Report: 93% of Online Merchants Experience Cross-Border Profitability
By D.J. Murphy, Editor-in-Chief, CardNotPresent.com
As the Internet evolved into a selling tool, its potential to allow retailers to reach international markets they never before thought of selling into became apparent. The ultimate promise of e-commerce became a world without borders. In reality, there’s no such thing. Differences in currency, culture, communication and regulation make operating an e-commerce business across borders daunting. But, the opportunity to sell their goods and services to new markets made up of billions of potential new customers can make navigating those challenges worth the effort.
A new report based on a recent survey describes the current environment facing cross-border aspirants in each of the major regions worldwide and confirmed the notion that, for companies that make the leap, cross-border e-commerce is very profitable. Dutch PSP Payvision partnered with CardNotPresent.com to poll nearly 500 online merchants, acquirers, MSPs, ISOs and PSPs to gauge their experiences and perceptions about cross-border e-commerce. Significantly, half of the survey’s merchant respondents already engage in cross-border e-commerce. And, for more than 93 percent of those merchants, the strategy has proven profitable. In addition to the headline number, the paper’s analysis concluded that the road to cross-border e-commerce profitability depends on partnering with a global acquirer.
E-Commerce Retailers Aim at Europe
For merchants selling or planning to sell internationally and the vendors that serve them, the survey found 73 percent wish to do so in Europe, the most popular region for cross-border e-commerce. North America is the second-most popular region, with nearly 60 percent of companies focusing their cross-border efforts there, followed by Asia Pacific (50.8 percent), Latin America/Caribbean (47.5 percent) and Africa (23 percent). According to the survey, selling into a country that shares a language with an online retailer is a more important factor in cross-border success than selling to geographic neighbors. More than 70 percent of all respondents believe that sharing a common language is a stronger business driver than sharing a common border. To that end, 67 percent claim partnering with local business partners which speak the language of the region and whose sales team understands the local preferences and culture, will lead to profitable cross-border e-commerce.
Many of the survey highlights showed how retailers and service providers perceive the complexity of operating across borders. More than half of respondents either strongly agreed or agreed with the statement that it is complex to provide consumers with a wide variety of online payment methods. Around the same number felt setting up a support center with the ability to meet multilingual customer expectations is complex.
Merchants Should Lean on Global Acquiring Network
Given the complexity shown in the survey, but taking into consideration the potential profitability of implementing a cross-border e-commerce strategy, the analysis contained in the survey report concludes that a strategy employed in Europe will benefit businesses globally. In the “connect-and-grow” business model e-commerce profits are shared by various stakeholders within a global acquiring network of regional acquiring banks and international payment service providers connected to one global card processor. The report said ultimately the model will provide the best value proposition for consumers and the various commercial interests.
In North America, meanwhile, the survey found merchants lack awareness of the payments ecosystem they need to use to operate overseas.
“Interestingly,” the report said, “44.2 percent of the merchants questioned in this survey admitted that they do not know whether the ISO [that] handles their card payments is connected to acquiring banks in the foreign regions in which they sell their products and services. Seventy-six percent of the respondents who do not know are located in the USA or in Canada.”
By estimates quoted in the report, in 2012, cross-border B2C e-commerce sales reached $300 billion, while global B2C online sales volume is estimated to exceed $1 trillion by the end of this year. Online shopping paid via mobile devices is becoming increasingly popular, as a growing percentage of consumers carry their mobile phones in their pockets 24/7. Internet penetration is still increasing in developing, emerging and mature markets. Given these figures, it becomes almost a necessity for e-commerce retailers to look outside their borders.
“Cross-border ecommerce is more intricate than domestic e-trade,” the report said. “But, once key requirements are met, the business opportunities presented by profitable expansion into emerging markets are well worth the investments.”
A free copy of the survey can be downloaded here . Payvision and CardNotPresent.com are conducting a Webinar that will examine the results in more detail on Thursday, Oct. 24 at 1 p.m. ET. Register for the Webinar here .