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Cross border ecommerce white paper - Pitney Bowes

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It's time to get serious about cross-border e-commerce.
Too often U.S. Ecommerce brands do not welcome international online shoppers. Is it time for the Ecommerce community to have a plan that not only welcomes international shoppers, but also generates a new source of growth. This document discuss ways to make that happen.

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Cross border ecommerce white paper - Pitney Bowes

  1. 1. Time to Get Serious About Cross­Border Ecommerce WHITE PAPER Every connection is a new opportunity™
  2. 2. PrefaceToo often U.S. Ecommerce brands do not welcome international online shoppers.Payment issues, high shipping and unexpected cross-border costs; di cultiestracking orders and long delivery times are just some of the challenges globalshoppers face when they try to buy from U.S. Ecommerce sites.Yet they keep coming. Whether sought-after brands, unique products or betterdeals drive the demand, there is no denying that signi cant revenue opportunityexists beyond the U.S. border.Is it time for the Ecommerce community — retailers of all sizes and specialtiesand their commerce technology partners and marketplace platforms — to havea plan that not only welcomes international shoppers, but also generates a newsource of growth?Executive Summary: It’s Time to Get O the FenceA commonly held view on cross-border Ecommerce is that it’s too di cult and tooexpensive—or too risky for the brand. Some, believing that the risks outweighthe bene ts, are content to forego the cross-border revenue opportunity. Otherspassively ful ll orders, knowing that the online shopping experience they providelags expectations. Yet, they do little to improve it.Barriers to cross-border Ecommerce do exist. Yet no longer is serving inter-national customers an all-or-nothing proposition. Unlike in years past, cost-e ective, resource-friendly ways to overcome these barriers are increasinglyavailable.Throughout the rst quarter of 2010, we asked leaders within the Ecommercecommunity about their current and future cross-border plans. Given theimmaturity of international Ecommerce, it was not surprising that most do notyet have solid plans, regardless of the size of their Ecommerce business or thenumber of Ecommerce businesses to which they provide Ecommerce technologyand services.Time to Get Serious About Cross-Border Ecommerce 2
  3. 3. Figure 1: The Impacts of Top Cross-Border Challenges According to the latest J.C. Williams Group StudyBarriers or challenges cited to cross-border Ecommerce were plentiful and varied.E ective in-house solutions were sporadic at best. Success stories were limitedto a handful of leading brands.Why aren’t more retailers leveraging their investment in U.S. Ecommerceoperations to ful ll global demand cost-e ectively? Why aren’t more Ecommerceplatforms pursuing the software, services and partners needed to improve thecross-border online experience for international shoppers?For some, the upside of Ecommerce’s international future is weighed down bythe reality of a choppy global economic recovery. Others remain grounded by thegravity of the domestic multi-channel market: slow store sales, maturing U.S.Ecommerce growth rates, high customer acquisition costs and market sharegains by established, competing brands.For these, both dynamics dictate a primary focus on domestic Ecommerceoperations as a safer, albeit conservative, near-term bet.A key take-away from the latest J.C. Williams Group research is that resource-friendly, low-risk cross-border practices can cost-e ectively drive growth andshore up agging domestic sales. At the same time, they can signi cantlyenhance the cross-border shopping experience of international consumers.Brands working with providers of cross-border Ecommerce solutions are helpinginternational shoppers more easily nd the products they want to buy, viewpricing in preferred currencies, check out and pay the way they prefer andreceive orders in a timely fashion at a reasonable cost—all with no surprises.Retailer satisfaction with these service providers was strong, indicative of thee ectiveness of the solutions.Time to Get Serious About Cross-Border Ecommerce 3
  4. 4. The following pages outline the main barriers that internationally ambitiousretailers told us they face as they go global. Use this study to understand howyour organization and solution providers can anticipate, prioritize and overcomebarriers to cross-border Ecommerce. Use it as a call-out to the members ofthe Ecommerce technology ecosystem to focus their vision, technology roadmaps and energies internationally.The study provides initial insights into emerging practices that are helpingretailers grow their cross-border sales. It speaks to what hasn’t worked and why.It pro les cross-border capabilities retailers told us they need, proven solutionsthat are now available (whether retailers and platforms realize it or not).We suggest that the next phase of cross-border success will require evolvingbeyond today’s operational focus on ful lling latent global demand. We concludethat the next wave of cross-border success will require proactively developingcountry-speci c demand generation and customer retention programs.The Cross-Border Ecommerce OpportunityMarket projections collectively forecast that global Ecommerce will reach$711 billion in sales this year.Search activity is a leading indicator of the growth of Ecommerce. The totalnumber of online searches conducted worldwide grew 46% in December ’09 vs.December ’08, according to qSearch data from comScore. U.S. search volumegrew 22% while France increased 61%, Brazil was up 53% and Japan grew 48%(see Figure 2 for the top ten international markets). Figure 2: Year-to-Year Growth (Dec ’09) in Number of Online Searches Conducted Globally (comScore)Time to Get Serious About Cross-Border Ecommerce 4
  5. 5. Forrester reports that online retail sales in Western Europe reached €68 billion in 2009 and are projected to grow 68% to €114 billion by 2014. Forrester expects business-to-consumer online sales to continue growing at double-digit rates, in part because most Western European countries’ online retail sales are still relatively undeveloped. Even the more mature markets (e.g., the UK) will experience very nice growth in the years ahead due to more shoppers becoming more comfortable with Ecommerce. There is no shortage of compelling estimates of the dollar value and near-term growth projections of Ecommerce in emerging markets. By 2012, IDC expects Ecommerce sales in China to total $134 billion. projects that China’s online apparel market will grow 63% this year and 40%+ in 2011. Newegg, a US-based computer and electronics Ecommerce retailer, reported more than 300% growth in its Chinese sales during the rst half of 2009. The company surpassed $80M in sales to China in 2009. This study did not focus on the many and varied market data points; rather, it focused on the challenges and solutions in a immature cross-border Ecommerce market. The State of Cross-Border Ecommerce Among the retailers we interviewed, few have proactively committed capital investments or strategically altered operational practices to optimize the cross-border Ecommerce opportunity. We found that some cross-border successes happen by accident, others emerge through trial and error. In spite of the haphazard plans to capture global demand, some retailers are realizing signi cant portions of their revenue from outside the U.S.Figure 3: Dual-peaks Reinforce the Early Beginnings, and Early Successes, of Cross-borderEcommerce Today Q: In 2009 what percent of your total web sales was generated from outside the United States? ! !Time to Get Serious About Cross-Border Ecommerce 5
  6. 6. The early leaders—be they large, medium or small merchants—have no “International customers knocks and a propensity to work with others. found us [and] it was really about not wanting to say no. with an operational focus on overcoming barriers such as localization, payment, Plus we could just use the fraud, and logistics. same DC & sell them the T same merchandise.” border solution providers to overcome the initial operational blocking and tackling required to expand across the border. Our research indicated a growing desire to minimize the number of internal and external resources necessary to administer a cross-border initiative, particularly when it comes to logistics. In fact, a need to reduce the number of vendors necessary to get product from a retailer’s warehouse to the cross- border consumer was also a key driver that emerged from the study. Not surprisingly, more retailers are evaluating cross-border Ecommerce solutions. Left unsaid was their desire for Ecommerce platforms to lend a hand in the process by developing partnerships and tight integration with providers of these cross-border solutions. Third-party Global Logistics Specialists Deliver the Goods While no single barrier was deemed more acute than another, the executives we interviewed most commonly mentioned shipping-related issues when How do cross-border discussing their cross-border challenges. Retailers that outsourced all or most Internet Retailer Top 500). Smaller merchants took a more hands-on approach to processing orders and relied more on “point solutions” for shipping insurance and web-only merchants and fraud prevention. the multi-channel retailers interviewed? Smaller and niche-product oriented pure plays indicated that customer In this scenario, retailers typically ship goods destined for international service and cost related issues are shoppers from their own domestic distribution centers to third party partners. their biggest barriers. These partners process packages for international delivery (e.g., open and inspect boxes, harmonize for customs clearance, complete customs paperwork, Larger multi-channel retailers tend etc.) and then ship orders to cross-border customers via networks of to be more concerned with brand international carriers and local, in-country delivery agents. This is an ideal approach for retailers who are still at the discovery phase of the localization, protection, and credit/ global markets, allowing them to test demands from various markets before security issues. committing to a heavier infrastructure investment overseas. A number of these third parties do more than just forward orders internationally. T overcome the barriers to cross-border Ecommerce success.Time to Get Serious About Cross-Border Ecommerce 6
  7. 7. Barriers to Cross-Border Ecommerce One marketplace executive commented, “Cross-border Shipping-related problems include 1) lower conversion due to the high costs of shipping and clearing customs and 2) customer service issues centering on has been interesting in that the timely delivery of products and poor (or cost-prohibitive) order tracking of packages as they pass among di erent global carriers and delivery agents. moving product around inside the country is much These issues, especially when coupled with another common challenge— higher-than-quoted landed costs (which means international shoppers end harder than getting product up paying more for the product than expected)—degrade the online shopping experience and can damage the seller’s brand. into the country.” Non-top 500 retailers were particularly vocal about their shipping challenges, which varied greatly from untimely delivery to discomfort with handling customs forms/fees. These smaller retailers are especially challenged by the lack of reasonably priced international express shipping options with end-to-end order tracking. On one hand, passing along to the customer the expense associated with tracking orders lowers conversion rates. On the other hand, the lack of order tracking raises costs, as merchants have to deal either with lost orders or with fraudulent claims from customers who say that their orders never arrived. !! GO GLOBAL. BE SOCIAL? ! Although few of the retailers interviewed have conducted cross- border social media campaigns, numerous merchants mentioned that social media was “something we need to look at... sooner rather than later.”! In addition to the challenges highlighted in Figure 1, common challenges faced by the retailers we interviewed included: dealing with country or region-speci c legislation and regulations (e.g., cultural and country-of-origin restrictions, data privacy, etc.), determining how best to handle in-country distribution and cost-e ectively sourcing products sought by international consumers. Translation (e.g., translating customer service requests and related emails) was a challenge commonly referenced by Non-top 500 retailers.Time to Get Serious About Cross-Border Ecommerce 7
  8. 8. Growing Cross-border Sales: What Works?To no one’s surprise, cross-border promotions featuring free and conditionalshipping discounts are working.Marketing tactics ranging from simply promoting a site’s ability to ship to avisitor’s country (e.g., using geo-location/IPtwo other common ways to successfully grow cross-border sales.display, search and email campaigns to grow their cross-border Ecommercebusiness, whereas smaller pure plays are more likely to rely almost-exclusivelyon paid search.Larger, leading retailers in the cross-border space told us they are justbeginning to do a better, more consistent job of planning campaigns that targetThese retailers are modeling online campaigns on successful U.S. onlinemarketing initiatives including themed promotions tied to holidays (Valentine’sDay, Halloween, End-of-the-year Holidays, etc.) and to cultural/social get-togethers (CyberMonday, World Cup, blockbuster movie releases, etc.).and cultural nuances of targeted markets and incorporate elements ofItactics and best practices gained from their U.S. experiences. One marketingexecutive from a global apparel manufacturer commented that although cross-border e-mail campaigns have had much higher click-through rates, conversionrates have been lower. Hacross-the-board surcharge to cover cross-border customs, duties and taxesis likely negatively impacting conversion.The retailers stressed that they will need to continue building marketingdatabases and executing marketing campaigns appropriately on a market-by-market basis. According to our interviews, this will require expanding theirSeveral pointed to the recent emergence of “in-country demand aggregators”that contact owners of U.S. Ecommerce businesses and promise to utilize theirAlthough these varied models are still emerging, they tend to encourage themarketing and demand generation to them. Tin that the demand aggregator simply adds their premium to the order. TheU.S. supplier is not asked for a share of its sale to the international shopper.Time to Get Serious About Cross-Border Ecommerce 8
  9. 9. It remains to be seen whether online merchants in the U.S. will be contentto allow in-country partners to “own the customer” while they remain in themarketplaces generate for them. Tonline merchants are primarily using search marketing which, in many cases,Apparently mastering international search marketing requires its own set ofskills, one of which is patience as the “Google ecosystem” gains market-by-market international sophistication. So too regarding Facebook and othersocial media.What needs work?Plenty. Hconsistently—with one notable exception: many admitted that their cross-Smaller merchants that sell primarily through marketplaces expressed somedegree of frustration “dealing with rules and policies that don’t always make sense.”Others said that they needed help with the basics of cross-border shipping, suchas validating international addresses, “Today we do this manually and it wouldreally help us.”Although currency conversion was also a consistent miss—“I imagine we couldgo with an Ecommerce site platform that actually does pricing in multiplecurrencies”—the smaller merchants agreed that by and large the international The same held truefor translating web content.We also found that a commitment to using basic analytics to understand theinternational customer and to react accordingly was consistently missing.What’s Next? For Many, That First StepAlthough numerous retailers involved in the study have been serving cross-border customers for more than two years, we also included other retailers thatdon’t ship internationally or that have only recently begun selling cross-border.Our cross-border research during the past two years clearly indicates that earlyStill, we notice a lack of awareness of solutions that facilitate cross-borderEcommerce among online merchants, marketplaces and the commerceplatform community. However, we expect to see this awareness grow quicklyand anticipate that partnering activity between the best-of-breed cross-bordersolution providers and the commerce platforms will pick up substantially inthe second half of 2010 and into 2011.Time to Get Serious About Cross-Border Ecommerce 9
  10. 10. What They’re Looking For “We would like to see a multi-faceted solution thatRetailers of varying sizes discussed their need for a low-cost comprehensive,cross-border Ecommerce solution that required minimal set-up and integration, facilitates the completionideally via web services. of the [cross-border]Their preferred solution provides reasonably priced shipping options, fraud transaction, ful llmentprotection and “plug and play compatibility” that o ers built-in translation and shipping... with acapabilities and currency conversion. marketing component.Also sought after was a single cross-border platform that allows retailers toguarantee their international shoppers accurate landed costs (i.e., the total costof getting a package from a retailer’s shipping dock to a customer’s doorstepincluding shipping, duties and all other taxes and fees). We wouldn’t be an advocate of heavy capital expendituresThe preferred solution delivery model minimizes any signi cant up-frontinvestment and delivers the necessary technology and services on a revenue- for growth that is notshare basis. yet predictable.The J.C. Williams Group’s ongoing research also indicates that online merchantswould welcome more assistance from their commerce platform providerswhen it comes to improving the online shopping experience for their We would like to seeinternational customers. solutions that take aSome retailers, especially smaller merchants, mentioned that some basic percentage of revenue orcommerce platform re-tooling was long overdue (e.g., some commerceplatforms and marketplaces don’t even allow for the basic form capture of pro t... a pay forinternational addresses). performance model.Others can be expected to step up the call for their platform partners to provide We’d be very open to that.”integration and other “connections” to the leading providers of cross-borderEcommerce solutions.In addition to providing technology leadership, commerce platforms are alsoin an advantageous position to take on a thought leadership role and to beginproviding guidance as cross-border Ecommerce best practices begin to emerge.Given the expected growth of both cross-border Ecommerce and Ecommercewithin international markets, commerce platforms that take the lead today canexpect substantial rewards tomorrow.Time to Get Serious About Cross-Border Ecommerce 10
  11. 11. Conclusion If your organization is content to be a “slow follower”Our latest study suggests that early leaders in cross-border Ecommerce aretoday generating incremental revenue growth of 5% to 10%, with little addition on the cross-border front,to xed costs. know that the global windowRetail brands working with cross-border solution providers are improving both of opportunity will close.the online and post-order experience. In doing so, they are converting rst-time Foregoing the cross-bordercross-border customers into repeat customers. Ecommerce opportunity couldLonger-term, our analysis suggests that leaders will expand beyond their be a monumental miss.present operational focus, beyond simply settling for ful lling cross-borderlatent demand.The next stage of growth will come from online retailers proactively growingdemand, geo-targeting both their cross-border growth initiatives and supportinge orts based on new analytical models and opportunistically leveragingemerging mobile and social media channels.Aligning multi-channel organizations with the global opportunity, enhancing thesophistication of merchandising practices and building appropriate, sustainabledemand generation programs will also allow the initial cross-border marketshare gains captured today to evolve into a sustainable competitive advantagetomorrow.Much work still lies ahead. If you are on the fence about whether to prioritizecross-border Ecommerce, it is time to take an important step ahead. It’s time toget serious.Do not be misinformed about the challenges of cross-border Ecommerce.Demand will grow and consumer expectations will rise. Low-risk, cost-e ectivesolutions exist today that can help retailers of all sizes expand their cross-borderand international Ecommerce.Whether your organization is a web-only merchant, a multi-channel retailer, aconsumer product brand—or a commerce platform or marketplace provider—you owe your international customer the courtesy of a closer look at thecompanies who are expanding the reach of Ecommerce globally. ABOUT THE AUTHOR: J.C. Williams Group ( is a boutique retail-consulting rm with recognition in the elds of strategic planning, retail branding, research, technology, and multi-channel retailing. With o ces in Chicago and Toronto, J.C. Williams Group provides practical, creative, and in-depth knowledge of retailing. Internationally, the rm is a member of The Ebeltoft Group (, an international consortium of retail consulting rms.Time to Get Serious About Cross-Border Ecommerce 11
  12. 12. Email us at bd-ecommerce@pb.comCall us at 855-PB ECOMMVisit us at© 2010 Pitney Bowes Inc.  All Rights Reserved.