According to the U.S Department of Commerce, employers with fewer than 500 workers comprise over 97% of exporters, as well as 31% of the known export value.
Export.gov estimates that nearly 96% of consumers live outside the United States, with two-thirds of the world’s purchasing power being in foreign countries.
Even though technically anyone around the world can reach an e-commerce website, it does not mean that it will convert those that reach the site into paying customers.
The e-commerce website must be able to communicate effectively and be user-friendly to foreign customers that do not speak English or are accustomed to websites designed a particular way based on their culture and values.
While expanding into international markets has never been easier due to the advancement of technology, businesses should take into consideration the following steps to achieve a higher probability of success when moving forward with expansion into international markets.
Steps to expand your online business internationally include:
1. Identify Potential Global Markets
Gather important statistics and annual sales numbers of competitors in the foreign market. If there are no competitors in the foreign market, determine if there is a demand for your product or services in this country.
According to Claudio Perez- Korinko in his article “Four Steps to International Market Entry”, the best indicator on whether there is a market for your product is the presence of similar technology, manufacturing processes and material sources in the target country.
For e-commerce businesses, it is critical that the country has sufficient infrastructure for customers to access the internet and for the transportation of goods.
Identify any cultural, religious or political factors that should be considered for the design of your website, packaging of products and communications with customers. Depending on the product, there could be specific laws in place in regards to the packaging, labeling and providing technical information.
In addition, business etiquette, methods and styles vary from country to country so research the mannerisms of the international country in order to develop relationships.
2. Localize the Language of the Website
The business should translate its website into the country’s language and localize it so that it uses common idioms and expressions. This can be done in one of two ways
- by geo-targeting the website based on the customer‘s IP address location
- or by allowing the customer to select the language upon landing on website.
Geo-targeting is done by coding the website so that it detects the country of the customer’s IP address then determines which language will be displayed on the website.
One thing to keep in mind when opting for this method is to also allow customers a way to manually adjust the language.
Even though having the correct language automatically display based on the country the individual is located within is a good idea, if the customer is traveling abroad to a country such as France but speaks only English, the customer should be able to adjust the settings so that the website displays in English.
3. Setup Credit Card Payment Processing Options
Each country may have its own popular form of payment methods, therefore learn which methods are popular in the country the business wants to do business.
Within the U.S., most businesses only accept Visa, MasterCard, Discover and American Express credit cards.
According to Chase Paymentech, 77% of 200 companies surveyed that sell internationally do not feel that they meet the demands of its European customers with their payment processing system.
The conclusion of the survey found that optimizing payment processes for the international market is vital for organizations that plan to succeed beyond their domestic market.
Customers in countries outside of the United States may have other payment preferences. For example, debit cards are the most popular form of payment in Germany, Maestro in the United Kingdom and JCB in Japan.
By not offering these payment methods, the business is missing out on potential sales.
Global Collect has verified that there is a correlation between the number of localized payments having a positive effect on the customer conversion rates, plus offers a global map showing the most popular credit cards in selected countries.
4. Analyze Pricing Strategies
The business should optimize its profit by pricing products based on the country of its customers.
Depending on the country and its economic conditions, customers in each country experience different levels of purchasing power.
An international pricing strategy must be implemented in order to maximize its profits since prices considered reasonable for a product in the U.S. may not be in other countries around the world.
By offering the product at the same price internationally, the business’s product either will be overpriced for that country, or it will lose potential revenue by being overpriced.
By doing research into the business’s main international markets, the business can develop a product pricing strategy to optimize its revenue potential.
In addition, businesses should consider the target country’s currency exchange rate stability, levels of inflation or deflation and other external threats when developing an international pricing strategy.
The Economist Magazine compares the purchasing power of customers in different countries with its Big Mac Index.
The Big Mac Index monitors the price of a McDonald’s Big Mac hamburger in various countries to show the fair value of an item in one country in comparison to another.
For example in March 2017, the weighted average price of a Big Mac
- in China it was $2.15,
- in South Africa $1.89.
In contrast, in Switzerland a Big Mac was $6.35!
This index can be used in combination with additional market research in order to develop a product pricing strategy.
There are advanced payment processors available that specialize in localizing prices to particular countries. They use complex algorithms and historical data to determine the optimal price for the product in any particular country.
However, these payment processors tend to be a little more costly so a thorough cost-benefit analysis should be conducted before considering this option for optimizing the company’s product pricing strategy.
Additional Resources for Expanding into International Markets
Business.Usa.gov is a valuable resource for businesses new to exporting, or looking to further move into additional countries. Business decision makers can take its Export Questionnaire to determine the business’s readiness to begin exporting.
In addition, this website helps businesses get started by providing them with information on training and counseling programs, and help with developing a business export plan, conducting market research, finding foreign buyers and financing exports.
The International Trade Administration hosts a section of its website for e-commerce. It offers
- a toolbox,
- trade policy,
- regulation updates and assistance.
This website offers a lot of information for businesses and should be reviewed regularly for the latest in global e-commerce policies.
When moving a business into an international expansion strategy to gain a higher percentage of marketshare, the business needs to carefully research the country, localize its website to increase usability, accept popular credit cards for that country and develop a new pricing strategy per country.
By taking into consideration each of these steps, the business will have a higher chance of success.