The great digital shift has been a rising tide that has lifted all forms of eCommerce — especially cross-border. Ben Fochs, VP of strategy at Digital River, told PYMNTS that cross-border transactions as a percentage of total retail sales have been steadily increasing.
“The new normal is expected to represent a step-change in the total market share, as buyer behaviors permanently shift increasingly to the online channels,” he said. To really take advantage of the market opportunity, he said, “it’s critical to offer a truly localized solution that creates a seamless buying experience for the consumer — something very similar to what they would get if they logged into a domestic website.”
Localization is about more than just knowing the language, Fochs cautioned. As he told PYMNTS, there are some prime considerations when choosing cross-border markets for expansion.
Using an end-to-end, cross-border eCommerce solution (such as Digital River’s) gives users access to more than 200 countries – which means, at a high level, a merchant need not choose a few markets over others based solely on payments acceptance. But, Fochs added, it is important to have at least international priorities, as enterprises need to know if a given country is a viable place in which to do business. “A good mechanism is to look at the incoming traffic, at your website, to see where the consumers are coming from – or if they’re coming at all,” Fochs said.
In crafting a cross-border strategy, he said, the low-hanging fruit would be tied to the largest markets by consumer population and where merchants are already seeing demand, such as in China, India and Brazil.
A successful cross-border plan can also be shaped by redirecting channels from existing marketplaces, such as Amazon. “It could be that you don’t want to pay Amazon 15 percent, and that you want to reclaim control of that consumer,” noted Fochs.
And once the desired market has been established, he said, the merchant will want to create an upstream, localized experience. An ideal online experience will dynamically update currencies right when the consumer reaches the website.
“And you want to make sure to also adopt other customs that they’re used to. This could be how you present the pricing and the card VAT, with inclusive pricing, ensuring that freight is included in the product price where appropriate,” Fochs explained. Drilling down a bit, offering localized payment methods can help prod the customer to complete the transaction.
Upon defining the “front end” of commerce for a cross-border solution in prioritized markets, firms need to approach trade and compliance questions thoughtfully, with an eye on products, SKUs and whether “on-the-ground” challenges must be addressed. There must be refund processes in place, the “reverse logistics” of moving items back from their final destination (and, by extension, less-than-satisfied recipients).
Against that backdrop, eCommerce firms must take banking relationships into account. Up until recently, they have had to leverage their internal BizDev and partnership teams to integrate with local processors as they identify specific payment types required for a targeted country. There also may be trade restrictions and import duties with which to grapple (not to mention PSD2 and GDPR).
Not The Turnkey Approach
Embracing relationships with solution providers or platforms can make those efforts a bit easier, rather than a “turnkey approach,” where the merchant owns the integration and may see slower times for revenue realization, Fochs said.
“There’s a lot of complexity here, and the cross-border shipments require this fidelity — and could require additional teams to manage this level of logistics and complexity,” he said.
The area that drives the greatest complexity would be around tax and regulatory requirements, where merchants are required to collect fees for the sale of certain goods and remit them to local authorities. There also might be conditional sales of controlled products. Fochs cited the example of a merchant selling consumer electronics devices that could require a recycling fee. “If you’re selling digital products, they could require copyright fees. Some other countries allow the sale of products such as video games, but there are age restrictions that you need to be compliant with,” he noted.
Processing the transactions as a local merchant leads to increased authorization rates, better sales and better conversion, PYMNTS said, and Fochs concurred, stating that “this is definitely a competitive differentiator — for merchants to provide an enhanced solution to their consumers — while also increasing their top-line revenue.”
Merchants can go through the process to create relationships and integrations with local processors, but the transactions themselves are processed as international payments with lower costs (transaction fees) for consumers.
A partner-first model, however, allows merchants to take advantage of the infrastructure that is already in place with companies that have created this local entity structure, “quickly [and] with a single integration. They can get access to local processing as a local merchant across the partners’ portfolio of locales,” said Fochs.