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Why now is the right time for Aussie online retailers to expand overseas

Michael Baker
Smarter Writer

Michael Baker is a retail consultant and vice-chair of the ICSC's Asia-Pacific Research Council

Michael Baker
Smarter Writer

Michael Baker is a retail consultant and vice-chair of the ICSC's Asia-Pacific Research Council

Don’t be fooled by the recent moderation in spending growth by Australians on merchandise from overseas-based e-Retail sites. Global cross-border e commerce is vibrant and prospects for Australian Retailers looking to sell their wares to foreigners have never been better. If, that is, they can get the execution right, which is easier said than done.

Consumers overseas are becoming increasingly willing to buy from retailers not domiciled on their own patch. This has required a gradual ramping up of the confidence factor on the part of consumers themselves, particularly in China and other emerging markets. Consumers want confidence in the product ordered, that payment will be secure, the product will arrive quickly, it will be the product that was ordered, it will be functioning properly, and if something isn’t right it can be returned without a hassle.

A widely-cited piece of research carried out by Nielsen estimated that cross-border e-commerce accounted for 16 per cent of all e-commerce in 2013, or US$105 billion. According to the report called, Modern Spice Routes: The Cultural Impact and Economic Opportunity of Cross-Border Shopping, this amount would increase to US$307 billion by 2018, with 130 million shoppers around the world chipping in for a share.

The reader should note that the sponsor of the research was PayPal. Thus, the report’s authors were at pains to emphasise that the largest outstanding concerns for consumers about buying from overseas sites were identity theft and fraud.

Shopping trolley on Earth

Australians are currently bucking the trend

Australians appear to be worried about fraud a great deal. Short of outright fraud, there is still the issue of being left with a dud item and having no redress. Anecdotally, an alarming number of overseas vendors are remarkably efficient about taking payment and remarkably silent when it comes to responding to customer complaints. But other factors are causing Australians to ease up on purchasing from overseas sites, making Australian consumers a bit off-trend at the moment.

These include depreciation of the Australian dollar, a steadily improving online offer by Australian retailers, and the rollout of stores in Australia by global fashion retailers. According to the NAB Online Retail Sales Index, domestic e-commerce had sneaked up to 75 per cent of total online retail in the year through July 2014, which is high by historical standards. Still, this should not faze Australian retailers thinking about expanding overseas via e-commerce. If the product and execution are right, the timing is just about as good as it is going to get.

Exposure to international markets via e-commerce offers not only an opportunity for direct sales growth but also the chance to understand foreign consumers and fine-tune your products for them. E-commerce is perhaps the best form of market research for eventually opening physical stores.

What the retailer will need to get right

1. Payment systems need to be secure and allow shoppers to pay in their local currencies. Credit cards are still the preferred payment method but alternative methods are gaining ground

2. Pre-opening market research and/or an ongoing local partner are needed to help you arrive at a better understanding of local culture, preferences and expectations. This knowledge is crucial to inventory management and providing the right mix of products

3. Shipping – many shoppers in other countries have very high expectations regarding the speed and cost of shipping. In the US for example, there is a push among leading online retailers toward same-day delivery and free delivery. A retailer looking to serve a market like the US will need to figure out the right formula because shipping is an essential input into consumer decision-making at the point of purchase

4. Multiple languages need to be supported on both desktop and mobile websites

5. And speaking of mobile – the percentage of e-commerce conducted on mobile devices is rising so effective mobile capability is of key importance

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