E-commerce Merchant International Expansion Best Practices
The best practices to address issues and challenges that affect e-commerce merchants looking to expand internationally include choosing the best third-party logistics (3PL) provider, having multi-currency solutions for foreign exchange issues and payment options, and learning how to combat online fraud.
- An e-commerce merchant who can successfully extend its offerings outside its local market (also called cross-border e-commerce) is more likely to boost sales by 10-15%.
- Of the overall retail payment volumes, e-commerce transactions account for 9.1% and is projected to grow up to 12.4% by 2020.
- Consumers who shop outside their home country can help generate $630 billion, equivalent to 20% of the global e-commerce sales in 2020.
Below are the best practices to address issues that affect e-commerce merchants looking to expand internationally.
#1. CHOOSE THE BEST THIRD-PARTY LOGISTICS (3PL) PROVIDER OR HAVE MULTIPLE 3PLs
CHALLENGES / ISSUES
- Online shoppers consider fast delivery time and item availability important when ordering. If an item is unavailable or would take longer to be delivered, 70% of shoppers would search for an item elsewhere, rather than wait for the stock to become available.
- In the Asia Pacific region, 41% of customers cite delivery time as an important factor on their shopping journey.
- About 24% of shoppers would cancel an order because of slow shipping.
- Additionally, 73% expects fast and affordable delivery. Therefore, choosing the right 3PL is vital for an e-commerce merchant to meet its customer expectations.
- An efficient logistics process should be in place depending on product type, packaging, and other considerations. But for merchants who expands internationally, a 3PL is an option.
- If an online merchant's shipping is growing, the 3PL should be able to support it and scale operations.
- Select a 3PL company that has a well-developed software and uses a technology platform that can efficiently track and manage inventory.
- Choose a 3PL that has warehouse management capabilities, customization options, customer support, advance technology, and with greater geographic footprint.
- Check for the 3PL's fulfillment centers/warehouses and shipping zones. When shipment travels to fewer shipping zones because the 3PL has many fulfillment centers, it means lesser cost for the merchant as well as the customer.
- Learn to check freight costs, fulfillment pricing, shipment rates, and hidden logistics costs.
- In cross-border shipping, understand varying shipping regulations and customs in different countries and make sure that the logistics partner has a transparent legal consideration.
- For international expansions, having additional 3PLs can help instead of switching to a global company. If there is a dedicated 3PL per region (e.g. one in the US, one in Europe, etc.), it is cost-effective and shortens delivery time.
#2. HAVE MULTI-CURRENCY SOLUTIONS FOR FOREIGN EXCHANGE ISSUES AND PAYMENT OPTIONS
- For international sales opportunities, currency exchange is one of the challenges merchants face upon processing international credit cards.
- E-commerce experts estimated that about 93% of international shoppers opt to pay transactions using their own currency.
- If an e-commerce merchant does not have the ability to transact in foreign currencies, it results to higher rate of "shopping cart abandonment", higher customer friction, and fewer repeat purchase.
- Cross-border e-commerce requires an efficient currency management on the side of the merchant.
- A credible international presence can be maintained if prices are displayed in the customer's local currency.
- A clear information about the merchant's currency conversion gains trust from the customer.
- Merchants should also have the ability to compare the advertised pricing after it was converted, against the price they set, and ensure that the correct currency was sent to the customer.
- Make the shopper's check-out transparent by offering multi-currency payment options.
- Always consider that when shoppers check-out, dealing with multiple currencies does not only depend on the shopper's location, but also on their billing preferences.
- Choose a payment service provider that has the ability to eliminate extra foreign transaction fees. These additional fees can sometimes become the reason for shopping cart abandonment when shoppers arrive at the check-out page.
- When working with a payment service provider, make sure to also consider how their multi-currency payment method corresponds with the limits and regulations of each country.
- Other e-commerce business operates in multiple websites dedicated per region (e.g: .ca, .com, .uk, etc) which simplifies multi-currency management.
#3. LEARN HOW TO COMBAT ONLINE FRAUD
CHALLENGES / ISSUES
- The growing e-commerce transactions give e-commerce merchants some challenges in managing fraud.
- Since it is not easy to verify identification online, international e-commerce merchants are considered the "soft target" for online fraud.
- The common types of e-commerce fraud that merchants can encounter include phishing, friendly fraud, man-in-the-middle attacks, and identity theft.
- The overall credibility judgment to a website is important to 75% of online shoppers. Among Americans, 62% worry about data theft, while 69% worry about their credit cards being hacked.
- For an e-commerce merchant facing fraud problems, it can cause financial losses and product loss, as well as damage to their reputation and loss of customer trust.
- On average, e-commerce merchants lose $2.40 to fraud for every transaction.
- To combat fraud, e-commerce merchants can protect themselves and their local and cross-border consumers by adopting card-verification technologies. This can prevent the fraudsters to impersonate the account holder.
- Gateway fraud filters can also be turned on as it can flag or block fraudulent transactions.
- Make sure to encrypt and secure all confidential and sensitive data from the customer, as well as the merchant's data.
- Another effective way to stop fraudsters is by using two-factor authentication technology as it gives an additional barrier. In some cases, it also simplifies checkout for shoppers.
- Use tools for delivery and signature confirmation. Especially for high-value transactions, fraudsters wouldn't want to be linked to a specific address and be identified, therefore, these tools help in fraud prevention.
- To prevent chargeback due to fraudulent transactions, make sure the customer knows the exact merchant name that will appear on their billing statements.
- Merchants can also remind their customers to be careful not to divulge personal information to suspicious entities to prevent phishing.
To effectively identify the best practices, we initially searched for different challenges and issues that are currently affecting e-commerce merchants, especially related to international expansion. This way, we were able to identify the common barriers and challenges, thus, giving us a broader view of how they should be addressed. After this approach, we looked for solutions for these challenges and consolidated our findings. While other best practices include solutions for better user experience, payment gateway options, better user interface, and maintaining customer's trust and loyalty among others, we focused our list of best practices to solutions for issues related to foreign exchange, logistics and global shipping operations, and fraud. These best practices were selected as they were consistently mentioned in multiple sources and based the inclusion on their impact when it comes to addressing the issues.