Passport to success in international e-commerce markets
What opportunities and threats does this new world-order create? And how ready are you to grab your share of the global consumer wallet?
The internet has opened up a world of opportunity for online merchants. No longer confined to selling within their own geographic borders, today’s e-retailers have access to a global customer base. What opportunities and threats does this new world-order create? And how ready are you to grab your share of the global consumer wallet?
Research conducted by Dynamic Markets on behalf of Chase Paymentech(1) throws light on this burgeoning shopping channel and assesses how prepared companies are to take their e-commerce strategies to the next level. When it comes to trading internationally, 75% of the companies surveyed had already expanded and currently trade overseas, while 62% had international expansion plans for the next one-two years, either to expand into additional countries (50%) or to trade internationally for the first time (12%).
A number of factors besides the growth in popularity of the internet are behind these international expansion aspirations, especially in Europe. The Single Euro Payments Area (SEPA) where individuals and businesses can quickly and cheaply make and receive card and electronic payments in the euro currency across Europe, regardless of their location, has opened the door to efficient cross-European trade.
Broadband is a precursor to e-commerce activity, with countries that have high broadband penetration generally experiencing high internet usage. There tends to be a sequence in the uptake of e-commerce activity: first broadband penetration becomes high, then internet usage increases and only when users become comfortable with the online experience do they shop online.
The 2011 Chase Paymentech survey suggests that a Card Not Present (CNP) payment capability is an important factor in the ability to expand overseas. More companies with over 25% of their total sales processed as CNP payments plan to trade internationally for the first time compared to those with a lower proportion of CNP sales. This reinforces the view that CNP payments enable expansion.
Identifying the challenges
Seizing the opportunity to expand overseas with an online presence is not without its challenges. Chase Paymentech notes that 86% of the directors surveyed at the start of 2011 believe there are, or would be, challenges to trading internationally, with taxation issues topping the list as the biggest challenge for 56% of these respondents. Dealing with exchange rates and handling multiple currencies are ranked as the second and third biggest challenges respectively.
A payments partner with strong global credentials can help to address these challenges. A solution from Chase Paymentech, for example, may help merchants seeking to sell to cardholders around the globe. By offering the ability to present in over 130 currencies and settle in up to 12, this solution gives merchants the flexibility to meet the requirements of their new customer base whilst avoiding the need for multiple bank accounts in multiple countries.
A question of security
The concerns about fraud and how to safeguard the e-commerce activity of both customers and their own businesses are very real for those merchants considering international expansion. While one of the advantages of CNP transactions is the increased reach it provides a vendor with, 61% of directors in the mid-sized and large British companies think international expansion leads to an increase in the threat of payment fraud and 57% think it leads to an increase in the threat of data breaches.
In total, 73% of directors in the Chase Paymentech survey agree with one or the other of these scenarios (fraud or data breach) and thus think international expansion increases the threat levels to a company. Despite these high figures, 70% of companies already affected by fraud currently have international expansion plans, suggesting they have not been deterred by the fraud they have experienced to date.
When considering international expansion it is also important to take account of different cultural variations. What are the buying habits of consumers in different parts of your international marketplace? For example, Forrester Research notes that UK shoppers like to buy groceries online, while books, clothing and event tickets are top sellers in Germany(2).
It is also not just ‘what’ consumers buy online, but how they view the e-commerce experience that is of interest. In Spain, for example, consumers like to browse online before shopping in-store with a high value placed by customers on touching and feeling the product before purchase. What works well on your website in the UK may also need to be re-visited after translation in other parts of Europe. These localisation efforts and ensuing costs should be factored into the development of a more global online business model.
Ultimately, businesses seeking to expand their operations globally – whatever the catalyst may be – face certain risks and challenges specific to the landscape of the economic climate and culture they choose. However, the potential benefits that often come from international expansion efforts can justify time, effort and monetary expenditure. And as consumer payment preferences and behaviors and local payment regulations vary around the globe, a synergistic approach to your payments program will only continue to grow in importance and necessity.
1. CNP Payments at Risk?: Independent market research conducted by Dynamic Markets on behalf of Chase Paymentech, (April 2011)
2. Forrester: European Online Retail Forecast, 2010 To 2015 (February 2011)
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