Internationalization Part 1
The world is a big place. It offers an endless potential of market outlets for manufacturers and dealers. This is nothing new either. Cross-border commodity trading has been consistently on the rise since the late 19th century, aside from a few interruptions. If WTO figures are to be believed, commodity exports have seen an inflation-adjusted increase of 1732% from 1960 to 2015. In comparison, the production of commodities “only” increased by 571%. Accordingly, exports are clearly of greater economic significance now .
Various technical further developments have clearly simplified the cross-border transport of information and commodities. The internet and e-commerce also offer smaller players the means to participate in the game of the big boys. Nevertheless, the different problems that go hand in hand with global trade are often underestimated. This first issue on the topic of internationalization is dedicated to some of the key challenges.
Level 1: The Obvious Construction Sites
It goes without saying that there are a few topics that immediately come to mind when you think of internationalization: language, shipping of goods or payment types- to name just a few.
Whoever wants to operate on international markets, had better have a command of different languages. Europe in particular presents the challenge of operating on different partial markets with different translations. Product and marketing content deserve just as much attention as the functions and customer communication offered via email, chat, etc. The provision and continuous further development of this information alone confront many companies with enormous challenges on a regular basis. However, linguistic challenges often surpass translations. For instance, the selected name of oneʼs own platform can cause quite some confusion in other language areas.
Language also has quite an influence on design. Apart from different characters, any given term will have a completely different word length in different languages. For example, when you compare the terms "Soccer boots", "Fußballschuhe" and "Chaussure de football", just think for a minute what effect that has on horizontal navigation.
Thanks to Amazon we have got used to next-day deliveries without any extra charges. That is a logistical challenge internationally because different local shipping providers seldomly seem to work together efficiently. The business model strongly dictates whether customers pay a surcharge for international shipments, or sellers bite the bullet.
Germany is the land of the invoice and offers direct-debit authorization. The French use the Carte Bleue, the British have their Barclaycard and the Dutch swear by iDEAL. Obviously, there are a few payment types that cover most of the western world, such as Mastercard, VISA or PayPal, but the absence of a favored payment type for a given target market will certainly result in a dead end. Countries in Asia present a particular challenge in this respect. Fortunately, a few internationally active payment service providers offer a wide range of local payment types for different countries.
Level 2: Advanced Internationalization
Beyond the comfort zone of the (euro-based) EU, managers of online shops are confronted with a few further challenges: different currencies, taxes and legal conditions.
The euro has bestowed many advantages for central Europeans, despite the concern we share for the stability pact: Going on vacation without exchanging money is just as much a part of that as are transactions without exchange-rate risks. Nevertheless, ten additional currencies have been added to the European Union. Switzerland with its franc has become another important trading partner in the geographical center of it.
Essentially, cross-border traders can respond in two ways: fix the price for each currency or automatically recalculate the price using the exchange rate. Depending on the product portfolio, the first option requires quite a big manual effort and comes with some exchange-rate risks. On the other hand, automatic calculation can be expensive depending on the requirement for automated exchange-rate querying, risk premiums and rounding- much to the delight or nuisance of the customers.
Taxes & Customs
In principle, each country has its own VAT arrangements. Even within the EU there is no guarantee that every product will always be assigned to the same category. Up to four different rates apply just in other countries within Europe. Each state in the USA has its own regulations, and individual metropolitan areas charge their own special levies within a state on top of that. It becomes quite challenging to keep track of all this.
The way the price is presented is also influenced by taxes: In Europe we are used to gross prices in the consumer segment whereas in the USA, customers expect net prices without additional charges.
If you conduct trade with customers outside your own domestic market, you will also have to think about duties on top of all that. This not only influences the price for the customer, but also the order-handling process, for instance when customs documents are involved.
You also have to keep an eye on the local legislation of the respective market. Here are some obvious examples: Americans are readily struggling with European privacy law, but the legal issues are more diverse. Even just the issue of which products may be sold on a market keeps a number of lawyers busy. Alcoholic beverages are completely prohibited in several countries, but supposedly harmless products such as chocolate “surprise eggs” will never get to customers in some places in the USA. Furthermore, depending on the market and product, it needs to be checked to whom a product should be sold to prevent abuse by criminals.
Level 3: The Ways of Customers Are Unfathomable
Even if you are able to master all the technical challenges of levels 1 & 2, it is nowhere near guaranteed that you will reach the hearts and thus the wallets of the customers. Even though the big players on the Internet are well established in the Western world, they are still playing a clearly minor role in Asia. The supreme discipline of internationalization is being able to adapt to the most diverse markets and fulfilling their wishes and expectations. It is a lot more than a matter of language or logistics, it is a question of culture.
Products must be advertised differently and parts of the design replaced because the understanding of color varies, or because symbols, numbers or animals invoke entirely different emotions than would be the case on the domestic market. As a worst-case scenario, a traditional online shop will hardly stand a chance in a market because customers in China, for instance, may prefer completely different forms of communication. Just think of the all-dominant player WeChat. In the end, many people also prefer to buy locally, but how do you get around that as a global company?
So maybe I should just stay at home? Not with us!
You could easily get the impression that we want to label the topic of internationalization as a fantasy and want to forget about it as quickly as possible. That is anything but the case! Limiting yourself to the domestic market greatly limits your own potential. After all, there are 7.5 billion potential customers out there!
Spryker offers support in most of the named topics through intelligent and proven software solutions. We offer a multi-e(verything)-commerce platform: multiple domains, languages, currencies, prices, discounts, taxes, payment types, shipping methods, calculations, front ends, ordering processes, and so much more. Practically every aspect and every logic of the system can be adapted to the particularities of each given market.
As is so often the case, an agile and iterative approach is a great advantage with regard to internationalization. In terms of agility, a few rules should be followed:
- You should pick your markets wisely. A portfolio of safe and experimental bets is certainly recommended in this case: it should be a good mixture of safe markets and those with uncertainty, yet high uplift potential. Safe markets are often nearby and are already well-developed, but also have various competitors in most cases.
- The focus on the most important challenges is of key importance. It becomes difficult if not impossible to tackle all the indicated problems uniformly. Nobody is perfect, but many have died virtuously.
- Testing, testing, testing. Never go onto a market blindly, but formulate your theories beforehand and then verify them using relevant tests. Given the number of challenges, it is important not to lose sight of the entire customer journey in the tests. Otherwise you will never warm up to your own customers because there is a lack of understanding.
And these are precisely the actual strengths of Spryker: the flexible design of our solution, the efficient development through your own team to gradually reach the perfect solution, as well as high-performing and highly scalable operations for optimal customer journeys across various touchpoints. We have all you need to make successful transactions worldwide.
Basically, success without borders.