To achieve success as a retailer in today’s world, you need to sell online. E-commerce has become standard practice. This is especially so in the world’s biggest economies. In 2014 alone, 8.2% of retail in Asia Pacific, 6.7% in Western Europe, and 6.3% in North America was done online. These figures are expected to rise to 18%, 10%, and 9% respectively by 2018. But even in lesser developed economies, e-commerce is becoming increasingly accessible and intuitive. Approximately $2 trillion dollars is spent in online sales a year. If you want to grow as a business, you need to start selling online.
But e-commerce is not finished changing the rules of the game. It is increasingly going global, with cross-border sales accounting for 25% of the e-commerce market. It is becoming more practical and affordable. This is mainly true of digital purchases such as music and books but it’s not limited to that realm. With customers ordering products from overseas markets, global e-commerce has given retailers a huge opportunity to expand. The Asian market is especially drawn to global e-commerce. You don’t want to miss out on such a huge region.
Amazon.com has long led the pack in terms of e-commerce in the West. 2 billion products were purchased from Amazon Marketplace sellers in 2014, with 44% of customers going directly to Amazon without researching other possibilities. As a seller on Amazon, you’re not limited to your own region. All it takes to allow sales in other markets is ticking a box.
Global e-commerce, however, has its hurdles. Any cross-border trading comes with complexities, especially regarding currencies and pricing. These are some of the problems you’ll come across, and the solutions you need to know about.
If you’re selling digital products, cross-border logistics should not present too much of a problem. However, if you’re selling physical products, you’ll run into significant challenges. You’ll have to weigh up the costs of these logistics, as they can be a decisive factor in whether cross-border commerce is an option for you.
But even if you can cope with the costs of cross-border delivery, there are complications such as customs duties and documentation, as well as regional regulations that you have to meet.
And then there’s the matter of return policies. Returns will add to your expenses and complicate your process. Unless you have a comprehensive logistical process in place, you will face many problems.
Remember, customers hold you accountable for their satisfaction, regardless of the challenges you’re facing. If they don’t get their product on time, or struggle to return it, they’ll pin that on you, and your reputation will suffer.
Pricing your product for markets abroad is itself a challenge. You can’t simply convert the price in dollars or pounds into the region’s currency. First of all, exchange rates change, and the current rate might be particularly bad for the region you want to sell to. While the price is appropriate for you, it will seem unreasonable to them when the exchange rate turns in their favour.
Secondly, cost of living is different around the world. Simply looking at the Big Mac Index gives you a good idea of people’s expectations across the world. A meal at McDonald’s in the UK costs £5. That translates to ZAR115 (South African rands). The price of a meal at McDonald’s in South Africa? Approximately ZAR50!
So, while you may be charging a very reasonable price in your region, due to different wage expectations and costs of living elsewhere, it may seem exorbitant.
Marketing your product
Another thing that you cannot simply translate is how you market your product. From translation of descriptions themselves, to images and slogans, what means one thing in your region may mean something entirely different elsewhere.
You’ll need to hire a native speaker of the region’s language (if they speak a different language to yours). They will need to be familiar with marketing in that region and know the do’s and don’ts. Simply posting it on Amazon won’t do the work for you.
Then there’s the problem of foreign exchange rates. The Forex market is constantly fluctuation. And while your currency might be relatively stable, another country’s currency might not be. You might start selling at an appropriate price in the target currency. But then that currency plummets, and you’re left earning significantly less than you were before.
Even if the prices remain the same, foreign exchange can be difficult to handle logistically, and you can lose a high percentage when you convert it through the bank.
After talking so much about issues, let’s discuss some solutions, right?
The simplest way to deal with logistical issues is to partner with a company that specialises in international delivery. These companies take full charge of the deliveries process, ensuring that your product makes it to the buyer unscathed, and that returns happen with no hitches. However, these companies charge high prices, which can be prohibitive.
The best solution is to do the leg-work within your company. Learn how to take advantage of the postal service in your targeted countries. Setting up a team to deal specifically with this will increase your likelihood of success.
Pricing your product for foreign markets is no easy matter. It will depend on a number of factors, including foreign exchange, competitors in their local market, shipping costs, the size of the market, and so on.
It is important here too that you have someone who knows the market well. You can work with someone currently in the target region, to make sure you get it right.
Read more about pricing in this short guide.
Again, it is key to work with people who know the foreign markets. They should be a native speaker if the country’s language is different. Idioms and phrases which sound right in one language, often sound crazy in another. Someone who has merely learnt the language will not naturally distinguish.
This does not need to be a costly endeavour. You do not need a whole new market team. Your current team can do the research, and you can hire a consultant to work with them on a regular basis through Skype.
If you’re looking for more tips, you might like this post about ecommerce marketing.
Finally, we have the challenge of foreign exchange without the tremendous losses. Fortunately, this is one of the easiest problems to solve. Money transfer companies offer options such as forward contracts, which fix your exchange rate for up to two years in the future.
You can also use a e-tailor foreign bank account offered by some currency transfer companies. You’ll technically have bank accounts in multiple locations, which cuts the costs of foreign exchange to a minimum. Furthermore, the money transfer company will handle it all for you.
You can see a comprehensive guide to these services by clicking here.
E-commerce is one of the fastest growing ways of selling goods. Cross-border e-commerce is becoming increasingly accessible and popular, giving you the opportunity to sell your products to foreign markets. Unfortunately, cross-border e-commerce comes with a fair amount of challenges.
However, the challenges should not stop you from considering foreign markets. Your competitors will gain an advantage over you, and you might even suffer from local customers buying from foreign markets. To grow as a retailer in today’s world, you need to take full advantage of globalisation. There are solutions to the hurdles, and if used properly, they’ll cost you very little.
featured image courtesy of Simon Waker