by Mark Fabian Henkel, co-founder and CEO of Paymill
E-commerce continues to grow worldwide, according to the Global E-Commerce Index by A.T. Kerney. The global market volume is estimated to grow 18 percent, up to €994 billion, by the end of 2015. Golden times for online retailers, many of whom have already hit walls when it comes to both sales and country borders. But compared to traditional shops, online retailers do have one big advantage – the barriers for entry into new markets and abroad are considerably less prohibitive.
But before going international, there are still a few hard facts every online retailer should consider. Here are three tips detailing how shops can avoid stumbles with their international expansion:
1. Translation vs. Localization.
Contrary what is commonly believed, just making translations into the target market’s language is not enough. In times of digitization the customer wants an online shop that is also optimized for cultural norms and needs. In addition, using the right language as well as favored color and design pattern or product portfolio is mandatory. However, the latter can be confusing if a product doesn’t fit to the market. One example: don’t try selling rain gear in the Sahara. Offering the right payment- methods can also be important, because not every nation has the same payment behavior. Germans, for example, are adverse to using credit cards, unlike customers in United Kingdom. In the end, the entire online shop has to focus on the preferences of potential customers in the target market.
2. Challenges In Operation.
In Europe’s retail trade, not all product groups are subject to the same law. Special characteristics are especially in the distribution of digital products: Until 2015, tax matters had been transacted in the vendor’s home country. But now tax rates have to be applied in the purchasing country. Under the name of VAT Mini one stop shop (MOSS), online retailers can be theoretically confronted with up to 28 different tax rates. Therefore it’s recommended to sign up at the VAT MOSS and transact sales taxes in the seller’s country.
Even shipping bureaucracy can vary based on the country. While that’s obvious for non-European deliveries, there are even customs charges even inside the EU. Cyprus and Monaco, for example, have imposed duty taxes for imported goods. So online retailers are advised to research cost expenditures for shipping and possible customs duty before expanding into foreign markets. It’s also important to give customers a detailed list of potential costs, to reduce expensive chargebacks.
3. Human Resources.
What impact do language barriers have on an employee’s attitude? Does the online shop need to hire staff in the target country? This is not only relevant for startups. Even medium-sized enterprises need to ask themselves this question. Language in particular has a key role in the customer support team, but it’s important to note that English isn’t always the preferred language. And don’t forget, marketing activities have to be planned in advance, meaning materials are needed in the country perspective. Translation and redesign of marketing material can be both costly and time consuming. When the latter is important for your support strategy, remember that customers need communication channels and time zones have to be considered.
Every expansion needs a planning phase which starts with a detailed analyses on the key country. Market sizes, opportunities and competitors’ situation have to be checked. Afterwards, online retailers should define key markets based on local languages, customer needs and time schedules. Small and medium companies should regard the expertise of trustful partners in operative actions. Such partners can handle complex topics like international taxes and adapting the online shop for different languages and designs. Going international has to be planned and carefully chosen well in advance. A carefully executed expansion strategy should take preference in order to assume sustainability in the market down the road.
Mark Fabian Henkel is co-founder and CEO of Paymill. Prior to Paymill he worked as COO for Rocket Internet Munich, before he founded the FinTech startup in 2012 together with Jörg Sutara and Dr. Stefan Sambol. Find out more at www.paymill.com.