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8 Questions to Ask Yourself Before Going Global

Our last piece focused on Cyber Monday and Black Friday – two of the biggest shopping holidays of the year for eCommerce owners. If you dedicated a lot of resources towards these two dates, consider this: Alibaba recently drew $5.7 billion during their 24-hour sale on Nov. 11th. That’s three times the total sales during US Cyber Monday. Even if you did well in the domestic market, you are only making a fraction of what you could be if you tapped in to global markets.

Taking your established eCommerce store to international markets is a move that requires a lot of research, planning, and know-how. And depending on how soon you want to start and how much you are willing to spend, there are many avenues you can take to get there.

 1. Where are the markets for my products?

No matter how well you know your eCommerce product, it very difficult to predict how your product will be received in international markets. Not only do they not always mirror domestic ones, it is possible the product you sell will be interpreted differently in other countries.  Predict which areas are most likely to buy using keyword tools and determine the markets that are actively seeking your products.  Google Trends can also be used to predict a sudden upswing in search volume in a specific area.

At the same time, don’t limit yourself to Google. It may be the number one search engine in the US, but its clout varies greatly from across the globe. A report by Search Engine Watch shows that Google fell to only 3% market share in China this year. You may have never heard of Baidu, but many of your potential customers rely on it.

2. What kind of payments will I need to accept?

It’s easy to forget that HOW your customer pays can be as different as the currency they are paying with. Find out how your target prefers to spend their baht, then make purchasing as easy as possible. Some countries favor wire transfers over online credit card payments. And it turns out direct debit is über popular in Germany and India. If your store’s only equipped to handle one kind of purchase, you’re going to turn away eager customers.

3. Single store or localized stores?

Did you know a “vest” in the US isn’t the same as a “vest” in the UK?

If not, you could lose sales by not speaking your audience’s lingo… even when it’s English. Separating your domains by location or language will give you greater control over content, marketing, and product availability. However, active managing means more work – writing, tracking, and site maintenance.  Separate sites also mean your domains could be fighting against each other for SEO value.

If you choose to have a single domain, you can consolidate content and increase your SEO power.  Yet you won’t be able to tailor your shopping experience for region-specific language or preferences.  It’s important to think through each user experience and understand the SEO impacts of each decision to be able to reach a solution that’s most beneficial for your company.

4. How will I provide customer service?

Speaking of language confusion, translation concerns and time zone changes are two barriers to delivering customer service. Will you have a 24-hour customer service? Will you outsource your CS? Or have a combination of both? Are your service reps also making sales? If they are you should consider what commission they receive or training they have. Keep in mind customer satisfaction is based on quality of service and could possibly be influenced by knowing the person solving your problems is halfway across the world.

5. How will I handle payment processing and exchange rates?

Odds are your foreign customers aren’t crazy about paying in US dollars, not any more than you are about accepting kronas. Find an API solution like InterPay, or a larger packaged solution (with constant rate updates), to exchange currency for you. This way you can accept international funds without the hassle of converting.

These services will be skimming a little off the top with a “processing fee,” so consider bumping prices to round them out and look more natural to overseas buyers (think $13.71 vs $14.00)… just don’t lose your competitive price.

6. How will I handle duties and taxes?

When your product leaves friendly shores, foreign porters are going to demand import fees. Smooth out this process with an API solution that uses your product’s international classifications (established when you go through product harmonization) to calculate any importing duties and local taxes. A solution system like this will look up product codes for each item and use real-time quotes to calculate landed costs, keeping you out of any legal trouble.

The tax man is happy, but how does that effect your price point? You’ve properly quoted the landed cost, but need to consider how that effects your pricing abroad.  Are you still competitive when you factor in these costs? If you are already being outbid by local suppliers, it may not be worth it to enter that particular market.

7. How will I fulfill orders?

Here you have a couple of options. Each comes with its own benefits and risks.

A. Freight forwarding

If you want to get off the ground as quick as possible, consider shipping your product to a freight forwarder who then receives the order, repacks (if necessary), classifies, and sends it from that location. To get the product to the freight forwarder, you’ll be paying for local delivery on top of the international shipping after the freight forwarder has received the item.  Very often, they’ll handle your product harmonization and be the exporter of record, which takes legal responsibility off your shoulders.

You’ll have to pay the freight forwarders to package and ship the products for you, as well as handling duties and taxes.  It also takes a bit of time for your product to reach the forwarder, this will increase the delivery times for the customer.  It’s the price you pay for the convenience of this relatively low effort, low investment solution.

Initial capital – lowest

Operating costs – highest

B. International shipping

The next quickest way to get off the ground is shipping directly from your domestic warehouse. You will have to figure out product harmonization and set-up a system with your shipping provider but you can quickly start moving product. The downside? It can be very expensive to ship individual products overseas, so you’ll suffer from a competitive disadvantage to your competitors if they’ve set up local fulfillment.  Depending on your product, shipping costs, and markets your looking to compete in, this can be a quick way of reaching international markets.

Initial capital – low

Operating costs – higher

C. Rented distribution space

Why suffer through expensive overseas shipping and longer delivery times when you can just have a closer distribution center? Using rented distribution space in another country is another option with more control. Keep in mind you’ll be paying storage costs as well as picking fees.

In order to do this, you’re going to have to maintain an inventory in a foreign country.  If you don’t have a system in place for that and haven’t done it before, it can be quite a challenge.  How will you route orders to the appropriate fulfillment center?  How will you maintain multiple inventories and local demand for products?

There’s an obvious increase in not only capital needed to make this happen, but in the know-how to create a system with all the right considerations in place.

Initial capital – medium

Operating costs – medium

D. Owned distribution space

The highest level of management and control is getting your own warehouse is the country you’ve chosen for distribution. You hire your own workers, managers and shippers, manage importing product, customs, duties, taxes, pay rent, and salaries.  This method not only has the highest capital investment, but it also brings in new, fixed overhead that’s not easy to get rid of if sales aren’t keeping up.

The process can take several months to years and demands a lot immediately out of pocket. But once you set yourself up, there’s no relaxing and letting the system run. You have to manage inventories, follow trends, and alter products for each location. It involves the most work and the most experience with this kind of set-up but gives you the biggest slice of the paycheck.

Initial capital – highest

Operating costs – lowest

8. How will I handle returns?

If you’re sending a package across the world, odds are you don’t want to pay to get it back. But it will eventually happen: a wrong order, a broken product, shipping error…so what will you do? Your response is strongly affected by the method of distribution you use. If you have a warehouse in another country, you could easily have the product returned there. But if a factory is constantly making mistakes, it could become costly.

If you are sticking with international shipping, you may need to factor the cost of shipping into the product cost or ask the customer to pay a large amount. Stores like Zappos that offer free returns understand there are a percentage of unforeseen returns that they must cover. Consider customer satisfaction, distance of return and product price.

Forget the Ethnocentrism

When you jump off the top of a building, make sure you’ve set up a trampoline at the bottom. In other words, do the research and planning before you make the leap to global. Just because your way of doing things is working here, don’t expect it to in another country. How will your luxury jacket store fare in foreign commerce? In China, you might take an unexpected hit that could damper your venture. Don’t leave anything up to chance and know how you will deal with problems before they arise.

Ripen Services:
Need help with the research? We can give you a leg-up. Our eCommerce marketing analysts and web development team can create unique solutions and provide insight into global markets. Take the next step with confidence with Ripen.