It’s year two for PayPal’s study on the preferences and practices of cross-border shoppers. Being such a hot topic, it’s why MPD CEO Karen Webster and Melissa O’Malley, Director for Global Merchant and Cross-Border Trade Initiatives at PayPal, sat down for nearly 30 minutes to get the lowdown on the results of this year’s study.
Starting with the fact that a few more markets were added to the survey this year – 7, in fact — O’Malley tells Webster that the number is up from 22 last year to 29, reaching 23,000 consumers.
“Probably the biggest finding this year,” says O’Malley, is the “market-moving news in China.”
“Everybody wants to know how the devaluation of currency and stock market fluctuations are affecting the buying habits of Chinese consumers,” she continues.
The results appear to be rather counterintuitive.
“What we saw is that there's actually been an increase in cross-border shopping from them. Last year, it was 26 percent; this year, it was 35 percent. When you hear all of these questions as to whether the propensity to buy is still there — it absolutely is there for the Chinese consumer,” O’Malley asserts.
The biggest driver for that consumer — “by leaps and bounds,” remarks O’Malley — is “product authenticity.” That category is followed in popularity by “product quality,” with “discovering new products” rounding out the Top 3 drivers.
And not even among the Top 5 reasons why Chinese consumers are buying cross-border? Cheaper prices – making them the ideal target customer for a merchant who’d rather not discount if she doesn’t have to in order to win a sale.
“I think that really goes hand-in-hand with the growth that you're seeing for that Chinese consumer who wants to be able to buy authentic products,” O’Malley observes.
“They're going to look to the United States, where they are ensured they can get the brands that they want; they can get the high quality that they want.”
Yet shoppers inside the U.S. very infrequently shop cross-border.
O’Malley notes that “while the U.S. is the No. 1 market for cross-border shoppers across the globe (all 29 markets cite the U.S. as the most popular place for them to shop from), the U.S. consumer does not shop cross-border very often. Only about 22 percent have done so.”
The fact that few U.S. consumers shop cross-border lines up with the very reasons that so many consumers from outside the United States shop within it. Explains O’Malley, “[the U.S.] has the authentic brands, the big variety of products ... and the No. 1 cross-border category in the entire world is clothing, shoes and accessories. Most of those favored brands across the globe — with some notable exceptions — are U.S. companies.” Therefore, there's really no need for U.S. shoppers to look outside their own country for those purchases.
To be expected, the PayPal study bore out that the mobile device is opening up a lot of opportunity for cross-border commerce. But mobile is only one half of the picture of what is going to drive eCommerce, according to O’Malley; the other is emerging markets, such as Nigeria, a new entry in this year’s study.
“Many people in emerging markets have one device,” observes O’Malley.
“They don't have a laptop and a desktop and a tablet and a phone, as you see in many Western markets; they have one device, and it's a smartphone or mobile phone. So I don't think it's surprising that Nigeria is leading this mobile drive, and the fact that they are tripling the average online spend made via smartphone: 37.8 percent of their online spend in the last 12 months was conducted via smartphone.”
“There's been a lot of research on the growth of emerging markets and how mobile is driving it,” she adds, “but to actually see people in those markets verifying that is really exciting for anybody in eCommerce.”
Another new area that the PayPal study explored this year was how merchants are found.
“We had a good idea of what people were buying, where they were buying, why they weren't buying,” O’Malley tells Webster, “but the discovery process is something that every merchant is interested in knowing about, simply because that process is so different across the world.”
“When you take things like social media into consideration,” she continues, “it’s so vastly different in places like China or the U.K., for example. It can be difficult for a merchant who wants to expand internationally to know what's important in a specific market.”
This year’s study found that SEO has “a huge influence” when it comes to consumers finding new products and new markets. About 58 percent of the people surveyed said they went directly to sites they've used in the past, followed by people searching for a Web address. That category was followed by people who type something into a search engine that “sometimes leads them to a foreign site,” says O’Malley.
O’Malley expresses the importance for merchants to be thoughtful about their keywords in promoting themselves on search engines. “If there are specific markets that merchants are interested in,” she advises, “they should be careful about the SEO terms they choose,” including adding foreign terms “if merchants are experiencing an uptick in people looking for specific products; they may not be searching in English.”
With all the positive things that drive cross-border, of course, the PayPal study also determined the potential downside (from the consumer perspective). A lot of that lies in the category of shipping costs, which O’Malley says is “a huge indicator of whether or not someone is going to click ‘buy.’”
She tells Webster that PayPal explored that issue in two ways: in terms of even considering to buy from a merchant outside their local market or — post that decision (but before final purchase) — if it causes cart abandonment. That second factor needs to be kept in mind for merchants, because shipping costs can still be an ultimate deterrent for consumers.
The study found that shipping cost “is paramount” to cross-border shoppers, as about half of them said it would deter them from making an international purchase. On the flip side, free shipping would make people more likely to buy from a website in another country.
“But it has been cited as the No. 1 reason for abandoning a purchase from a website in another country,” O’Malley notes.
O’Malley points out that this is one of the big reasons that PayPal has added free shipping to their list of benefits to PayPal accountholders. It just plain helps merchants “close the deal.”
She cites one example: “If you're a consumer in India and you made a purchase with PayPal yesterday and you want to buy something from the United States, and for some reason you don't like the product or the way it fits, you can return that purchase and we will refund the return shipping costs.”
“When you look at research like this and you apply it to the business practice that we do or how we make recommendations to our merchants to enter a new market successfully, that is the really exciting part of this,” concludes O’Malley. “We have ways to lower those barriers and help make it successful for a merchant to go cross-border.“
To download the full study from PayPal, click here.