"I can sell anybody anything anywhere" was one of many mantras of the '90s. Usually chanted by businesspeople who had just learned how to sell from their website, it relied on the commonly-held belief that once you're up and selling on the Web, you've entered a retail world without borders.
To a degree, it's true, too. It is possible to sell a bottle of lavender oil from your New Hampshire-based website operation to, say, a monk in Tibet. But that typically assumes, a)the monk speaks English, b)that he has a major credit card, c)that he's not concerned about exchange rates, d)that he's willing to purchase in U.S. dollars, and e)that Tibet's customs will permit the bottle to be delivered without payment of duty.
That's a lot of assumptions. And what U.S. e-Commerce vendors are discovering is that those assumptions are often invalid. There are a lot of people out there who simply aren't interested in paying in U.S. dollars, who won't take risks on exchange rate variances, and who don't hold a major credit card. So, maybe there are some borders out there? Heresy to say it, but the answer is yes.
The Key Borders
We'll ignore the language border in this brief article, if only to avoid belaboring the obvious. Though many people around the world speak English, it is clear your website will have more appeal if it can communicate in multiple languages.
Local payment type borders.
Credit cards have always worked well in the United States and Canada for online purchasing. Not so true in other parts of the world.
In Germany, one of Europe's largest e-Commerce participants, bank cards play a relatively small part of online purchasing. Direct bank transfers are preferred by 40% of Germans (according to a data compiled by Gartner Group, Forrester Research and eMarketer). Direct debits are used in 20% of e-Commerce, and good old fashioned cash-on-delivery still gets 20%. That only leaves another 20% for the traditional bankcard. e-Commerce merchants who accept only plastic are effectively eliminating 80% of their German potential market. Though the U.K. and France seemingly come closer to the North American model (see chart below), Italy, Holland and Sweden (especially Sweden) all seem bankcard averse.
"That's OK," you say, "I'll just sell in France and the U.K. They're big enough markets and they like bankcards." Well, not so fast. Though many customers there buy with bank- cards, don't think you can snag them all with the standard Visa, MasterCard, American Express line-up. There are local cards widely used in these areas, including Switch/Solo, Electron, and Carte Bleu. The "border" issue: "How in the world can I ever support all those payment types, not to mention the local bank accounts required in each country?" Answer: there is a way.
Exchange rate borders.
If you're the only company in the world selling bottle cap collections on line, it may be possible to succeed using U.S. dollars as the only acceptable currency. But if you're trying to sell those caps in Belgium and there are two Belgian companies selling similar collections and quoting their prices in Euros, do you think you'll be competitive? Hardly. The good news-it's perfectly possible today for American e-Commerce merchants to post their prices on websites in non-U.S. currencies, accept payment in those same currencies, but receive U.S. dollars without worry about exchange rate fluctuations. See Figure 1.
Internet tax & export borders.
If you want absolute proof that selling into Europe is becoming an important trend, you need only consider this-they've introduced a tax on it. Since July of 2003, non-European Union sellers of digital goods have been required to pay a value-added tax (VAT) on the sale of their products. The rates vary, depending on such things as where the seller has a physical presence or the location of the customer. Range of the tax-approximately 15% to 20% of the product's value. The "border" issue: "How do I calculate the tax, if any, that I owe?" and "To whom do I pay it, anyway?" The border answer: there are companies out there to help in the calculation and payment of internet taxes-international and domestic. There are also solutions for managing compliance with export controls on what can be shipped where in this time of heightened international security.
International fraud borders.
Internet fraud is obviously not a North American phenomenon. Studies show international fraud to be 2 times more likely than the domestic version, and tools developed for use in the U.S. do not necessarily translate to effective use in Europe. Address Verification System, for example, would declare virtually all addresses invalid that did not correspond to the familiar American style of number, street, town, state and Zip Code. 236 Elm Street looks good, but Banhofstrasse 236? Forget it. The border issue-how can I tell when non-American addresses are legitimate? The border answer: there are software solutions that normalize address formats so the merchant can determine immediately whether to accept or deny the order.
Succeeding in the face of e-Commerce borders-the answer. There are a variety of point solutions in the marketplace that answer all border requirements, including dynamic currency exchange, local payment types, real-time regulatory compliance, and international risk management tools.
CyberSource Corporation offers a comprehensive solution called Global Payment Suite that enables merchants to literally cross all the borders itemized here, simply and inexpensively. Using Global Payment Suite, merchants can display their goods on websites with guaranteed prices in local currencies. When a purchase takes place, the buyer's credit card bill will reflect exactly the posted local price, and merchants will receive exactly the expected payment in their own currency. Local payment preferences can be honored, including in-country bank cards, bank transfers, and direct debits. International delivery address verification ensures addresses are legitimate and IP geolocation even verifies the ordering computer is where it claims to be. All tax calculations and export compliance checks are provided. Though point solutions are available, this is global e-Commerce in a single, simple package.
Why should you care about globalizing your e-Commerce? America's era of Internet dominance ended in 2001 when the number of North American Internet users was surpassed by the number of users in the Asia-Pacific region. The next year, 2002, Europe also passed North America.
Value of Online Shopping-U.S. vs. Europe
Sources: U.S.: eMarketer April 2003, Europe: GartnerG2, May 2003. See Figure 2.
A quick look at the value of European e-Commerce through 2005 illustrates an important trend and a true retail imperative: if American e-Commerce players want to be leaders, they're going to have to consider entering some vast new markets that happen to be found outside the borders of the U.S.A. These markets are open for business now; the tools for reaching them are available.