2/04/13

Special Report: Global e-commerce

Going global isn’t as hard as it looks, but e-retailers should take some basic steps to help assure their success.

Consumers outside North America will buy $1 trillion worth of goods this year online, and there are a growing number of services that can help e-retailers reach those shoppers It's a big world for e-retailers, what with 90% of the world's population living outside North America, and those that are not yet making the most of reaching consumers beyond U.S. borders are missing out on a huge opportunity. Global business-to-consumer e-commerce sales are projected to top $1.25 trillion in 2013, according to the Interactive Media in Retail Group, a U.K.-based online retail trade organization. Consumers outside of the United States and Canada will account for roughly 80% of those purchases.

Some of the booming overseas markets include Europe, where e-commerce sales in Southern and Eastern Europe are growing rapidly; Asia, where e-commerce sales in China alone could surpass those of the United States this year; and Latin America, which many e-commerce experts feel is a hidden gem.

So what's holding back many U.S. e-retailers from cashing in big on international markets? Many believe that selling internationally is harder and more complicated than it is. Many retailers look at shipping to countries with no postal codes, of which there are about 70, overcoming the language, cultural and consumer behavior differences, facilitating convenient returns, especially for customers living in rural areas, and same-day delivery—a must in many large Asian cities—as deterrents rather than solvable problems.

"There is a myth among many retailers that international sales are too complicated, but that is far from the case," says Jaime Basagoitia, vice president and general manager for TransExpress, a provider of international transportation and logistics services to Latin America and the Caribbean. "What retailers need are partners that can help them understand that overcoming the hurdles to selling internationally is easier than they think."

Localized web sites

Best practices for retailers selling internationally start with localizing their web sites. While many retailers interpret this to mean designing a site specific to each country, all it really requires is making sure they answer questions international shoppers might have about products before they click the Buy button.

Setting up a customer service center staffed with agents who speak the local language, translating frequently asked questions, offering international size charts for apparel, and using high-resolution images and displaying multiple views of products will answer most international shoppers' questions.

"There are a lot of things a retailer can do to address many of the local nuances of selling to international shoppers without having to create a country-specific site," 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 services. "The key is to make sure the customer feels confident they are getting exactly what they want so they are not disappointed when the item arrives."

Address formats

One aspect of localization retailers tend to overlook is delivery. The formats used to address packages vary by country—addresses for packages sent to Brazil require six lines versus three in the United States, for instance—and getting those formats wrong can prevent packages from reaching customers.

"A lot of retailers shipping to customers in Brazil will compress an address into three lines just as they do in the U.S., which can lead the shipping carrier to deem the address to be incorrect," says Charles Gaddy, business development manager, global solutions, for Melissa Data Corp., a provider of data quality and address management solutions.

Germany is another country where retailers often make mistakes formatting the address, Gaddy says. German addresses require the street name to be in front of the house or building number, and the postal code in front of the town. For example: Herr Karl Schultz, Strassa 123, D-66123 Munich.

Many U.S. retailers will invert the address data to fit the U.S. address format, which can confuse German postal carriers.

"Getting the address right is critical to delivery and if an address is formatted wrong the item may not get delivered or the retailer may have to pay to get the address corrected," Gaddy says. "Retailers not only need to step out of their domestic practices when shipping internationally to make sure they have the right address formats, but include the right shipping information, because the cost of an incorrectly addressed package can be a returned item and the loss of that customer's business."

Minimize shipping costs

As is the case when shipping domestically, retailers want to keep the delivery costs down when shipping internationally. One solution is to partner with an international shipping company that operates a warehouse where international packages can initially be shipped in the United States, resorted, and then shipped to the customer using the destination country's local postal service.

The process can save consumers as much as 70% off the cost of international shipping through a third-party carrier such as DHL or FedEx, according to TransExpress' Basagoitia. "That's a substantial savings," he says.

Retailers utilizing TransExpress ship packages destined for Latin America and the Caribbean to the vendor's Miami warehouse. From there, the documentation needed to clear the package through customs is completed, duty is calculated and the consumer informed of the tax due and the final shipping cost. The package is then shipped to the customer using either TransExpress' own distribution network or the local postal service. TransExpress provides e-commerce support for a number of postal services in the region as well. Consumers are billed by TransExpress for the final shipping leg and pay any duty and tax upon receipt of the package. Retailers using TransExpress' service include the Walt Disney Co. and Universal Studios.

The company also markets its services directly to consumers. The shipping process is the same, only the customer provides the retailer with the address for TransExpress' warehouse at the time of order, resulting in a charge for domestic shipping. Consumers provide TransExpress with the address they want their packages sent to and TransExpress completes the order once the package is received. The company has signed up more than 600,000 consumers for its service.

"A lot of consumers in Latin America prefer to purchase from U.S. retailers because the prices they offer are often much less than what they can purchase the same item for locally, even after shipping and duty costs are added," Basagoitia says. "One customer saved 50% off the price of a game available locally, even after shipping, by ordering it from the U.S."

Convenient pickup

Another way retailers can lower their international delivery costs is to work with companies that operate consolidation shops where packages can be delivered; consumers then stop by to pick them up. The service is convenient for customers who are not typically home during the day, as local consolidation centers are often located in businesses that are open in the evening along common commuter routes, such as gas stations and train stations.

Hermes, for example, operates 14,000 Hermes ParcelShops across Germany and 4,000 more in other countries, such as Austria, the United Kingdom and Russia. A European shopper can choose to have her package shipped to one of these facilities to avoid multiple delivery attempts. Consumers can also initiate returns via a Hermes ParcelShop.

"In countries where there can be long lines to pick up a package at the local post office, such as Russia, consolidation centers are a major convenience, because people can wait in line at the post office for as much as two hours on a given day," says Hermes' Bense. "Consumers can contact Hermes and arrange to have the package sent to the consolidation shop of their choice. This is especially advantageous in peak times like Christmas with record sending volumes having to be delivered successfully on time."

Emerging markets

Being a true global retailer, however, means shipping to emerging markets where the delivery infrastructure is often underdeveloped. In these instances, access to third-party data can help verify an address and a local courier networks can complete delivery.

"Address verification and geolocation data from reliable third parties are important capabilities to have when shipping to consumers in less-developed economies, because retailers can't always rely on the local postal service to offer address verification applications," Melissa Data's Gaddy says. "Some emerging markets don't even have postal codes."

Melissa Data provides retailers with geocoding tools that assign a latitude and longitude to international addresses to help identify the final destination where the package is being shipped. The information helps determine if the package is being shipped to a rural area where a delivery agent may be needed to complete the final leg of delivery.

Packages sent to an emerging market such as India, for example, may only have the customer's name and the address of the local post office because his residence may not have an actual address. Nevertheless, the customer expects the package to be delivered to her.

"That's where geolocating comes in to play, because it zeros in on the address and helps the retailer determine whether a courier with local knowledge of the residents and where they live is needed," Gaddy says.

Melissa Data's geocoding tools incorporate spatial data from multiple data sources to determine the most accurate delivery point. The interactive service is available via the web for real-time data, or clients can submit data requests in batches. The company's address verification service uses data from international postal services, as well as marketing companies and other third parties. "Delivering into emerging markets is a challenge, and the better the data retailers have when it comes to validating and locating addresses the better they will be able to serve their customers and reduce costly returns and address corrections after a package ships," Gaddy says.

Delivery in Asia

For many retailers looking to sell in Asia, hiring local couriers to complete the final leg of delivery is a necessity. Many Asian consumers living in large cities in Taiwan and China, for example, expect same-day delivery for orders placed by mid-afternoon and, in some cases, as late as 5 p.m. local time.

To help retailers achieve this goal, Hermes stocks and manages local fulfillment warehouses for retailers. The company then contracts with local delivery services to enable same-day delivery.

"Same-day delivery is a must-have in Asian cities with populations of 10 million or more," Bense says. "Retailers focusing on China need to set up a local warehousing system for China separate from the rest of Asia to meet the delivery expectations there."

Local warehouses can also help lower the cost of returns, which can be very expensive for international orders. Returned items can be shipped to the warehouse and stored until another order for the item is placed. The order can then be filled locally, reducing the retailer's shipping costs on that order, Bense says.

Latin American preferences

One region where the risk of returns is lower is Latin America. The reason, according to TransExpress' Basagoitia, is that many consumers in this part of the world are inclined to keep an item that does not fit, such as apparel or shoes, and resell it on their own or give it to a friend or relative who needs it.

"Retailers need to keep in mind that returns for orders from Latin America are much lower than elsewhere because of cultural issues," he says.

Shoppers who want to return an item can ship it back to TransExpress' warehouse, which then forwards it to the retailer.

One aspect of international shipping that retailers often overlook is surcharges for dimensional weight exceeding that of the package's gross weight. Dimensional weight is an unfavorable calculation for retailers that ship lightweight items in large boxes because low-density items take up a lot of space, which makes them less profitable for carriers to ship. Subsequently, the carrier is unable to maximize the payload of its vehicles. Charging by dimensional weight allows carriers to monetize the extra space taken up by large, lightweight boxes.

"Dimensional weight is definitely an issue and we talk to retailers about it," Basagoitia says. "For our consumer customers we do have to pass along the higher costs for when dimensional weight exceeds actual weight, but we work to negotiate the best possible rates with the airlines to keep shipping costs down."

Make it easy to pay

Finally, retailers should localize payment options to meet consumers' preferences in each country. Many cross-border shoppers prefer to pay with alternative payment solutions native to their country.

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 operator Alibaba Group, China's dominant e-commerce company. Consumers fund their accounts using a debit or credit card, a money wire transfer or online transfer from their bank account.

"Retailers should offer the top two local payment options and two to three more internationally recognized options to meet consumer payment preferences, such as Visa and MasterCard or PayPal," Bense says.

With more consumers growing accustomed to shopping internationally online, retailers who make the effort to understand the unique challenges of each country, localize their web sites and delivery options, offer competitive pricing and cater to consumers' product preferences in each country stand to reap a windfall of new sales.

"Consumer behavior and cultural practices differ in every international market, even between the U.S. and Canada, and retailers need to take this into account from a marketing, merchandising and delivery perspective," Gaddy says. "The retailers that drop their U.S. mindset are the ones that will get the best results selling internationally."

Topics:

February 2013 Global Supplement, fulfillment and delivery, global delivery, global shipping, Hermes Fulfillment, Melissa data, TransExpress

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