl and City Beach that cater to a broad interest in water sports. With high credit card penetration levels and a population that’s quite comfortable online—Australians spend an enormous amount of time on social networks, for example—Australia is increasingly hitting the radar of companies looking for new online opportunities.

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