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Offering international shoppers familiar payment choices helps e-retailers increase sales abroad.
Managing Editor, International Research
Retailers looking to sell to Chinese consumers can't ignore Alipay. The Chinese payment method similar to eBay Inc.'s PayPal says it has more than 800 million registered users, and Beijing-based research firm iResearch estimates that Alipay has a 48.3% share of the online payments market in China.
Retailers looking to sell internationally via the web encounter similarly strong local payment options in other markets. For instance, about 31% of Brazilian online shoppers use Boleto Bancário, a service that invoices a consumer at checkout and enables a shopper to make a payment at her local bank, post office, ATM or lottery outlet. And roughly 60% of all Russian online orders are paid for with cash, says Sergei Millian, Belarus-born president of the Russian-American Chamber of Commerce.
That means that it isn't enough for retailers looking to sell in new markets to just translate their sites and hope consumers will follow. They also have to give shoppers the payment methods they're accustomed to.
To help with the payments learning curve, some U.S. e-retailers are turning to vendors that research popular local payment methods, enable retailers to add them to checkout, and then charge merchants a percentage of each transaction. Others are taking advantage of the global ambitions of payment providers like China's Alipay that want to offer their payment methods to U.S.-based e-retailers trying to sell abroad.
Offering shoppers the payment methods they're used to can produce big results. Take nutritional supplement and health product retailer iHerb Inc., which began accepting Alipay earlier this year to drive sales on cn.iHerb.com, a subdomain of iHerb.com aimed at consumers in China.
IHerb added Alipay, which is owned by e-commerce giant Alibaba Group Holdings Ltd., to help it build trust among Chinese shoppers visiting for the first time and to encourage them to buy, says John McCarthy, the retailer's director of marketing. It chose Alipay because of its widespread usage.
In the first six months after adding Alipay, sales on the retailer's China-focused site rose 244.5% compared with the prior six-month period and 684.2% compared with the same period a year earlier, McCarthy says. Before iHerb added Alipay, China was not one of iHerb's top 10 markets. But now it has catapulted into the top 10 "and is moving up quickly," he says. Based on those results, McCarthy says iHerb plans to explore other types of Chinese payment offerings, including Tenpay and China UnionPay.
Chinese shoppers last year spent 20 billion yuan ($3.3 billion) at non-Chinese e-retailers, most frequently buying baby products, apparel and luxury goods, says Jingming Li, chief architect and acting president of the newly formed Alibaba International Financial Service Unit. Li works out of Alibaba's U.S. headquarters in Santa Clara, Calif.
Alipay, like PayPal, in many cases is funded from a consumer's bank account, reducing the risk many credit cards encounter when extending lines of credit to shoppers. This, Li says, makes the transaction fees charged to merchants lower than those charged by MasterCard and Visa Inc. He won't reveal Alipay's transaction fee; PayPal charges a 3.9% transaction fee plus a fixed fee based on the currency for web transactions outside the United States. McCarthy of iHerb says the fees he pays are comparable to what he pays for other payment methods.
The e-retailer also operates an informational site in China, iHerb.cn, which is completely in Chinese. The site informs visitors about what they can find on the iHerb e-commerce site, including screen shots that show how to place an order.
Other retailers, like WinZip, a retailer that sells file-sharing, compression and encryption software, have turned to vendors that offer an array of payment methods popular with international shoppers.
WinZip moved its e-commerce platform from one built in-house to a software-as-a-service e-commerce platform from Cleverbridge in December 2011, in part because the vendor offered a shopping cart that supported several currencies and payment options, says Rob Charlebois, the company's vice president of e-commerce.
Before switching over, Charlebois ran an A/B test between Cleverbridge's e-commerce platform, which offers 11 payment methods and allows consumers to choose to read WinZip's site in 13 languages, and WinZip's in-house platform. When shoppers could read the site in their native language and pay with their local currency, non-U.S. conversions increased about 10%. Before Cleverbridge, WinZip only accepted PayPal and major credit cards, Charlebois says.
"The move was definitely an effort to get many payment methods and currency conversions at once without having to do all the work to set it up ourselves," Charlebois says. "I'm a big supporter of renting an e-commerce platform over building it. Payment options can change all the time and we don't have the time or expertise to keep track of them."
Switching to Cleverbridge took about a week, Charlebois says, in part because the retailer only has around 20 SKUs. About half its sales now come from international shoppers, he says. And those shoppers are using the payment options familiar to them that WinZip didn't offer before. For example, about 30% of Chinese shoppers use Alipay, and more than 50% of Dutch shoppers pay with the Netherlands e-commerce debit payment system Ideal, Charlebois says.
Cleverbridge says that on its platform, 12.9% of orders from shoppers in Brazil in 2012 used Boleto Bancário. And about 15% of WinZip's Japanese shoppers use Konbini payments, a payment type that allows consumers to pay for their online orders at thousands of convenience stores across Japan. (Konbini is a shortened form of the Japanese phrase meaning convenience store.)
When a shopper selects Konbini on the checkout page, it creates an order in Cleverbridge's back-end system. The customer then receives an order confirmation e-mail with information detailing how to complete her payment. She prints out an invoice document and takes it to a store that accepts Konbini payments and pays for her software. The customer does not receive the product until the payment is received. When a customer pays, WinZip receives a notification and then delivers the software.