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Profits & Pitfalls of Global eCommerce

Nov 1, 2011

The old adage, "Think global, act local," is increasingly obsolete. In the ecommerce business, global is local. As buyers and sellers move online, the distance between them shrinks and ecommerce sales increase. According to a recent Goldman Sachs report, global ecommerce sales will hit $963 billion by 2013, with a predicted annual growth rate nearing 20 percent. The worldwide market includes 922 million web surfers in Asia, 476 million in Europe, and 272 million in North America. While the web has brought the world closer, international trade requires a commitment of time and resources, as well as an understanding of the cultures you plan to interact with. For those who are willing to brave the waters of international trade, there are some concrete steps to take, and pitfalls to avoid.

Sourcing Products From Overseas

When buying products from a foreign manufacturer, there are certain aspects of the transaction to consider. There will be long lead times, since suppliers may have to actually manufacture your order and then ship it. You will have to place a large minimum order, since the manufacturer will require a large quantity to make it worth the effort. Also, expect your supplier to demand a hefty down payment, possibly sent via wire transfer. If you are designing products to be manufactured, expect constant communication with language barriers, before the final quality level reaches your specifications.

Shipping is one of the biggest headaches, since products have to clear customs. You should be aware of the need for documentation such as a commercial invoice, a packing list, detail sheet, and bill of lading. Whether you are moving goods by sea or air, look for a carrier that will handle all the customs issues for you. One carrier, for example, entices ecommerce merchants with this sales pitch: "Let Pitney Bowes take care of the customs process. Our Global eCommerce solution keeps you current with changing requirements. We help you manage your export compliance with regulations, including export license control." Another possible solution is to hire a customs agent.

Selling To Shoppers Abroad

According to J.P. Morgan, global ecommerce revenue is on track to grow 19 percent this year. With the right approach to sourcing, your business can ride the crest of that wave, even in a tough economy. As more and more people around the globe go online to shop, and as search engine optimization efforts pay off with more page views, ecommerce retailers are fielding an increasing amount of inquiries and orders from paying customers beyond national boundaries. This business can be a lucrative new source of revenue and repeat business, but not without concerns.

Retailers are well advised to watch out for orders from countries known to harbor online criminals, including Yugoslavia, Nigeria, Romania, Pakistan, Indonesia, Macedonia, Bulgaria and Ukraine. They should also contact the customer to confirm the order and direct attention toward any expedited shipping requests, since criminals want product fast, before they are exposed. Fraud is more likely to involve high value goods ordered in multiple quantities, which criminals hope to resell. Retailers are well advised to require a fax showing the face of the credit card, and verify the issuing bank.

Then there is the issue of shipping. Depending on your willingness to pay a premium, air shipment may or may not be an option for your goods. The price may well be five or six times higher than a sea rate. Using a well-regarded carrier can smooth potential problems. Other shipping issues include local laws restricting imports, issues regarding how to address packages, local regulations on package size and shape, and local tax and fee structures.

If international trade becomes more important to your online retail business, you may want to optimize your site for speakers of another language. For instance, you might create a duplicate of your site that is translated. Retailers should also be aware that shoppers may use online translation services, and may need to make their site more translation friendly by avoiding text in images. Also, currency translators will allow users to see prices in their own denominations.

According to Businessweek, selling abroad has never been easier, thanks to advances in technology and free trade agreements that encourage imports and exports. "The Commerce Dept. and its trade arm, U.S. Commercial Service, can help you get established," urges Businessweek. "The U.S. Chamber of Commerce has offices in cities throughout the world. Most states also have economic development agencies with international trade offices. All will help you find distributors, trading partners, and other leads." And whether you are buying from a big Chinese manufacturer or selling to consumers in Brazil or India, it pays to be culturally aware. Understand your new customers and how your product fills a need or fits a niche in their culture. Reports by Forrester Research say that online retailing in America and Western Europe will see double digit growth over the next five years. Developing countries, especially China and India, are just as promising.

Topic: Business Strategies

Related Articles: ecommerce 

Article ID: 1514

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