Five Points Of Cross-Border Commerce Failure

ByPYMNTS

Posted on March 15, 2016

 

 

 

When it comes to optimizing cross-border commerce opportunities — in both developed and emerging markets — every merchant knows that they must think mobile first.

Beyond that, they must think global.

And how does one think global? According to Howard West, the Senior Director of Global Strategies at Digital River, that means thinking local.

“If you’re going to go global, you have to go local. That’s the key takeaway. Once you start your global expansion and you start your cross-border buildout and experience, you really have to start thinking about what that local experience,” West told MPD CEO Karen Webster in a recent digital discussion in which the duo dug deep into the findings of the recent X-Border Payments Optimization Index.

Going local means thinking and optimizing for: languages needed, supported currencies, regional logistics and regulation, and then, of course, payment and payments processing. On top of that, merchants have to think about how they are going to push their marketing strategies globally.

To put into context how important cross-border has become in commerce opportunities, there’s one key number that stuck out from the findings of the Index — and that’s 57 percent.

To be more specific, according to Nielsen’s Global Connected Commerce report, based on 13,000 people surveyed in 126 countries, 57 percent of respondents have made an online purchase with a merchant outside their country’s border in the last six months.

If you do the math, times that by the number of people anticipated to have a mobile device (hint: there’s more devices than people), we’re talking billions of people in just the last two years.

Which is pretty remarkable if you think about it, showcasing the ever-important need for merchants to understand how to optimize their customer experiences for mobile — both on a global and local level.

“When you look at the expansion of mobility, especially once you go outside your traditional markets into some of the emerging markets, [mobile is] the only path they have to access the Internet. It makes sense as you see this massive growth of mobile usage and then as we continue to offer products across border and around the world, being able to access those products through a mobile device is the way it’s happening,” West said.

What that all goes back to is the buzzword of the day: mobile.

“Think mobile first,” West emphasized.

As Webster pointed out in the conversation, that’s a lesson merchants have learned in the domestic market (even if they aren’t quite fully optimized). Regardless of which market you’re talking about in cross-border optimization, mobile is where there’s the most friction, but mobile is also the device consumers are increasingly turning to for shopping.

And as cross-border commerce grows globally – and consumer shopping at anytime from anywhere becomes easier by the moment – technological adaptation by merchants must keep pace, if not outpace consumer comfort in the ability to punch payment information into servers in lands known and unknown.

And that brings us to the results of the recently released Index from PYMNTS and Digital River. The research behind the Index involved studying 192 sites around the world across 10 merchant categories. Those merchants were evaluated based on 60 criteria, including: shopping, shipping, payment, information access, pricing, security, ease of use, support, and time and effort required to checkout.

The results? A slight improvement across the board. The top sites performed the same as they did last quarter, but the bottom 10 sites were actually up a few points from last quarter’s score.

But why?

Well, West asserts, a lot of the difference has to be the progression the smaller sites have had when executing their global strategies. If they have the ability to think global first, they can address challenges from the start instead of having to rebuild a system later on. Overall, the smaller sites are starting to address factors quicker due to their realization that strong partnerships in global markets can take them a long way.

So what was the key factor driving success? Free shipping. When looking at the top 20 percent of sites in the Index, 89 percent of them offered free shipping. The bottom? Just 27 percent of those offered free shipping. And, as data has shown, not offering free shipping drives up checkout abandonment.

But logistics is a tricky industry to manage, West said. Besides the costs, the regulations for each region vary drastically, and there are a variety of fees merchants must deal with across borders. For smaller merchants, those cross-border shipping fees may be hard to stomach, even when it is a major factor influencing conversion.

And then there’s factors as seemingly simple as offering a box to check to automatically input a shipping address to match the billing address. This is one important factor merchants have caught onto quickly, as the Index results show that 91 percent of sites offer this option, which was a big jump from last quarter’s results of 77 percent.

Meeting consumer expectations often means offering a more streamlined checkout process, with less clicks, fewer hurdles and less friction.

“It all boils down to optimization,” West said. “In today’s world, the consumers are driving what the merchant’s expectations are. The reality is: How do consumers in the region you are serving want to interact? What are their expectations?”

Those are the questions merchant must ask themselves. Especially when it comes to payments.

“Understanding how consumers interact with you and how they interact with payments is super important. There are some regions where if you do not have the right local payment type, you are going to miss out on the revenue opportunity that you might be expecting,” West said.

That goes back to the concept of being global — but with a local mindset.

That means being accommodating to local languages, local currencies, and providing consumers with an experience that makes them feel comfortable from start to finish — including browsing, buying, checking out, shipping and payments.

Currency conversions, for example, can throw a wrench into the experience if not properly optimized and that’s where partnerships come into play. As the Index showed, 80 percent of the top 10 sites offered six or more currencies.

“It’s important to be working with payment providers that provide local banking relationships that reduce those fees,” West said. “It allows consumers to pay the price that’s displayed on the site.”

Education in cross-border optimization, he emphasized, is key. And in markets like China — one that has become a major player in recent years in the cross-border space — as a result of the trade routes between China and the U.S. opening up. That’s made it more efficient to bring Chinese products into the U.S.

But locally, there are still issues. That’s how bringing a global perspective to local markets can open up entirely new cross-border opportunities for merchants both in and outside of China.

“The reality is that China’s regulator environment for providing local eCommerce has been kind of influx,” West said. But with a growing middle class looking outside their borders to shop, the concept of being a trusted site becomes a key decision factor for those consumers, he added.

And, of course, being mobile optimized, as mobile is one factor driving commerce in China. But to go local in such a massive market also means one thing. What the Index also hints toward is that China could be on its way to overtaking the U.S. as the world leader in cross-border.

“Think globally first,” said West, as his advice to merchants thinking about going cross-border. “And show some optimization there. Educate yourself and understand the markets you are going after.”