The U.S. and Europe alone make up less than half of the global domestic market. While there are clear, significant opportunities for businesses’ cross-border growth, those opportunities also come with risks like taxes, fraud and varying rules and regulations that make the process a daunting one. To better understand companies’ appetite to expand globally and the best methods and approaches for them to do so, Digital River commissioned a new study, highlighting the role of third-party partners in both speeding up cross-border growth and mitigating the risks. Get the details.
The study, conducted in December 2014 by Forrester Consulting and commissioned by global eCommerce and payments services provider Digital River, targeted the financial decision makers from 150 U.S. and U.K. eCommerce-branded manufacturers and digital services providers that operate internationally. Key findings can be broken down into three different segments.
GLOBAL ECOMMERCE EXPANSION
Forrester estimated that the 2014 global online retail market would reach over $1 trillion, and it forecasts that the global market will double by 2018 with fastest growth rates in China, the rest of Asia and Latin and South America. ECommerce is a good way to test new products in these areas for branded manufacturers, says the report, as customers increasingly spend money online and are generating a significant portion of overall company revenues.
According to the report, companies achieving a large portion of revenue from global markets see further expansion as a key strategy for growth. Businesses with an international online presence are, on average, generating 45 percent of their revenue through their eCommerce channels, and 40 percent of this is international. In the next year, 67 percent of respondents consider expanding into new international markets to be a high or critical priority.
Today, it’s both easier and quicker to go global. ECommerce platforms are able to be localized quickly, marketing campaigns can shift aim to new regions with “the click of a mouse,” and payments and logistics services are global by design, says the report.
Most companies expanding into foreign regions therefore expect to start earning revenue within a short amount of time –82 percent said within one year. This is due to pressure on eCommerce players to get up and running in new markets quickly.
At the same time, compliance was the most concerning risk (62 percent of respondents were worried about staying compliant with foreign government laws). Other top concerns included fraud protection (58 percent) and providing quality customer service in new markets (52 percent).
ROLE OF THIRD-PARTY MERCHANTS OF RECORD
Results indicated that 95 percent of decision-makers surveyed said they used third-party vendors for at least some of their international business functions including customer service, payment security and privacy, tax collection and global market expertise.
The study found that partners like third-party merchants of record, organizations that are held financially liable by an acquiring bank for customer returns and chargebacks, are able to help companies enter new countries faster and with lower risk. They help reduce financial liability, and are key in overcoming regulatory challenges in new countries. They can also offer local market expertise.
Sixty-one percent of global eCommerce firms use a third party as their merchant of record for at least some countries, and 42 percent said they were “very satisfied” with the service, while 34 percent said “satisfied.” Not one respondent expressed dissatisfaction, according to the report.
"Decision-makers expect their merchants of record to provide expertise as it relates to entry in new markets, faster time-to-market, lower costs and reduced burden on internal resources,” the study indicated, which “accelerates the entry into the market even if the long-term goal is to have the firm eventually assume these responsibilities."
To get the complete survey results and a list of 5 key recommendations for eCommerce decision makers to maximize their cross-border success, download the full report below.