Worldwide economic development and growth of the middle class has put increased purchasing power in the hands of millions of new consumers. Global cross-border eCommerce sales alone total some $2 trillion annually and are expected to exceed $6 trillion by 2020.
eCommerce is defined as the exchange of business transaction information online using Electronic Data Interchange (EDI), an interorganizational exchange of business documents in a structured and machine processable format, Electronic mail (email), Electronic fund transfer (EFT), Websites and Payment gateways. So now that you have discovered that you have already been contributing to eCommerce daily, let’s take a look at cross-border eCommerce.
Before eCommerce became a true driving force in revenue, businesses had to choose between direct and indirect sales channels. Now with eCommerce, your sales strategy has many more considerations, particularly selling internationally, allowing you to take full advantage of its power and opportunity. Choosing the right eCommerce channel mix depends upon your products/services and customers. The mix you choose will form your marketing channel strategy and understanding what you are selling and to whom, is the starting point for your eCommerce strategy.
In other words, you need to know who your customers are and from where (brick and mortar stores, online marketplaces, social media, or direct from websites) they are buying. If you have determined that selling your products online via transactional site in the U.S. is not the appropriate channel, then in most cases, selling online to overseas customers is equally inappropriate. In that case, you may want to focus resources on hosting a more non-transactional or educational site. Such a site is worth the investment and usually involves a listing of product specifications and sales contacts who can respond to international visitor inquiries within 48 business hours.
Like any common business model, in order to sell a product or service, you must first establish that there is someone willing to buy it. To identify market opportunities, it is important to evaluate key factors such as the political, economic and competitive environments; market access; product potential; local distribution and production; and the social/cultural and demographic/ physical environments.
You can start your market research in evaluating market viability with our agency’s free on-line Country Commercial Guides we produce annually for over 125 countries found at export.gov/ccg. Building on that knowledge, given the amount of information available on-line, now more than ever, it is possible to evaluate trends through online data and simply search for products in overseas marketplaces. To do this, use online searches on popular foreign eCommerce sites to identify competitors and substitutes. In addition, you can create surveys and interviews to better understand first-hand, what potential customers in foreign markets are looking for and their current sources for procuring the product.
When you are evaluating a market, you will first want to identify what the competitive landscape looks like in your target market. Is the market share across your product category fragmented? If there is fragmentation, with lots of smaller competitors jockeying for sales, evaluate whether your product or service will stand out enough for you to successfully compete. Determine your value proposition on how you will differentiate yourself in a crowded market. Contrarily, is there one dominant competitor? If so, then evaluate this competitor. Find out if the competitor has a monopoly on the market or whether they are only serving part of the population of a whole customer segment. Further examine why there is little competition. Does the market or provincial lawmakers have “protectionist” tendencies in favor of the local competition? This could be a red flag that entering this market comes with potential barriers.
While international sales are often more easily attained through cross-border eCommerce, new opportunities bring new responsibilities: complying with regulations, collecting additional information about your product, and managing new risks. So next you will want to look at policy or regulatory legislation that you might be able to capitalize on. Take a deep dive into tax laws, customs laws, corporate organization, import restrictions, and overseas domestic laws need to be understood prior to entering a new market. When in doubt, always seek guidance from the regulatory bodies in any overseas market regarding interpretation of laws and regulations, especially when the responsibility of understanding the local laws lays with your business or one of your eCommerce service providers.
By far, one of the most critical steps one needs to consider when selling abroad via eCommerce or otherwise is protecting your Intellectual Property (IP). Take the steps to protect your IP, including your brand names, company name, trademarks and logos (among others). Simply protecting your IP in the U.S. does not mean it is protected anywhere else. Unscrupulous businesses often referred to as patent or trademark “trolls” search the internet looking for IP to grab and register in their country.
Then, when your business arrives in a new market (for example, in a large marketplace’s country-specific eCommerce platform, such as Alibaba.com in China), trolls inform you that you’ve violated their IP and demand large fees to license property that once was yours. Protect your investment by registering your IP in markets you’ve targeted – BEFORE market entry. Often, registration is neither difficult nor expensive. In the European Union (EU), for instance, you register only one time and gain protection in all EU countries. For additional information on registering and protecting your IP in key countries around the world, visit stopfakes.gov.
We know that the scariest aspect of selling overseas is wondering “how will I get paid?” Credit cards are still the preferred method of payment online - both domestically and internationally. But with the use of credit cards also comes the inherent risks of client drawbacks and fraud. Mobile money wallets are becoming increasingly popular in countries like India, where there are more people with mobile phones than active bank accounts. A payment gateway is a software application set up as a part of your website eCommerce platform to enable customers and other businesses to complete transactions from your website, which is responsible for taking the forms of payment you determine will be accepted (ewallet or credit card compared to cash on delivery).
Selling through cross-border eCommerce inherently raises your risk for fraud, so how do you combat international payment fraud-prevention? Well, this fraud risk can be mitigated by researching customer behavior and fraud trends in each target market. All payment gateways have data encryption, however some countries like Singapore require a second layer of data encryption software (ie: CVV2, 3D Secure) for all online transitions in order to prevent fraud. It is important to go with a well-known payment gateway with a strong reputation for security, as overseas consumers need to feel their payments and transactions are secure. Additional payment considerations are knowing what e-payment types are commonly acceptable in your target market, determine if you accept payment in the currency of the foreign buyer, know if there is a local legal entity required in your target market region for payment processing and what local taxes & duties you must collect.
Just like any on-line business, building your digital brand online requires planning to ensure your success with your target customer segment in an overseas market. For cross-border eCommerce brand building, determining the right mix of engagement with social media, marketplaces, and content for overseas search engine optimization (SEO) of your website can be a process of trial and error. Adapting your brand to the market you are entering is important because the platforms you use for your current marketing strategy may diff er in international markets.
Your company may need to re-evaluate its position in this new market. Take time to explore which online platforms are popular in the country that you are entering as it may diff er in each region. The benefit of this effort is increased overseas brand recognition which will translate to an increase in website traffic from targeted overseas markets, with the potential for more customers and more sales as a result. Remember if you have established a business relationship with a local partner, you may need to work with this partner to further refine a local marketing strategy that suits your product and business needs.
eCommerce can open a world of possibilities and off er growth to your product or service. If you would like to explore this topic deeper, the U.S. Commercial Service eCommerce Innovation Lab offers many on-line tools to U.S. exporters, including a full eCommerce Business Guide and foreign country e-commerce briefs to assist you. Contact our local office to get started @ 412-644-2800.