Q&A: The Rising Opportunity of Cross-Border Ecommerce

Melissa O'MalleyThere’s a whole world of ecommerce shoppers, but U.S.-based merchants say they are not ready to embrace the cross-border shopper. According to Multichannel Merchant’s MCM Outlook 2016 survey, just 41.9% or respondents said their ecommerce sites are set up for global business.

So why aren’t more merchants looking to become cross-border sellers? Melissa O’Malley, Director, Global Merchant and Cross-Border Trade Initiatives at PayPal, says many merchants are overwhelmed about where to start.

In this Q&A with Multichannel Merchant, O’Malley, who is a keynote speaker at Multichannel Merchant’s Growing Global 2016, discusses some of the common mistakes ecommerce merchants make when they start their cross-border journey, how technology has made it easier for merchants to go cross-border, and where she sees cross-border ecommerce going in five years.

MCM: Why aren’t more merchants looking to become cross-border sellers?
MO: Most merchants know that there can be huge growth opportunities with cross-border selling, but many of them are overwhelmed about where to start. When they begin to look at all of the areas they need to be informed about, including localization, fraud, currency fluctuations, shipping regulations, customs, social media landscapes, customer support, local finance and regulatory issues, it’s no wonder that some of them take a “I’ll wait and see if people come to me first” approach. And while that does happen for some online businesses, they still need to optimize the shopping experience on their site in order to get foreign shoppers to click “buy”. And that takes time and research – with no guarantee of additional sales.

How much of a growth opportunity is it? Our research finds that consumers who shop internationally spend nearly twice as much as those who shop only domestically – clearly, cross-border sales can be a vital source of incremental revenue for merchants – they just need to know where to start.

MCM: What are some of the common mistakes ecommerce merchants make when they start their cross-border journey?
MO: The mistakes can vary by the merchant’s type of business and the destination country they are targeting, but in general, one of the biggest mistakes I see is insufficient knowledge about the new market. They simply don’t do their homework. This frequently occurs when the new market has a common language with the merchant’s domestic market and they forget to consider the other components of website “localization” beyond language, such as offering popular country-specific payment methods, or they fail to ensure that their returns policy takes into consideration longer international shipping times or they don’t show prices in the local currency.

Lack of transparency is also another common mistake in the cross-border journey. Customers don’t want to have to dig through your site to find your international shipping fees (which is a cross-border shopper’s biggest pain point) nor do they want to have to go through the entire checkout process to see that customs, duties and taxes are not calculated in the final price.

MCM: How has technology made it easier for merchants to go cross-border?
MO: It’s true: technological advances are lowering the barrier to entry and enabling new corridors of online trade with consumers shopping directly on overseas websites.

Mobile is a big part of this – with the rise of Internet-connected devices, more than two-thirds of the world has a mobile phone, and more ways to shop than ever before. Mobile commerce is poised to eclipse traditional online spend, growing at nearly three times the rate of overall ecommerce.

Our research shows that among the online consumers we’ve surveyed around the world (over 23,000 people in 29 countries), 16 percent of their online spend was made via smartphone. What’s incredible is that Nigerians nearly triple this: on average, those online shoppers estimate that 37.8 percent of their online spend in the last 12 months was conducted via smartphone, followed by China (34 percent) and UAE (31 percent).

We also just released fascinating new global data on millennials – this fast-growing group of consumers with enormous spending power are increasingly using their phones for essentially every part of their lives. The future of buying is, quite literally, in their hands. While they, like the general online buyer population, still use desktop computers for the majority of their cross-border shopping, they shop from a smartphone 20 percent of the time. To us, the big takeaway here is optimize, optimize optimize (for mobile, that is).

Utilizing this knowledge to get their attention now will reap rewards for savvy international sellers for years to come.

MCM: Which countries do you feel are low-hanging fruit for ecommerce merchants who are looking for grow their global sales?
MO: There are a lot of factors to take into consideration: what country the merchant is located in, proximity to the target country, language, currency fluctuations and the propensity of the target population to shop cross-border.

For example, if you look at our most recent cross-border insights research, we reveal that consumers in Ireland are the most active cross-border shoppers. In Ireland, 86 percent of online shoppers polled had made a cross-border purchase in the past 12 months. This is fantastic if you are a UK merchant since the UK is also their number one cross-border shopping destination. However, less so for a Polish merchant as Irish consumers cite they are less likely to shop there.

US merchants year over year have been cited in this same study as the preferred destination globally by cross-border shoppers, but when you look at one of the biggest corridors –  US to Canada – while the language and proximity checkmarks are there, weakness of the Canadian dollar is now also a major factor that US merchants have to consider.

In short, you have to do the homework to find the low-hanging fruit.

MCM: Where do you see cross-border ecommerce going in 5 years?
MO: This couldn’t be a more exciting time for businesses to enter into the the global ecommerce market. There is no sign of the opportunity letting up. Increasing, global prosperity and the pervasiveness of global Internet connectivity is creating enormous consumer demand and global production. Research from McKinsey shows that by 2025, 1.8 billion people around the world will enter the consuming class, nearly all from emerging markets, bringing the total number of shoppers to 4.2 billion people. These emerging-market consumers will spend $30 trillion annually, up from $12 trillion in 2010.

The rise of China’s middle class, for example, is one of the most important economic stories of our time: according to Pew Research, middle income earners jumped from 3% to 18% from 2001 to 2011, and with this growth has emerged an unprecedented, multi-faceted consumer class with discretionary income to spend. As the country transitions from decades of rapid economic growth to a more sustained pace of development, it’s never been a better time for businesses around the world to consider China as a key investment opportunity for increasing global sales. Once considered the domain of only large global enterprises, China is officially open for business – and small businesses no longer have to sit on the sidelines.

Melissa O’Malley’s Growing Global keynote session, “Leveraging Cross-Border Trade Insights to Increase Sales,” will take place Wednesday, April 13, at 8:20 a.m. at the Duke Energy Convention Center in Cincinnati, OH. For more information about Growing Global, click here.

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