By Steve Villegas, Vice President of Partner Management, PPRO
E-commerce continues to change the way we live, work and play, and the disruption taking place has somewhat paralyzed online merchants. Many of them, in the U.S. particularly, are immobilized at the thought of selling across local borders—distinctly fearing a combination of unforeseen scenarios from fraud to security concerns and constant chargebacks.
Frankly, they have it all wrong—and it's hurting their chances to take advantage of the abundance of e-commerce sales available to them globally.
Recent PPRO research reveals that, in the United States, only 11 percent of total e-commerce revenue came from cross-border sales in 2017—surprisingly low considering the world's admiration for American brands.
Merchants should be leveraging global opportunity more, but, when it comes to expanding e-commerce business outside local borders, there are many false facts that online merchants believe. Many U.S.-based online retailers are misinformed about local payment methods and the benefits they can bring to their business as well as global consumers.
It's time to debunk these misconceptions. Let's share a few common myths in the current e-commerce climate and reveal the real truths behind them.
Myth 1: American merchants are reaching their full potential selling in the United States.
In fact, 64 percent of American merchants only sell to U.S. consumers. This is causing American merchants to fall behind some of their global counterparts. Cross-border sales represent 40.6 percent of all revenues in Western Europe and 34.7 percent in Asia>.
Fact: Global markets present a great opportunity for U.S. merchants to expand.
Emerging global markets represent a great way for U.S. merchants to expand operations globally. According to PPRO, 64 percent of Canadian consumers shop cross-border and this rises to 66 percent for Mexico. Currently, only 36 percent of U.S. merchants sell cross-border. U.S. merchants are leaving billions of dollars on the table. By 2021, U.S. cross-border e-commerce is expected to rise to $203 billion.
Myth 2: Offering credit card payment options is enough to reach global e-commerce shoppers.
Credit cards are a very popular payment method in the United States—57 percent of all online purchases in the U.S. are paid by card. This makes perfect sense because U.S. credit card penetration is 66 percent. So, even when they begin to sell abroad, many merchants believe there is no reason to look to into other payment options.
Fact: Online merchants need to offer a variety of local payment methods to connect with global consumers.
Not every consumer uses the same payment method. In fact, different global markets have different ways that native consumers prefer to pay for goods. These are referred to as local payment methods or LPMs. LPMs are payment methods outside of traditional credit cards and brands that facilitate the needs of different geographies, cultures and domestic economies across the globe.
LPMs tend to be geographically specific and are many times preferred by the majority in a certain region. For example, an American consumer and a shopper in the Netherlands will have vastly differently preferences when it comes to online payments. While Americans mainly prefer to pay with credit cards, consumers in the Netherlands prefer to utilize online bank transfers like iDEAL. These payment preferences vary across different regions around the globe. In China, for instance, 49 percent of online payments are made by E-wallet, while 70 percent of online purchases in the Ukraine are handled with cash.
Myth 3: Global customers are only driven by competitive pricing.
A popular method of sales is offering the lowest price possible. Many online merchants believe that the only way to attract customers worldwide is through competitive pricing.
Fact: Ease and convenience are just as important as competitive pricing.
While offering low prices is vital to consumers who frequently shop online, ease and convenience of payment is just as important. Global consumers want to pay for goods with methods they are most comfortable with. Failure to offer those methods usually results in the customer shopping elsewhere. Almost 50 percent of consumers will end a transaction if their preferred payment method is not available. Offering local payment methods that cater to the needs of global consumers in various regions will lead to higher sales conversions.
With 85 percent of the world's spending power residing outside of the U.S., merchants should look to scale their business models globally to reach a new wave of consumers. The global middle class is rising, and American good are in demand. By offering locale payment methods, U.S. merchants can make global consumers feel more comfortable with transactions and, in turn, reap the financial benefits.
This Is the first in a two-part series exploring myths vs. facts in cross-border e-commerce. Read part 2 here.