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Online retailers need to take steps to realize the potential revenue, a report says.
Global e-commerce, including travel and auto purchases as well as online retail sales, will increase 13.5% annually for the next four years and reach an estimated $1.4 trillion in 2015, according Cisco Systems Inc.’s Economics & Research Practice. In anticipation of such growth, Cisco conducted interviews with 32 e-retailers that sell internationally to define the priorities, processes and individual market complexities involved in international e-commerce.
First, an e-retailer has to decide which countries or regions it wants to sell or expand to. In picking a market, Cisco says the most important consideration is the amount of company revenue already coming from that market. Then retailers should take into account the sophistication of that country or region’s e-commerce infrastructure, such as Internet connection capabilities, delivery services and payment systems. “The level of existing popularity in a given country is always the best indicator of potential online success, as long as that country is ready for e-commerce,” the report says.
E-retailers also have to consider how they’ll procure new or alter existing products to appeal to local tastes and how they might have to merchandise those products differently to match local expectations. These considerations also guide how an e-retailer will manage international sales. Cisco recommends managing core functions, such as branding, technology platforms and site navigation, from company headquarters, but letting in-country staff manage functions that require local expertise; those tasks include local delivery contracts, payment and bank agreements, and online merchandising and marketing. The differences among countries can be striking, Cisco notes. In France, for instance, consumers prefer to pay for online purchases with debit cards and PayPal more often than credit cards, and to pick up their purchases at neighborhood stores rather than have them delivered to their homes.
E-retailers should also consider enlisting local experts to ensure relevancy when it comes to merchandising and marketing, Cisco says. “Percent-off sales may work in the U.S. but have negative connotations abroad as distressed goods,” the report says. Instead, retailers might want to offer free shipping or tax refunds instead of percent-off discounts.
E-retailers also need to deal with potential changes to their computer networks and software. Local e-commerce sites need technology to handle foreign exchange rates, and e-retailers may have to contract with local data centers or use application accelerators to make sure an e-commerce site loads and responds quickly in other countries.
Although going global can cause headaches, Cisco says the potential gains from global expansion justifies the risk and effort. Cisco estimates that while the United States, United Kingdom and Japan will command more than half, or 53%, of e-commerce sales in 2015, e-commerce in countries such as Spain, Brazil, China, Russia and Mexico each will grow at rates of 26% or more annually through 2015.
Angus Cormie, director of e-commerce, Western Europe, consumer and small business for Dell Inc., will explain how the computer maker is handling international expansion at the Internet Retailer Conference & Exhibition 2011 in San Diego on June 15 in a session titled “Dell goes global with language, content, experience and more.”