Recently, the Gorilla Group team had a virtual sit down with ecommerce industry analyst Kent Allen, Principal of San Francisco-based The Research Trust, and cofounder of the Global E-Commerce Leaders Forum. He touched on a wide range of topics driving the growth of the community active in the Global E-Commerce Leaders Forum.
The following excerpts include some of his thoughts on trends in and key drivers of the international ecommerce landscape. The following is part two of a two-part series of excerpts taken from our wide-ranging discussion with a focus on cross border commerce strategy and roll-out implications.
As more companies ramp up international shipping, we’ve heard of unfortunate circumstances where customs can block products from reaching end consumers due to international laws, duties and policies. How can merchants remain informed of regulations at individual country levels. Is there a guide or a resource?
That’s a great question, and you could argue that these kind of cross-border complexities and challenges are what has kept international ecommerce so limited for years.
As we discussed earlier, up until about 5 years ago, cross-border ecommerce basically meant either going all in or not at all. One of the big reasons for that polarity was the complexity of navigating border laws and tariff regulations.
The emergence of what we used to call the “Participatory Phase” of cross-border ecommerce was really been driven by the rise of third-party solution providers like Borderfree, eShopWorld, Bongo, iParcel, Global Access and the like. All these firms did the early heavy lifting needed to convince the online retail brands that were holding off on international ecommerce expansion that there was a better way to go.
These third-party cross-border enablers have enabled the rise of the first phase of global cross-border ecommerce, a stage which our latest model has re-branded as the “Cross-Border Growth” phase.
A key point to keep in mind is that these tools typically offer variations of revenue-share models. Six or seven years ago, global ecommerce was typically a very small piece of overall online sales. And since cross-border was perceived to be so complex, a 10-15% revenue share was considered by most retailers to be a compelling revenue model.
However, as international ecommerce sales volume has grown, the revenue share model has started to become more expensive and is a bit more scrutinized by finance departments. But it is still workable for many, especially those new to the global game.
As global ecommerce expansion becomes more strategic and businesses begin to pull things in-house – by finding their own tools or working with existing ecommerce partners and digital commerce platforms – we are seeing more hybrid revenue models emerge.
But dealing with border issues can still be very really tricky, especially in Brazil and even Canada in certain situations. It is important to not lose sight of all the challenges and the complexity when you take into account all the frequent changes to govt. rules and regulations. So you really need a good, trusted partner on this front to serve as a guide and dependable resource.
Let’s talk about payment providers: What do you recommend to companies looking to transact across different countries, currencies and payment methods?
Payment is one of the most dynamic spaces out there right now with a good amount of talent churn, some consolidation and more and more disruption. There’s no shortage of options, but it makes sense to work with a provider who can really help you understand the broader, global payment ecosystem.
Considerations when choosing a payment provider to support internationalization is thinking about things like screening for fraud pre-sale, localizing payment options at checkout and resolving disputes after the sale instead of just processing credit cards from international shoppers. Handling payments across devices and touchpoints is obviously growing in importance too.
Understanding the payment preferences within regions and in particular countries is also key. For instance, bank transfers are very common in Germany and paying in installments is popular in Brazil.
I also recommend paying attention to alternative payments and staying on top of new options like bitcoin. The idea with bitcoin is that it’s preferable in international commerce since there are no chargebacks or foreign exchange rate because you’re cutting out the middleman and miscellaneous fees. There is more to bitcoin than that, so stay tuned as market catches up with the opportunity.
In the digital commerce service provider space, brands who are planning ecommerce channel enhancements typically take a ‘technology first’ approach. They ask “Do we need a new ecommerce platform? Do we need to upgrade our existing to go global?” How have you seen clients evaluating technology?
When clients are just starting out and looking at international shipping, their technology or platform decision tends to be less about technology and more of a business decision. Questions might include: How much are we willing to pay in a rev share model? What’s the length of the outsource agreement? What’s the chance we can reduce the revenue share as volume grows?
As companies become more strategic with their global ecommerce planning, more and more decisions need to be made. As we see people evolve from the completely outsourced international shipping model to the cross-border growth and regional build models, they tend to lean a little bit more on their commerce platforms – the Demandwares, hybris and Magentos of the world. And they may be working with a ChannelAdvisor as well to make the connections to international marketplaces and digital aggregators.
As brands move into what we can the regional build phase, where they’re doing a lot of the build themselves, technology decisions become even bigger and they lean more on their systems and in-country partners.
One of the biggest challenges can be knowing who the right in-country partners are. To that point, one of our goals for 2016-7 is mapping and vetting the global ecosystem of ecommerce partners into a dynamic directory of sorts. So stayed tuned on that front too.
But it’s hard to say there’s a best technology or IT infrastructure fit for everyone. In many cases, it depends on the product category and country. Different models work at different times and in different countries. Plus, it’s not surprising to see a brand doing international shipping for some countries and using marketplaces for another set of countries.
I think it’s a little too early to talk seriously about implementing global omnichannel strategies. But we’re going to see more and more leaders test fulfillment from international stores and maybe even work with same day delivery firms operating in key global urban zones. This flavor of global-omnichannel may come online a lot quicker than some might think, especially as international ecommerce becomes more profitable and more strategic.
What are some of the decision-making and sourcing criteria that companies need to go through when sourcing technology partners?
Existing relationships are key. The criteria also depends on the size of the company and equity of the global brand. We all need to better understand the dynamic world of system integrators and system implementers – the real builders that are building ecommerce sites in each country. Some of the leading ecommerce SI partners are just beginning to develop a more holistic international portfolio of services and it varies by market. Take China, for instance, where getting a localized site up and running is a whole different ballgame.
In addition to the site builders, you need to work with the agencies and shops that are connecting with the next generation of borderless online shoppers.
Once companies get international sales volume up and are confident in handling the operational processes —screening for fraud, getting paid, fulfilling the order, processing the payments and shipping the product, then they broaden their focus to launching more innovative customer acquisition and engagement programs to scale their investment. For those tasks, customers tend to work with digital marketing solution providers and agencies that have networks of local marketing partners. You can look at the localization of the customer experience through the same lens too.
What I think we’ll see in the next year or two is more of these U.S. marketing platforms acquiring and/or developing more comprehensive agreements with smaller local digital agencies.
When it comes to interacting directly with the international customer, today the smart ecommerce companies tend to think local-first. They put their country managers and their country teams in a position to work directly with a local talent and stay out of the way for the most part.
Still one of the biggest challenges out there facing everyone is the lack of digital expertise in fast-growing international markets.