Online shoppers are increasingly likely to ‘go global’ in their search for purchases, leaving retailers to address their cross border e-commerce capabilities if they don’t want to lose out to marketplaces.
That’s one of the topline conclusions from the 2017 Pitney Bowes Global Ecommerce Study, based on the survey results from 1,200 retailers across eight countries and 12,000 consumers from 12 global markets.
There are three main trends that the study isolates with accompanying ‘to do’ calls to action for retailers.
Take a cue (or two) from marketplaces to optimize the domestic market
According to the research, 67% of online shoppers prefer to use marketplaces likes Amazon, eBay, Flipkart, Rakuten, Tmall and JD.com to search for products. This compares with search engines (46%), retail websites (40%), social media (24%), and mobile apps (23%).
Consumers cite a variety of reasons for preferring to shop at marketplaces:
- Product assortment.
- Better deals.
- One-click checkout.
- Quicker delivery time.
- Free shipping and delivery.
- Ease of finding what you want.
- Take advantage of loyalty points.
- Personalized customer experience.
- Brand loyalty and trust.
- Better quality of products
Marketplaces also cross international divides, with 62% of cross-border purchases and 59% of domestic purchases take place on online marketplaces rather than on retailer websites. The report notes:
As of 2017, marketplaces are now #1 destination for product searches in nearly every country surveyed—Australia being the lone exception (where search engines now rank highest). Online retailers’ own branded sites are the second most popular choice among consumers in Canada and France, followed closely by search engines. In the US, UK, Germany, and China, retailers’ sites and search engines have equal mindshare. Retailer sites have minimal or decreasing importance in Japan, Mexico and South Korea.
Pitney Bowes findings suggest that retailers often end up competing directly against the dominant marketplace in their home country. Marketplace strategies succeed based on a number of factors:
- How differentiated a retailer’s product assortment is versus the marketplace’s own assortment. Wow much does a retailer risk diluting the brand?
- Market presence the retailer already owns. How much does a retailer need a marketplace?
- Market presence the marketplace owns in the retailer’s home country. Has the consumer already chosen the marketplace strategy the retailer should adopt?)
Retail ‘to do’ list
- Learn to love shipping. Low cost, fast, flexible and accurate shipping is key to attracting and retaining customers.
- Personalize to convert: Implement customer information management solutions that aggregate a single view of the customer.
- Expand your product assortment, offer timely promotions, and simplify checkout.
Don’t rely on brand alone to capture near border markets
Some 62% of domestic and global retailers surveyed already engage in cross-border ecommerce, with more than 31% of remaining respondents planning to engage in cross-border ecommerce in the next 12 months. Only 6% of retailers express no interest in cross-border growth opportunities.
The main reason to sell cross-border is to “tap into pro table high-growth consumer markets worldwide”, cited by 53% of retailers. Product perception and brand awareness are also factors, with retailers in the US, UK, and France rating capitalizing on their global brand as a cross-border driver.
The European Union’s free trade zone might reasonably be expected to be a favorable environment for cross-border e-commerce and the study bears this out, but only up to a point:
European countries have a higher proportion of retailers operating cross- border given the long history of international trade within that region. However, the average of (59%) across UK, France, and Germany is only marginally higher than the average among US, Canadian, and Australian retailers (53%)—indicating that intra-European commerce still has room to grow.
Overall, 70% of consumers globally make at least one cross- border purchase annually. Some 48% of consumers surveyed cited more attractive pricing as the main reason why they shop cross-border, despite having to factor in shippings costs.
Product quality and brand equity also matter, particularly among consumers in China, Hong Kong, South Korea, India, and Mexico, as well as product authenticity and brand names. The report suggests this may be indicative of an underlying issue:
Put together, quality and authenticity indicate concerns around counterfeit and grey/ black market products—but also the value a orded buying brand-name products directly from the manufacturer. Even among North American and European consumers, the value of brand names increased 7% year over year.
Retail ‘to do’ list
- Localized marketing is essential because marketing channel preferences among consumers vary significantly by country.
- Operational prowess separates the winners from the losers. This is particularly true in neighboring countries. The expectation is low cost and high visibility of delivery, localized customer care, and minimized duties and taxes.
Look like a foreigner, talk like a local when expanding into global markets
When it comes to selling cross-border, China is rated as the most challenging country to crack, cited by twice as many respondents who cited the US. With the current protectonist regime in the White House, it will be interesting to see how that plays out in next year’s study. It’s striking that Canadian retailers named the US as a more challenging cross-border market than China. France and the UK were seen as the least challenging markets, although Brexit may yet alter that.
From the sell-side, the biggest challenge to entering new global markets is concern about generating demand (41.1% of respondents), followed by the need to participate and build a presence on national marketplaces, such as T-Mall in China or Snapdeal in India (36%).
There are fiscal and regulatory challenges as well, such as calculating border taxes and ensuring import/export compliance (34.3% of respondents), and calculating accurate shipping and handling costs during checkout (27.1%). There’s also the need to manage logistics, including distribution, transportation and warehousing (25.7%).
And don’t forget the need to talk the talk. Twenty-seven percent of respondents see the need to localize branding and online presence as an entry challenge to a new market.
Retail ‘to do’ list
- Go where the customers are.
- Remember that the greatest opportunity for cross-border growth and success is further from home.
- Don’t prioritize near-border markets at the expense of underserving consumers in countries more apt to shop cross-border.
A very thorough and wide-ranging study and accompanying analysis that’s well worth a read by any e-commerce retailer that wants to play in the global digital economy.
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