Start building your global ecommerce operation now – but expand with a measured, step-by-step plan rather than trying to cover the globe in a few months.
This was some of the advice given in the Raconteur webinar ‘Going global: the ecommerce era’, sponsored by PayU, which looked at the headaches in creating an international electronic storefront and how to solve them.
Floriane Gramlich, global head of product payment solutions at OLX Group, a classified ads platform that has a leading position in India, Brazil and other high-growth markets, said that an expanding ecommerce operation needs to recognise the complexities of expansion and create a plan to manage them, for instance by rolling out via regional clusters.
She said: “Go to Indonesia and the Philippines, or India and Pakistan. They are still quite close in terms of how payments work and how the mechanics are.”
Matthias Setzer, chief commercial officer of PayU, a fintech that provides localised payments services in 17 high-growth countries such as Brazil, Nigeria, India, Russia and Turkey, said that despite the complexities of many developing markets the opportunity was too great to ignore.
“If you’re looking for real growth opportunities then you should consider those growth markets.”
He added: “I would not necessarily recommend going to India first… it is a challenging market. But it is in the process, over the next five or six years, of bringing online another 500 million people. That’s like another entire European Union going online.”
In terms of reducing complexity, Mr Setzer advocated partnerships and outsourcing, saying: “Find the right partner, find the right friend. You’re not alone.” He said that companies that were rivals in some countries could be useful partners in others.
Mr Setzer and Ms Gramlich discussed the complexities of handling payments in a world where hundreds of millions of middle-class, online consumers use local payment solutions rather than the Visa and Mastercards that are an easy payment solution for many developed markets.
Ms Gramlich said: “Especially in emerging markets, payments are complicated. It’s not like in Europe where in many countries you can happily go along with credit cards.
“It can be a challenge to enable users to actually pay.”
They also noted that many countries such as Brazil and India are now rolling out privacy legislation similar to Europe’s GDPR, and discussed the implications for European vendors trying to serve those markets.
- Instant credit at the checkout: a must-have for Turkey, Brazil and some other large markets, even for small purchases
- Is there any value in adding bitcoin as a payment option?
- Security topics such as compliance with the PCI DSS security standard for handling card information and special issues relating to India
- The merchant’s least-favourite subject: returns and refunds
- And another very unpopular subject: tax and what could go wrong if it is ignored.
David Beckham’s Instagram feed is a primer on the borderless brand. The lavishly coiffured former footballer pops up in Indonesia to work with Unicef, in Japan to sample Kobe beef, in Miami to launch his new Major League Soccer Club, and recently in Paris to launch a Vietnamese luxury car brand. His average photo gets a million ‘likes’.
Mr Beckham is international – part of the reason why he makes a reported £1 million a month, long after retiring. He is also a glimpse into the very near future. Where Goldenballs treads, businesses follow, recognising that national borders are immaterial. Consumers are everywhere – and brands should be too.
Some people learn by accident. British shoe entrepreneur Shaherazad Umbreen recently won Exporter of the Year at the National Best New Business Awards, despite wandering into export pretty much by accident.
“I sell to Kuwait, Germany, the USA, Australia and Hong Kong,” says Ms Umbreen. “A total of 21. And I do it all online. People buy my products in markets I’d never even thought of! My first orders came from expats, and it’s grown from there.”
Her model is online and low cost. She has a slick website, showcasing her red-carpet style footwear. Her marketing budget is tiny: she invests a little in search engine optimisation, and the rest is via social media posts, which cost essentially nothing.
“We do Facebook, Twitter, and Pinterest. With the right marketing you can reach markets no matter where they are. The last product we launched sold out in 48 hours.”
People buy my products in markets I’d never even thought of
Her message is that businesses need to wake up to the rise of the global consumer. “It’s totally true. I sell shoes to Indonesia. In no way was I targeting Indonesia”.
Research by investment banks points to the same conclusion: a wealthy middle class of consumers is emerging across developing and developed markets, and they are prepared to buy online from foreign vendors.
The Demand Institute, a joint venture between a coalition of major businesses and Nielsen, a consumer data analyst, forecasts that the number of connected spenders – consumers with internet access and cash to spare – will rise from 1.4 billion in 2015 to 3 billion by 2025. In emerging markets, the growth is down to better internet connections, and in richer economies it will come from digitally savvy consumers with enough income for discretionary purchases. Either way, it’s a golden opportunity for businesses to multiply their market base by several orders of magnitude.
Forward-thinking brands are rushing to position themselves to be globally accessible. Pablo Isla, chairman and CEO of Spanish clothing group Inditex, which owns the Zara fashion label, announced in September that all company brands would be available to consumers worldwide by 2020.
He said: “We want to make our fashion collections available to all our customers, wherever they are in the world, even in those markets which do not currently have our bricks-and-mortar stores.”
Online sales at Inditex jumped 41 per cent in 2017 – proof that this is where the growth is.
Businesses that want to become truly global will find a wealth of support. Logistics companies such as DHL and FedEx offer practical advice for exporters, including detailed guides to handling the paperwork. Anyone wanting to grow sales in Brazil or India, where red tape is a part of life, will find their help particularly welcome.
With the right marketing you can reach markets no matter where they are
Complex steps, such as getting an EU certificate of origin for manufactured goods, can be done via an online portal, such as Edge CTP. The form is automatically sent to a designated chamber of commerce to be stamped and forwarded online or in the post. It means even small companies can handle the paperwork without much fuss.
In terms of payment processing and credit, handling global consumers has never been easier. The most sophisticated payment partners can handle more than 300 payment types, so consumers in all markets will be catered for, even those with poor banking infrastructure.
The practicalities are straightforward. The main obstacle is mindset. It can take a leap of imagination to realise that this is now a world where South Korean teenagers go to Harry Potter themed nightclubs, Congolese sapeur dandies dress like Lord Grantham from Downton Abbey, and Shanghai tycoons read the Wall Street Journal.
The name of David Beckham’s new football club says it all: Club Internacional de Fútbol Miami. Internacional – what else would it be, in an era when fans will come from all corners of the globe?
Charles Orton-Jones, a former Professional Publishers Association Business Journalist of the Year, was editor-at-large of LondonlovesBusiness.com and editor of EuroBusiness magazine.
Ecommerce is creating a new breed of global consumer, and it is not just westerners who have a keen appetite to buy online. There is a rapidly increasing demand in high-growth markets too. But businesses wanting to capitalise on the borderless internet and maximise the potential of these burgeoning areas first need to overcome a major point of friction – payments.
Many see credit card payments as a panacea, on the assumption that they are a global currency. But this can be a costly supposition. Thinking local is imperative.
India, for example – one of the emerging markets with the most potential – has just 1.25 per cent credit card penetration. In Latin America, cash accounts for over 30 per cent of sales. Merchants that don’t have local processing could be missing out on over 80 per cent of the market.
Consumer behaviour differs starkly from region to region, from country to country, and merchants that don’t understand local behaviours and needs won’t reap the rewards. From specific local payment preferences to varied smartphone adoption rates, no two markets are the same.
Convenience will always be king, and people want a seamless, frictionless purchasing experience. In order to succeed in these high-growth markets, merchants need to offer simple ways to pay, and that means enabling payments through the options and systems that are most favoured locally.
India has just 1.25 per cent credit card penetration
When we launched our first credit product, LazyPay, in India, many people told us it would fail. It is designed to enable quick and easy small payments, such as Uber rides or takeaway food, for example, allowing consumers to conveniently access micro-loans of up to $50 (£38). Others said there was no precedent for loans in India and that the concept wouldn’t resonate with people. The opposite has been true: the growth has been exponential – Indian consumers love it.
Having an in-depth knowledge of the subtleties of each specific market is crucial for merchants looking to expand globally, and this includes understanding the often complex regulation in place. It is an area that can often seem outdated and onerous to new entrants.
For example, Argentina withholds tax, meaning that often only certain products with enough margin will be viable to sell. In India, certain products require import licences. Working with a local partner becomes critical if businesses are to manage these potentially costly regulatory nuances.
PayU has set up a model in India which allows our merchants can sell their goods there without having to work with numerous third parties or negotiate multiple contracts. We can do that because we have local operations; we are effectively an Indian company.
Businesses that don’t have local processing could be missing out on over 80 per cent of the market
But while regulation can seem archaic in some growth markets, it can also be very up to date. Brazil, for example, is currently implementing comprehensive data privacy regulation which is comparable to the EU’s General Data Privacy Regulation (GDPR).
India also recently implemented advanced data protection laws, and now requires data generated by businesses in India to be stored within the country, including that of all payment system operators. Our data is held locally in India in a series of data centres that are far enough away from each other to withstand typhoons. In Russia and Turkey we also have physical servers on the ground, in line with those countries’ data requirements.
In markets such as Colombia, India and Poland we use the data we collect in a regulated and unique way to issue credit to consumers. In those markets we have introduced ‘buy now, pay later’ options, which allow consumers to use credit responsibly, paying for goods up to 30 days after receipt. This only works because we are local; we have strong relationships with regulators; we are fully licensed to issue credit; and we make sure our merchants remain compliant.
Emerging markets offer a huge opportunity for global online merchants but understanding the payment preferences unique to each area, and being able to offer these options in compliance with local regulation, is the only way companies can realise the potential.
The cross-border market is expected to increase from $401 billion in 2016 to $994 billion in 2020
No longer is it necessary to negotiate multiple relationships, contracts and service level agreements. Our single API gives merchants reliable and scalable access to PayU’s regional and local payment processors , enabling them to fulfil the unique needs of each market.
The cross-border market is expected to increase from $401 billion in 2016 to $994 billion in 2020. And with nearly two-thirds of this coming from high growth markets such as Asia and Latin America, the opportunities for merchants to expand are unprecedented.
The capability of today’s technologies means there is nothing to stop retailers moving into new geographies and capitalising on these opportunities. With cryptocurrencies showing potential to facilitate payments between merchants, consumers and payment companies, we are watching this space with interest. For example, we have invested in companies such as Luno, which is working to bring digital currencies to everyone, everywhere.
As technology continues to advance at pace, and consumer behaviour evolves, businesses simply cannot afford to ignore shifting consumer preferences, particularly with such huge rewards at stake.
Matthias Setzer is chief commercial officer at PayU, responsible for cross-border business, global sales, key accounts, strategic partnerships and marketing.
The rapid expansion of ecommerce is transforming many emerging economies, bringing an array of benefits for consumers and entrepreneurs. While there are clear opportunities for multinational giants, local businesses could hold unique advantages.
Ecommerce has slashed the costs and logistical challenges associated with starting a business, negating the need for bricks and mortar stores. In emerging countries, this has empowered cash-strapped local businesses that would otherwise have been locked out of the market, says Raj Rajgopal, president of digital business strategy at IT services company Virtusa.
“In turn, this spurred the creation of new businesses to fill the gaps in existing capabilities, such as last mile logistics, insurance, and even digital banking, all of which strengthens an emerging market’s hand in attracting new products and other retailers,” adds Mr Rajgopal.
The rise of ecommerce brings many benefits to consumers in these nations, particularly for residents of rural areas and smaller population centres. Research from the Boston Consulting Group found that a major contributor to the strong ecommerce sales in smaller cities is the ability to buy from brands that don’t have a local store. For example, BCG found that almost 50 per cent of premium skin care products sold on Alibaba’s Tmall online marketplace are bought by shoppers in Chinese cities where these brands have no physical presence.
Even for large, multinational corporations, the costs of opening bricks and mortar stores in a foreign market can be substantial. The need to establish a physical presence in a new region to pursue meaningful growth created barriers for companies that didn’t want to commit to such costly expansion plans.
That’s not to say it’s easy to build an ecommerce business in emerging economies. There are well-known challenges around weak delivery infrastructure and payment security, while online shoppers in some emerging markets can be sensitive to unexpected costs and barriers when checking-out. There can be onerous security checks from the payment processor, while payments can be declined without explanation.
For international entrants, any attempt to treat emerging economies as a homogenous whole is destined for failure.
“China is one of the largest and most innovative retail e-commerce markets in the world, with technological Goliaths such as Alibaba and JD.com at the forefront,” explains Wayne Snyder, vice president – industry retail strategy at supply chain software provider JDA Software. “The Indian e-commerce market is forecast to increase fivefold over the next eight years and in a recent JDA consumer survey India had the strongest demand for new technological shopping innovations from anywhere in the globe.”
International companies need to tailor their ecommerce platforms to each region’s unique cultural expectations, even at the most basic level of ensuring that prices appear in the local currency. For example, many Brazilian online shoppers are accustomed to paying in instalments, sometimes through a variety of different means: few online stores can accommodate this request
Local e-tailers are often at an advantage thanks to their detailed knowledge and experience of their markets. This enables them to offer a user experience that eases the transition from offline to online retail. Some are leveraging their physical store network to encourage hesitant consumers to try online shopping. Omnichannel solutions – which combine various types of shopping – are in use throughout the developing world, with some 85 per cent of China’s shoppers consuming in this way, according to Jeongmin Seong, a Shanghai-based McKinsey Global Institute senior fellow.
“Customers search, evaluate and order for delivery using their mobile phones even when they are at offline stores. About 60 to 70 per cent of shoppers surveyed [in McKinsey research] said that they were excited about omnichannel services such as O2O [online to offline] product pickup, QR code-scan payments, product-return services, and VR [virtual reality] experiences at offline stores,” says Mr Seong.
The explosion of ecommerce in these nations isn’t happening in a vacuum, with advances in online shopping stimulating the formation of new businesses that are working to find solutions to challenges around logistical issues and patchy payment systems. The combination of these factors is helping emerging markets to attract innovative products and new retailers, in addition to improving efficiency in developing countries. In China, for example, the leading five retailers only control between two per cent and 20 per cent of the market, whereas in the United States the ecommerce sector is far less fragmented, with the top five firms accounting for between 30-70 per cent of sales in most categories. The rise of ecommerce will see the consolidation of a number of industries, allowing for economies of scale to be achieved.
“Whilst this digital revolution has led to growth in certain areas and significantly expanded the consumer choice, many of these countries are also seeing some of the same growing pains that Western countries experienced – namely increased costs, cannibalisation of store sales, and organisational challenges,” says Mr Synder. “However, as the Western market becomes more saturated and challenging, it is the emerging countries that will provide new growth opportunities for retailers.”
Finbarr Toesland is a freelance journalist specialising in technology, business and economic issues.
Registration for the “Going Global: The Ecommerce Era” webinar is now open! Click here to sign up.
The world’s largest ecommerce market shows no signs of slowing down anytime soon. China already dominates Asian ecommerce, accounting for over 80 per cent of the region’s online shopping sales, with the country’s online retail market expected to become the first to reach $1 trillion later this year. According to Statista, ecommerce sales account for 28 per cent of China’s total retail sales, leaving a vast section of the country’s spending power untapped by ecommerce platforms.
A diverse range of local ecommerce websites, including megastores Alibaba and JD.com, are competing with upstart social ecommerce platforms likes Xiaohongshu and Pinduoduo, and in the process are establishing innovative new ways to shop online. The online shopping market in China has pioneered the use of so-called ‘new retail’, which sees the merger of offline and online retail channels, helping ensure the growth in online sales remains robust.
As residents in rural Chinese villages become connected to the Internet – primarily through mobile devices – the ecommerce sector will scale new heights, reaching $1.8 trillion by 2022, according to market research firm Forrester.
Brazil’s ecommerce sector is rapidly developing on the back of the more than 120 million internet users who have made the country Latin America’s largest online shopping market. Global ecommerce players are heavily investing in the country, with Amazon quadrupling the size of its warehouse earlier this year, an indication that the American firm is preparing to expand operations.
As concerns around payment security and weak logistics continue to be overcome, Brazil’s vast base of Internet users are increasingly confident shopping online and trust that delivery will be on time. International e-tailers already have a strong presence in the Brazilian market due to the often-complex tax conditions faced by local ecommerce firms.
Local companies like Magazine Luiza have adopted an omnichannel approach to ward off challengers and are using their physical stores as distribution networks to make the consumer’s purchasing journey more streamlined. Over 40 per cent of Latin America’s total ecommerce sales originate from Brazil, with the country on track to record annual ecommerce sales growth in the double digits until at least 2021, according to Euromonitor International.
Poland ranks as one of the strongest ecommerce markets in Central and Eastern Europe, with the sector enjoying double-digit growth every year since 2012. The ecommerce landscape in the country is heavily dominated by local players, most notably shopping platform Allegro, with 53 per cent of Internet users buying from Polish e-tailers, compared to only 16 per cent purchasing from foreign online platforms, according to business consultancy Gemius.
Robust mobile commerce sales are helping drive forward the Polish online shopping market, as mobile payments are growing at substantially higher levels than ecommerce as a whole. Strong Internet penetration rates and growing awareness of the safety of buying online, alongside a new Sunday trading ban, are expected to further boost the Polish ecommerce industry.
Chinese e-tailer Aliexpress has been working hard to pursue Polish customers by offering free delivery, and is now the number one foreign shopping platform in the country, beating out Western rivals including eBay and Amazon.
4) United Arab Emirates
The ecommerce sector in the United Arab Emirates isn’t as well developed as Western markets, accounting for a meagre two per cent of total retail sales, according to a Boston Consulting Group report. Yet the growth potential in the emirates is vast, thanks to a burgeoning young population, improved fulfilment infrastructure and an increasingly comprehensive selection of goods available online, which are allowing e-tailers to more effectively compete against traditional shopping malls.
Business-to-consumer sales doubled from 2015 to 2017, and this growth is forecast to continue at annual rates of more than 20 per cent until 2021, according to a report from Research and Markets. A number of recent high-profile deals are also set to increase competition in the industry, most notably the purchase of Dubai-based ecommerce platform Souq by Amazon for an undisclosed sum.
A central part of the UAE’s transition to a more ecommerce-focused economy is the launch of two ecommerce ‘free zones,’ which provide high-tech warehouse spaces where goods can be held before being shipped off around the world.
Despite slowing down in recent years, India’s ecommerce sector is still growing at a faster rate than other leading Asian nations including South Korea, China and Japan. According to research from Forrester, Indian ecommerce sales are expected to experience a growth rate of almost 30 per cent by 2022, rapidly expanding from the current annual level of $27 billion.
The increasingly affordable price of smartphones and mobile data, alongside a growing middle class, are attracting more and more of the over 1.3 billion Indians to online marketplaces. Almost half of the country’s total Internet users are mobile-only, and this number is on track to increase as rural Indians continue to come online via smartphones.
Local and foreign ecommerce firms are fiercely competing to gain the upper hand and are making major investments in infrastructure and logistics solutions. There is a huge opportunity for e-tailers in India as only 14 per cent of Indians with an Internet connection buy online, according to Morgan Stanley, leaving a potential market of hundreds of millions of citizens.