Five helpful tips for e-merchants entering new markets (to start with …)
As was mentioned by payment processing provider, Computop’s CEO Ralf Gladis, in an article he wrote for Payment Magnates, Europe and the US have suffered a harsh beating by economic recession which has obviously affected business development and sustainability. Those of you in the e-commerce space are, however, presented with opportunities that your brick-and-mortar neighbors cannot boast – which are potential business ventures in foreign countries.
Foreign market is an important topic for you to be thinking about and the payment process is an obvious and vital attachment to the thought process, which is why we are presenting some helpful tips as a starting point.
While there are many viable foreign markets to be explored, e-commerce reports indicate that, currently, the two biggest markets are China and Russia. China has a population of 1.344 Billion, its estimated e-commerce revenue for 2013 is $210 billion and it is just behind the US as second biggest e-retail market in the world. Russia is the fastest growing eastern European country and is, according to Gladis, one of the “two key markets that I consider to be ‘low hanging fruit’”.
Business differs from country to country and so should your approach if you choose to become an e-commerce explorer. The best way to illustrate this point is through the following detail: Chinese e-retail mostly exists through virtual marketplaces whereby retail happens through “megasites” at online storefronts. This is one of many variations on what we have come to see as e-commerce models, making adaptation, the first informal tip for e-merchants.
Here are 5 others:
1* Focus on foreign tax and tariffs
Research and calculate according to the laws of the market that you are entering. Your pricing will need to be adapted according to these calculations in order to make sure that the cost of your goods are both reasonable and profit rendering for you as the merchant but also, of course, to ensure that you are acting in accordance with the country’s legal requirements. There are various service providers that can equip you with the tools you need to make these calculations accurately and easily, but selling offshore can under certain circumstances result in increased margins for you and reduced costs for your customers if for instance VAT cannot be applied. The requirement to declare the imported goods to customs is mostly the responsibility of the end-user and if we are talking about digital goods …
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2* Decide about Delivery: shipping and returns
Consider both the law and the general expectations of end-users regarding returns and shipping. You will need to develop your delivery process and return policies based on local trends and common practices. In addition, postal service reliability is different from one country to the next. For example, in many African nations, postage is not an option, and courier or other such services may be offered to consumers in order to guarantee delivery. Also, In Russia, one of the fastest growing e-commerce markets in the world, the postal service is thought to be inefficient and as suggested by Russian PSP Qiwi, is one challenge for e-retail provided by merchants outside the country. Another relevant consideration is the shipping cost; this needs to be a great part of your brainstorming when entering a new market because the overall price of the delivered good must remain attractive to the customer. You should also refrain from merely adding a turnkey plug-in to your cart to allow the shipping costs to be calculated and added automatically. Think it through: Does the added distance and handling of the product require additional packaging and protection? (You cannot endure the cost of systematic broken products). How long will the delivery really take? (So many products are not delivered on time and result in chargebacks and refunds, for goods which will eventually arrive). You may want to consider an arrangement with fulfillment warehouses that are based closer to your targeted markets in order to alleviate some of these shipping burdens.
3* Alleviate loss with local currencies
It is vital that consumers are able to pay using their own currencies. In the absence of this option, customers may feel distanced from your product or confused about how much is actually being paid (with questions around exchange rate fluctuations as an unnecessary preoccupation) and abandoned payments are likely outcomes. You may feel that it is still a bit early to consider this option, but Bitcoin might just be the perfect solution to this difficulty and others – like chargebacks.
4* Accommodate customers and their payment capabilities
You should also question and research what method of payment is most commonly used in the country you are targeting. There is no use in focusing on credit card payments in countries such as Russia and China (which are two of the most potentially rich markets). Russia is still a cash dominant country which means that the purchasing and use of e-wallets or payment tokens is essential. And in China, the international VISAs and MasterCards remain rarely issued to citizens, thus payment possibilities through Union Pay must be established as this is the dominating acquiring bank in the country. The same goes for EU markets like iDeal in the Netherlands (~80% of the market).
We are currently working on an exhaustive database of all available payment methods spanning the globe and the specificities of each one of them so you will be able to make an educated choice with regards to the right payment methods your business needs in order to function suitably in foreign markets.
5* Rally against risk and do not forget fraud prevention
Try to organize payment guarantees through local PSPs to make sure that the risks of not being paid by customers are mitigated. According to Gladis, PayPal’s services are helpful for merchants in foreign markets because of the guarantee that is offered and, in China, as a result of the security that is embedded in payment systems, like SMS authentication, security is often more reliable and payment guarantees are often easily attained. Fraud prevention has unfortunately become an essential for any e-merchant who does not want to lose his boots or his links to banks, with countless chargebacks and irate customers, thus a consultation with a reliable PSP or security provider cannot be avoided.