For many e-commerce merchants operating in Europe, expanding their business footprint in search of international growth markets makes sense. European e-commerce is now saturated in many segments, while there are billions of potential customers living in countries beyond the European Union.
There are countries with increasing middle-class populations and growing disposable incomes including places such as Mexico, Brazil, Australia, Singapore, India and China.
These countries stand out for a whole host of reasons ranging from online spending volume, especially China, the world’s biggest e-commerce market, to emerging markets with huge populations, like India. These countries all have digitally savvy shoppers craving access to global goods.
Internationally minded merchants need to know how shoppers access the internet, how they like their websites to look, and how they prefer to pay. The beauty of e-commerce is that a merchant can entice a shopper in any part of the world with an internet connection. In practice, attracting a shopper and providing them with the customer experience they expect will look different in every country.
In Asia Pacific, e-commerce is typically mobile-first, having leapfrogged the traditional desktop e-commerce route in European markets. This means a strong focus on mobile-commerce is necessary for new entrants. For example, in China, transaction volume on the country’s ubiquitous messaging app WeChat was increasing by 134% per quarter at the end of 2018. For international merchants, the ability to integrate with such apps is now essential.
In Malaysia, developing strong social media marketing around your business and products is vital, as citizens spend a significant amount of their day browsing Facebook, WhatsApp, We Chat, Instagram and Twitter. In this country, an app-based shopping platform would make the most sense. In Malaysia mobile-commerce is expected to increase at a CAGR of 31.4% over the next year, to become a $5.6 billion sales market by 2021.
India is also a highly attractive market. Shoppers are already primed to look beyond their home country. Cross-border spending accounts for 74% of total e-commerce sales. Merchants can also be encouraged by the government’s plans to launch a national e-commerce policy. This policy aims to improve the country’s data protection, privacy and international trade rules.
If a merchant wants to offer a truly local experience, they need to offer a range of payment methods which their consumers know and want to use. E-commerce payments in Europe are dominated by cards, but globally, payment preferences vary from country to country. For instance, in New Zealand and Australia, online buy now, pay later schemes are highly popular, while in Brazil, one of the key payment methods is ATM-based system Boleto. In China, where WeChat dominates, merchants will need to be able to provide a strong suite of digital payment options which integrate easily with app-based social media platforms.
Consulting your acquirer could prove key to getting to grips with payment preferences in individual markets and assessing the potential costs of adopting each option. It’s worth noting that card payment fees vary from country to country and in Brazil for instance, regulations around card payment fees are evolving to encourage consumers to spend. As of late 2018, a cap has been set on debit card fees paid by businesses to card issuers. Interchange fees are capped at 0.80% of transaction values and can average no more than 0.50%. These fees could possibly drop even further in an attempt to enhance consumer protections.
Working with acquirers with a local presence or expertise can help international merchants reduce costs. Cross-border transactions can be expensive for merchants as well as FX charges, merchants must also pay additional cross-border scheme fees implemented by Visa and Mastercard.Experience has shown us that significant savings could be possible if a client is locally acquired in the country it sells into.
This is because when an acquirer and a merchant are both domiciled in the same country, the authorization rates are typically higher than for cross-border transactions,[xv] where there is a higher perceived risk of fraudulent activity.
It also goes back to customer experience. A local acquirer means shoppers are far less likely to experience a declined payment or incur cross-border fees from their bank ranging from 3-6% of the purchase price.
As the final part of the e-commerce journey, it’s important to be able to provide accurate delivery and return timelines to international customers to avoid dissatisfaction.
For merchants used to Europe’s strong delivery infrastructure, other countries may present a steep learning curve. Indonesia, for example, has a high predicted e-commerce growth rate, expected to grow at a CAGR rate of 34.6% to 2021. But with an estimated 6,000 inhabited islands,providing timely e-commerce delivery is a significant, ongoing challenge on the archipelago.
Entry requirements, whether they are import taxes, inspections or delivery charges, can also vary vastly from country to country, creating the potential for significant delays if a country-specific delivery strategy is not in place. Some places are easier to service than others: Mexico has a streamlined imports and customs clearing procedure for items valued under 50, which will support merchants selling from overseas. Some 67% of Mexican e-consumers have already shopped from an international site, suggesting international merchants should be able to find a willing customer base already familiar with buying from abroad.
This contrasts with Brazil, where foreign goods can be hit with high import taxes payable by the consumer, plus a customs clearance fee. For countries like Brazil with complex import rules and tariffs, one solution for e-commerce merchants is to use local fulfillment and distribution centers. Establishing a local domain for your e-commerce site can also help build trust and push your site higher up the local search rankings.
