Five Minutes to a Better Understanding of
Global Ecommerce

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Enhance your expertise in global ecommerce in just five minutes. The five fundamentals outlined in this article give you a rapid, high level view of selling to an international Internet audience and clarify some of the most common areas of confusion.

1. Who is likely to be looking at your online shopping cart? And what are they likely to be looking for?

If someone is on the Internet, chances are 8 out of 10 she also shops online fairly routinely. Worldwide, the most frequent shoppers are in North America and Europe, followed closely by Asia/Pacific, South Africa, and Latin America. The highest selling goods are books, videos/games, travel, and clothing. Online shopping is also standard practice for electronics, software, and computer hardware.

2. What are the most important factors in getting people from other countries to buy from you?

Make the buying process as easy as possible for your global customers. For starters, your online store needs to present goods and options in:

• The customer’s local language
• The customer’s local currency
• The customer’s preferred method of payment

Localization: Speak Your Customer’s Language

By 2010, predictions indicate non-English speaking Internet users will outnumber English speaking users by 3 to 1. As you might expect, people prefer to buy from websites that are shown in their native language. Try to think of the last time you bought a product from a web site written in an unfamiliar dialect. If your website is only available in English and you want to sell worldwide, it is highly advised that you spend some resources translating the buying experience for your key markets.

Go Beyond the Dollar: Accept a World of Money

People buy items more readily if the shopping cart shows them prices in their native currency. This practice eliminates the need for customers to calculate exchange rates or pay unpredictable currency exchange fees. When a shopper clearly understands what she will pay for a product or service, she is less likely to abandon her shopping cart.

From Cash to Cards and Everything Between

The credit card may be king in the United States. And television commercials may suggest the global ubiquity of payment by name brand plastic. In reality, you will miss a significant portion of the Internet market by limiting shoppers to Visa, MasterCard, and American Express. Even though credit cards are gaining in popularity worldwide, you can benefit your bottom line by understanding local payment preferences. For example, the French like to shop using Carte Bleue. Shoppers from Germany, Austria, and Belgium like to pay with inter-bank transfers. United Kingdom shoppers prefer to use their Maestro debit cards. And shoppers from South America often choose to pay with PayPal.

Contrary to common wisdom, shoppers who do not find their favored payment method frequently abandon the cart and never come back. More payment methods equal more completed sales. Period.

3. Who pays for currency conversion?

A great deal of confusion surrounds this simple question. If, for example, a buyer in France places an order through a website that only offers products in US dollars (USD), a currency conversion occurs, for a fee, to allow the Euro (EUR) denominated card to complete the transaction in USD. Many smaller businesses, assuming they will bear the cost and complexity of these currency conversions, back away from doing business in other countries. These businesses simply miss out on the incredible opportunity to reach across international borders for sales — the buyer pays for any currency conversion when the need arises. The conversion rate appears on the buyer’s credit card statement. The vendor of the product does not pay anything for the conversion.

This placement of burden on the customer, of course, justifies your effort to offer your products in the customer’s local currency (see item 2).

4. Who has to pay European Value Added Tax (VAT)?

By law, VAT must be collected for buyers located in the European Union (EU), regardless of the seller’s location. Each country in the EU sets its own VAT rate.

What is often an area of confusion is that VAT is a tax on the buyer, not on the seller. It is added to the buyer’s invoice and does not affect the total amount of money you, the seller, receive for the sale of your product.

The Merchant of Record is the legal entity responsible for VAT. If you are the Merchant of Record, you are required to calculate, collect, and file VAT for products that you sell into the European Union. If you outsource your store to someone else who acts as the Merchant of Record, that entity can take care of VAT related tasks for you. In fact, one of the benefits of using an online store outsourcer is that you are relieved of the burden of handling VAT and can more easily sell to countries in the European Union.

5. How can you protect yourself from online payment fraud in a global environment?

Most payment processors have online fraud filters to protect you and your customers from payment fraud. Some services and payment processors also allow you to set rules about payments that you will never accept or you would like to review. For example, you could ask to review all orders over $400 or coming from a certain area where fraud is prevalent.

Some outsourced online store providers may offer custom fraud filters to let you customize fraud detection based on your specific business model. For example, many sellers of expensive electronics require the delivery address and credit card address to match. Some vendors of expensive goods will decline customers with “anonymous” email addresses, like those from Hotmail or Gmail, that can easily mask identity.

Another option, depending on the goods you sell, is to ask for payment via wire rather than via credit card. This is especially valuable if you have high dollar goods or sell in areas prone to payment fraud.

What Are You Waiting For? Go Global Today.

With nearly 1.2 billion people cruising the Internet today, why waste the valuable opportunity to place your products into a global storefront? If you and your team can remove language and currency barriers from the buying experience and overcome the challenges of fraud and VAT filing, your business can grow substantially by expanding beyond its borders. Alternatively, you can simply use an outsourced ecommerce solution with systems in place to help you start selling internationally today. Outsourced solutions give you overnight access to a range of currencies, payment options, and powerful fraud filters. Some will provide pre-built user interface translations to present standardized, customer-facing online store functions in multiple languages. And a few will accept, calculate, and file VAT as your Merchant of Record.

No matter how you decide to offer your products online, these five fundamentals will guide you towards profit and success in the international marketplace.