Breaking Down Borders From The Inside


According to the most recent X-Border Optimization Index, even some countries with thriving eCommerce ecosystems within their own borders are nonetheless struggling to find the same level of success when it comes to doing cross-border business. Some of the obstacles in their way are familiar, while others are coming from new and perhaps unexpected places.

In a recent discussion, John Phillips, Head of Marketing at Digital River World Payments, and MPD CEO Karen Webster sorted out how merchants can identify what’s holding them within their own lines of demarcation — both from the inside as well as the outside — and break through to cross-border achievement.


KW: Lets talk about cross-border, in particular the insights that we both gleaned from the latest X-Border Optimization Index starting with Brazil.

Everyone knows that Brazil is on fire in terms of eCommerce within its own borders. Cross-border commerce has yet to really ignite for the country, however, despite the environment being able to facilitate it.

Why hasnt it taken off yet? And what should merchants outside of Brazil be doing to take advantage of the environment inside the country to cater to those customers?

JP: It’s a really interesting question. To start with, Brazil is a large market — growing at just under 10 percent…but a better sense of its size can be gleaned from its potential. That’s how we at Digital River present it to our merchants.

While Brazil is a fast growing, emerging market, it’s also very complex, due to its regulatory and tax structures. There are different control mechanisms in place based on what type of product you want to sell. You’re dealing with intricate import and export requirements, expatriation of funds, and other requirements and fees related specifically to cross-border transactions as opposed to those done in country. It all makes things more difficult — not only to get products in and out of the country, but also to recognize revenue.

The first step for a merchant is to be clear on why it wants to do business inside or outside of Brazil, and what products it’s selling. The complexities I described make it strongly advisable for any merchant entering into the Brazilian market to do so with a partner — be it Digital River World Payments, or someone else — that can help them navigate it.

There’s heightened awareness around Brazil right now, with the Olympic Games coming up next year, and we’ve got a number of clients that are growing their businesses for the market as that approaches. A key for outside merchants, though — in any country really, not just Brazil — is to focus on the local experience as a means of creating a cross-border one.


KW: One point we addressed in the commentary of the index as well as in the tracker is that the biggest obstacle in cross-border is often not the specific attribute of payment or even managing language or currency, but rather the broader infrastructure issues. Merchants need to recognize the regulatory restraints, as you mentioned, that can prevent a retailer from being able to do business in a country.

In terms of the Olympics in Brazil, I think that making wholesale improvements to infrastructure could put both the country and merchants in a position to take advantage of those investments.

JP: There’s a lot of news right now about what cities really want the Olympic Games. I think Brazil is a country that could really benefit from hosting the Games, from an infrastructure perspective — both physical and digital. Hosting the Games puts a lot of pressure on the cities and countries that do so; in this case, I feel like it’s the right time for Brazil to crank things up a notch.

To the more general point of achieving cross-border commerce, there are many different attributes that have to be considered, even beyond understanding the complexities of regulatory issues. There has to be an effort made to create experiences online that are similar to ones that a customer would have in person. A merchant has to ask itself: Does the experience feel local, or does it feel foreign? How credible and trustworthy is it?


KW: Lets talk about experience. Often, what it is good for the consumer may be somewhat at cross-purposes with whats easy for the retailer to enable. How do you define the ideal balance between the two?

JP: This is one that Digital River thinks a lot about, because it’s both an eCommerce provider and a pure play payments provider globally.

The answer comes back to achieving that local feel. A consumer who searches online for the perfect item of apparel and finds it with a merchant who’s in another part of the world is still going to expect the familiar elements of the shopping and checkout experience that they would get with a domestic site. That’s what we try to do with our merchant partners and clients — make their experiences feel local. Doing so goes beyond language to address currency and payment methods. There are subtle things, too, that make a difference for the consumer, such as address fields and verification.

From a merchant perspective, the important focus is to enable those elements. Setting up business in certain markets can be complex, but a cross-border merchant needs to offer, for starters, a broad variety of language options in order to reach the consumers in the markets that matter most to it. Just as important in that regard is connecting to different payment options and methods through providers that have banking connections in the desired markets.

The process requires levels of complexity that most consumers — and even a number of merchants — take for granted. But what we learned from the latest index is that, once a cross-border merchant gets past the initial hurdles of being like-for-like with local merchants, adding incentives — such as rewards and shipping offers — can make it truly competitive.


KW: Cross-border almost redefines what it means to be local. If Im shopping on a site that is in a different country, Im going there because of a product they have that I want and cant find locally as I define it. But I still want an experience thats local to me, not local to where Im shopping.

It almost takes the idea of local and turns it on its head, because every consumer visiting a retailer cross-border has a very different definition of what local means.

JP: You’re right. The merchant’s perspective on what it means to be “local” is changing a bit. Having providers and partners in new markets allows merchants to think differently about how they can be more cost-effective in reaching consumers in those regions.

Obviously, the product that they sell plays a role — and that goes back to the earlier point about the complexity of the markets. The act of delivering physical goods cross-border is the most complex element, as it requires the implementation of distribution capabilities and a logistics network. Merchants need to consider what kind of margins they’ll be able to maintain by “acting local” while still delivering incentives that potentially cut into their profits.


KW: That brings me to another insight from the index. Approaching these different aspects of delivering a cross-border experience almost as independent initiatives be they siloed or patchwork isnt a satisfying experience for either the consumer nor the retailer. It introduces friction and creates added cost for the retailer.

Yet, as these markets are evolving so quickly, it almost becomes difficult not to address the elements separately because you might not know what you dont know until you get a lot of feedback from customers.

What are you advising merchants to do as they address the need to solve a single problem while remaining uncertain about what the bigger picture will look like?

JP: For merchants with cross-border aspirations, doing a few things right isn’t enough. They’ve got to pull a few different levers at once in order to optimize a wide range of options and properly tune a cross-border experience. Those levers are described in great detail in our X-Border Optimization Index and Tracker, and that makes the resource really helpful.

Merchants have to look at everything in total, specifically at the barriers. That’s one of the insights that I found most useful — even for our business — coming out of this research: to first target the friction points for the consumer in cross-border commerce.

These are things that can be done in total; a merchant doesn’t necessarily have to do one before the other.

Product selection is obviously key for any merchant. Language, currency, security, address fields, shipping and payment options all need to be addressed, as does — going back to our first cross-border index — the availability of help and support at a local level.

Some recommendations that we added more recently — which the most effective cross-border sites are doing — are making sites mobile-friendly and implementing rewards and incentives at checkout for returning loyal customers.

These elements address the shopping experience but are also tied to end-delivery capabilities. A merchant has to deal with those areas in parallel to create an experience that’s going to be competitive.


KW: Since you brought up mobile, lets talk a little more about it.

Its such a driver of the cross-border opportunity, democratizing access to the Internet and then to merchants that are represented on it. Is mobile-friendly now at the top of the list of things that should be done to optimize the cross-border experience for the consumer?

JP: I put it at the top of the list. It doesn’t just help your cross-border experience; it’s going to benefit your total experience. Not to mention that, since Google adjusted its algorithm a few months ago, a site that isn’t mobile-friendly — besides alienating consumers — is going to be ranked lower in its search results index.

Merchants shouldn’t be designing (or redesigning) their websites in the order of desktop to mobile and how it degrades, but rather mobile first, and then how additional elements are composed for desktop.

The growth of mobile is proven out by statistics. In our research for the index, we found that 95 percent of sites in the U.S. are mobile optimized. And recent data monitor studies of total online commerce — meaning checkouts, not general traffic — show that mobile is growing rapidly in the U.S.; it’s currently at 16 percent. In some Asian markets, mobile comprises upwards of 50 percent of all online checkouts.

When correlating the survey of the 10 countries we polled against the same data monitoring set, some inconsistencies appear. For example, in our study, only half of the Japanese sites surveyed were mobile-friendly, but the country ranks as the highest for data monitor: 22 percent of all online commerce is checked out through a mobile device. So there’s opportunity there.


KW: For a merchant, though, I think the importance of mobile is different in cross-border commerce than it is in domestic. Mobile is critical, but theres more to optimizing the cross-border experience than just being mobile-friendly.

As you pointed out, the U.S. is at the top of the countries that we studied as part of the indexbut there are others that are kind of close. Although no one has the crystal ball, how would you handicap the likelihood for success of others that scored well but maybe arent quite there yet like China?

Are we looking at the possibility a year from now, or two years from now of the U.S. losing its No. 1 spot to another country thats done better in cross-border optimization?

JP: The U.S. and China certainly are neck-and-neck. The year-end forecast for data monitor for all online commerce is about $363 billion for the U.S. and about $378 billion for China. Who’s to say how that will look at the end of the year, but it’s definitely close right now.

China is leading the cross-border piece, too. Given the size of the market there, it’s not surprising that the country would be advanced in serving the consumer.

To surpass the U.S., Chinese sites would have to continue localization end-to-end and international shoppers are going to have to be comfortable with that. Online merchants in the country are taking steps to try to accomplish as much.

I think this is going to be a really close race. I would be hesitant to put money down on either one just yet. Maybe at the time we release our next X-Border Optimization Index, we’ll be able to predict a winner. But at the moment, for me, it’s too close to call.


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