The growth and consumers’ growing reliance on the Internet has created a vast amount of opportunity for retailers – and a fair volume of challenges, too. Thanks to instant connectivity, retailers are now able to appeal to a grander audience locally and globally, empowering widespread expansion. Yet, there are still a few things to consider before deciding to plunge forward and invest in a global commerce platform.
If you’re a retailer who is expanding globally, with physical stores in different countries, it’s essential to understand the barriers and solutions for international commerce.
What kind of information are your customers expecting you to provide in the different regions and cultures? A single platform must support the demand for alternative products, languages and descriptions in the different markets – something I call “lifestyle information.” For a retailer to be successful globally, it’s critical to understand customers’ unique demands. While a product might be wildly successful in the U.S., it does not mean it will create similar demand in Japan or other countries.
Understanding International Commerce
When expanding internationally, retailers must be cognizant of regional currency fluctuations.
For example, it might be more effective to drop prices in Europe right now considering the dollar is closer in value to the Euro. On the other hand, if the local currency was being devalued, it might make better economic sense to raise prices to maintain a better margin. Retailers need to be aware of the fluctuations and impact on pricing, margins and even customer perception.
When determining product pricing, retailers also must look at taxation rules – which differ in just about every region. It’s not a black and white process. The U.S., for instance, may have as many as six jurisdictions – school districts, county, city, state, federal, and special interest taxes (for places such as Disneyland). Because of the complexity of taxes, you need a platform that can support either integration to taxation engines or a robust calculation.
Because the process can get a bit convoluted, you could potentially outsource taxation to a third party. Nevertheless, once tax has been collected, it’s your job to responsibly manage and report the collections in those jurisdictions, as well as remitting taxes once they’ve been collected.
Sharing Customer Data across Borders
For many retailers, having a single platform system to support the network of stores is ideal. However, this often entails that customer data is being distributed across borders because there is only one system. To prevent data sharing across borders, regional regulations might require multiple systems for distribution purposes.
A customer in Germany, for example, may purchase a product and, after the transaction, would like his or her personal information removed from the database. Because Germany has privacy provisions for electronic information and communication services, the customer is entitled to the request. Yet, it becomes quite challenging to sift through customer records and delete individual transactions – and equally complicated when a retailer must delete records from the backed up data, too (a nearly impossible task).
While global accessibility has opened up a variety of opportunity for retail expansion, it’s important to recognize the prospects and hindrances in different regions – such as currency fluctuations, customer data regulations and taxation – when operating on one global commerce platform. Understanding these aspects, along with taking into account different cultural demands and perceptions, can lead you one step closer to creating a global retail empire.
Lori Mitchell-Keller is senior vice president and head of global retail at SAP.