International e-Commerce:
A U.S. Retailer’s Guide to Gaining Entry into International Markets
Introduction
You don’t need to be a seasoned veteran in the e-Commerce business to understand why the industry is growing
at such a rapid pace and why there is no end in sight for its growth capacity. Despite a loss in momentum
within the United States over the past decade in e-Commerce growth, the international e-Commerce market
is booming and has undoubtedly
opened-up countless doors for
online retailers and businesses alike
(see exhibit 1).
However, there can often be
a sense of reluctance when a
US-based
business
considers
expanding abroad.
Fraud risk,
logistics challenges, international
site translation, sales and customs
collection, currency conversion,
technology limitations, and other
factors can make a move into
international markets daunting.
However, US online retailers may
not realize that they have a number of options that can lower these perceived barriers to entry and relatively
easily enable the extension of their e-Commerce businesses into lucrative global markets
Navigating the Waters of International e-Commerce and What to Consider:
While there is no shortage of opportunity for U.S.-based merchants to successfully offer their merchandise to
international customers, there are important factors to consider before entering the international market:
International payment processing
Customer brokering and paperwork
Fraud prevention
Language barriers
High shipping rates
Duties & Taxes
Fortunately, there are a number of solutions for merchants to consider when looking to transition from selling
exclusively within the U.S. market to a global customer-base – and while some of them are more effective
than others, it is worth exploring all of the options available to your business. In addition, each approach
has different costs and resources to consider for the business – including logistics, additional specialized and
trained staff, technology, and other capital expenditures/ongoing operating costs.
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For those looking to manage everything in-house, it is essential to localize the business’s website to
ensure that it caters to the international customer’s basic shopping needs – currency conversions, payment
options, etc. With these considerations, the merchant must ensure that their platform is ready to process
international payments and maintain a robust fraud detection/ management program which can be built
into its e-Commerce engine. After implementing these key components, it is up to the respective business
to select a shipping provider that can offer them aggressive shipping rates while providing basic shipping
services like tracking and competitive shipping times.
Further, to manage orders from abroad, it is essential to develop an international shipping policy that can
easily be followed by the customer service team and understood by those purchasing the merchandise from
outside of the U.S. While an in-house solution can be a viable option, it is often a lengthy and very handson process that can be better suited for a larger business/merchant that has a larger-range of resources to
implement:
• Multi-lingual customer service representatives
• Complex paperwork for customs/duties processing
• International checkout system
exhibit 2
A
more
straight
forward
alternative is to utilize a fully
integrated international e-Commerce
checkout and shipping solution;
an option utilized by a large range
of businesses that have revenues
from $100,000 to $100,000,000. This
option takes a rather comprehensive
approach in dealing with businesses
looking for a solution that will
manage most (if not all) aspects
of international e-Commerce and
logistics. This “one-size-fits-all” option
can provide a universal platform for
the business that takes into account
many of the nuanced details of
selling to an international customerbase. The U.S. based merchant works
Fully Landed Cost
Int’l Customer
Database
Capable of Shipping to
Over 200 Countries
Competetive International
Shipping Rates
Fraud Screening
Integrated International
e-Commerce Checkout
& Shipping Solutions
Live Currency
Conversion
Customs Brokering
and Paperwork
Duties and Taxes Calculated
and Payable Immediately
Multilingual International
Customer Service
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with the logistics provider to implement a third-party shopping cart which will manage the international
transaction from the time the customer enters the international cart until the package arrives at their doorstep
(exhibit 2 & 3). Most importantly these solutions are often straightforward, easy to implement, and more cost
effective in the short and long-term than other options that give merchants the ability to ship worldwide.
exhibit 3
Why Take the Leap Forward in the First Place?
You would be hard pressed to find someone that has an austere outlook on future global e-Commerce growth.
In fact, a recent report by the Boston Consulting Group revealed that the internet economy is expected to grow
at a rate of more than 10% annually for the four years (2012-2016) within the G20 countries. It is expected,
according to the BCG report that the internet economy will reach $4.2 trillion, approximately 5.3% of GDP, in
2016 – up from $2.3 trillion/4.1% of GDP in 2010 (Exhibit 4). And while an incremental amount of growth is
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certainly expected, an increase of nearly 30% of the internet economy as a part of the total GDP in the G20
countries from 2010 to 2016 is a truly impressive statistic, should their forecast pan-out in the coming years.
exhibit 4
This tremendous growth in
the e-commerce industry,
will certainly give global
merchants with an on-line
presence the opportunity
to strengthen international
sales significantly; especially
in a market such as the
United
States
where
international
consumers
often look for the most
well-known/reliable brands
and the most competitivepricing.
Perhaps the most attractive markets for U.S.-based merchants looking to expand their international
sales are within the G20 countries, where disposable income, internet access, and consumer knowledge is
certainly well-developed and understood. Of the developed countries, one of the fastest growing markets in
the e-Commerce world is Australia, where there has been a significant boom in the B2C e-Commerce sales. In
fact, according to a recent article by eMarketer in 2012, they are forecasting sales in the country to rise from
$10.5 billion in 2011 to $13.3 billion in 2012, an increase of over nearly 30%. Australia’s well-established and
ever growing e-commerce market has also directly benefitted merchants from abroad, more specifically U.S.
based merchants. Collectively, GlobalShopex’s merchants have seen at least 20% of their international sales
going to Australia from data dating back to March 31, 2011 through the end of the second quarter this year.
“US retailers have already targeted Australia, but there is plenty of room for expansion,” said Jeffrey
Grau, eMarketer principal analyst in an eMarketer Report – Ecommerce Booming Down Under, April
18, 2012. “Besides sharing linguistic and cultural affinities, Australia does not require duty on imports
under AU$1,000 ($1,031). Plus, the strength of the Australian dollar further adds to the attractiveness
of this market.”
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Getting a Piece of the Action Early in the Game
While more established and economically developed countries like Australia are obvious target markets, the
e-Commerce boom has trickled down into the emerging markets which have helped stabilize the global
economy in this recent economic crisis. Perhaps one of the most exciting and well-known countries that
has unlimited potential in the e-Commerce world is China, where the Boston Consulting Group calculates
that every year for the foreseeable future there will be another 30 million Chinese that will do their online
shopping for the first time; thus leaving a rather sizeable opportunity gap for any local or foreign business that
has an online presence. In fact, foreign businesses often have a greater advantage of localized brands and
merchants, as foreign brands are often seen as being far more superior respective to their local-counterparts
for their overall quality and brand recognition.
Another market that certainly cannot be
overlooked is Brazil, which ranks alongside
China as being one of the most sought
after developing markets for businesses
and consumers alike. Growth rates of
first-time online consumers have been
consistently high (exhibit 5), making Brazil
one of the more attractive destinations for
the e-Commerce world.
exhibit 5
With that said, Brazil still has one of the
highest import taxes in the region, making
it more of a sleeping dragon (depending on
if the Brazilian Government will consider
future import tax reforms). However, its next
door neighbor, Chile, has been noted as the
“hidden gem” of Latin America by global
management consultant, A.T. Kearney.
The average household in Chile averages four credit cards and spends approximately $160 annually online – a
rather large difference between China’s $17 per year online. Co-author of the A.T. Kearney study, Parvaneh
Nilforoushan acknowledged that, “There’s a big discrepancy in terms of the size of the online retail market
(China vs. Chile), but when we look at online penetration and percentage of people who are actually active
online, the percentage of people who shop online is highest in Chile.” With that said, there are obvious target
markets that a U.S.-based retailer should consider, but then there are also the lesser-known developing/
developed economies, such as Chile, which can certainly be a large contributor to the business’s overall
international sales.
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Should Every Business enter International e-Commerce?
While expanding globally through international e-Commerce is an attractive undertaking for most U.S.-based
online retailers, it can often be a better fit for some businesses over others depending on their respective
merchandise. In fact, according to a recent report from the market research firm, THE NPD Group Inc, books &
stationary/office supplies are the most common product category that consumers are shopping for online –
with nearly 50% of survey respondents acknowledging that they have shopped for those items over in 2011.
Additionally, respondents recognized that at
one time over the past year the items in the
following categories were purchased:
46% apparel and consumer electronics
34% shoes/boots
5% fashion accessories
“What makes international e-Commerce so
attractive is its tremendous development and
the potential for any business large or small
to experience exponential growth by giving
international consumers the ability to access
their U.S.-based website. “
International online consumers are repeatedly
drawn to these product categories because
shipping these smaller/compact items by air
is often affordable (shipping heavier/bulkier
products overseas becomes rather costly and
international consumers can be discouraged by this) and online U.S.-based retailers tend to offer the most
competitive pricing on their merchandise. While these statistics should not necessarily deter any U.S. retailer
from trying to gain their share of the international e-Commerce world, they could serve to counterbalance
expectations based on actual global e-Commerce market and geographic trends.
Conclusion
For any U.S.-based merchant, it is worth considering all of the opportunities and examples mentioned as
a reason to move forward and begin selling their merchandise abroad to an eager group of international
consumers. Whether a U.S. business already has an option to ship internationally or they are just starting to
discover the international logistics world, the merchant must be readily prepared and mindful of all of the
options that they have. It is still early enough in the e-Commerce revolution that the global opportunity set
is limitless; however, in order for any U.S.-based merchant to truly take advantage, it is essential that they
choose the best international shipping solution for their respective business – carefully evaluating options
and choosing the optimal approach that will increase total sales and provide a cost-efficient and seamless
experience for their international customer.
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