Internet Retailer: Foreign Affairs

In the September issue of Internet Retailer, Kaite Deatsch writes about the challenges e-retailers face selling to international customers.  MotionPoint's work with DNA 11 is highlighted.  The article is reprinted below. 

International waters can be rough but vendor services can toss a lifeline to e-retailers seeking to sell abroad

by Katie Deatsch, Internet Retailer

One of the beauties of e-commerce is that an online retailer can reach consumers all over the world. But that beauty can also be a beast.

Selling to those potential customers isn`t easy. Just because an online merchant can reach shoppers around the globe doesn`t mean it can speak their languages, understand their cultures and regulations, or find a way to ship them goods in a timely and cost-effective manner.

More retailers are giving foreign sales a try. A 2008 survey of 100 larger online merchants by retailing consultancy The E-tailing Group found that 34% shipped to countries beyond the popular Canada and Japan. That`s up from 28% in 2007.

The good news for e-retailers is that a growing number of vendors have emerged that can help with such tricky issues as web site translation, fulfillment and regulatory issues. There are still significant barriers, but they can be surmounted by e-retailers with the right kind of business and the willingness to invest in learning the ins and outs of foreign sales.

A virtual handshake
Adrian Salamunovic, co-founder of DNA 11, has the right kind of business in that he sells a unique product: custom-made Andy Warhol-esque art created from consumers` DNA, which the retailer collects through a kit it sends the consumer. That has attracted interest from consumers all over the world, and Salamunovic quickly learned that foreign consumers are looking for e-retailers they can trust. He reaches out to them with what he calls a virtual handshake.

"The first thing international customers want to know is, `Will you ship to my country?`" Salamunovic says. "Our first step was to make sure they knew we did."

And so the retailer, which launched in 2005 and has annual sales of less than $5 million, began using a service from MotionPoint Corp. that determines from an IP address where the consumer is coming from.

The system, implemented in the fall of 2007, automatically translates prices into the currency of the visitor`s country, and posts a country flag on the home page. DNA 11 started small, by recognizing visitors from Canada, the U.K., the U.S., the European Union and Australia. The price to add the flags and currencies was only around $2,000, and results came quickly, Salamunovic says. Orders from Australia alone jumped 400% soon after DNA 11 began welcoming Aussies with their flag and offering free shipping.

With the initial test a success, DNA 11 stepped up its global efforts last summer. It used MotionPoint to help create Spanish, French and German versions of its sites, and to create sites for 48 countries in those languages and English.

Each site displays the flag of the country and employs its currency, and each has its own template that DNA 11 staff can change. That way, if the retailer wants to offer free shipping in one country, it can add that to the country`s home page. Or, if the retailer is mentioned in an article in the German version of Cosmopolitan magazine it can add a link to the article on the German site. DNA 11 hosts the English web site, while MotionPoint hosts the foreign-language retail web sites, Salamunovic says.

Reduced bounce rates
Speaking to consumers in their own languages has made a difference, reducing the frequency of consumers leaving after just viewing one page of a site. Bounce rates for visitors from French-, Spanish- and German-speaking countries were about 70% when DNA 11 offered only an English-language site. That rate has now dropped to below 50%, Salamunovic says. And, he says DNA 11 is now receiving steady orders from Germany and Spain, which previously generated few orders. About 40% of all the retailer`s orders now come from outside North America.

Rolling out all 48 sites and adding languages cost well under $30,000 and took about three months of planning and another three months to execute. Salamunovic says translation was the biggest challenge.

"Once the languages were done, it was nearly as easy to target 10 countries as it was to target 48," he says.

While DNA 11`s method of branching out was a great way for it to dip its toes in international waters, Salamunovic has run into some cross-border conflicts, in particular, with international forms of payment. DNA 11`s payment processing package does not accept some forms of payment such as Diners Club and Maestro, a MasterCard-branded debit card that is popular in the U.K. and Europe. DNA 11 is now considering switching to a processor with a more global reach.

Local payment preference is one reason retailers serious about going global should consider putting staff, or at least vendor partners, on the ground in the regions they target, says Jeffrey Max, CEO of Venda Inc., which has developed international e-commerce sites for such retailers as Urban Outfitters, DeBeers, and Crabtree and Evelyn.

For instance, Max says around 60% of online shoppers in Germany use a payment method called ELV, which is similar to direct debit. Staff on the ground in the region would know this, but someone operating out of Florida might not.

"You can put a German flag on your site and price in euros, but if you really want to target the German consumer, you need a site that is based in the region, that takes German payment methods, and that integrates with the Deutsche Post," Max says.

Cutting through red tape
Understanding local customs, rules and regulations is also key. For example, Max says, retailers in small European countries routinely offer next-day delivery, so using that sales tactic won`t be as effective as it is in the U.S.

E-commerce rules and regulations also vary by country, Max says. In the European Union, for instance, there are stricter laws regarding making web sites accessible for the handicapped. In many countries, most text on retail web sites has to work with devices that read text aloud for vision-impaired shoppers. Often these devices can`t read text embedded in Flash images, so if a retailer creates a site with abundant Flash it might not comply with regulations, Max says.

J.C. Williams Group Ltd., which is conducting ongoing research with retailers expanding globally, is finding that complying with local regulations is one of the biggest hurdles to selling abroad. Retailers report difficulties with everything from labeling and advertising laws to return policies.

For instance, Swedish law requires an invoice in every box, says Maris Daugherty, senior consultant at J.C. Williams. A packing list does not suffice. Moreover, laws in some countries change if the retailer has a bricks-and-mortar location, she says. For example, in Canada, the French language laws in Quebec require that merchants have the same amount of French as English on web sites and all media. But the law only applies if the retailer has a business on the ground.

More than just sales
Casual Male Retail Group Inc. believes the best way to learn about a country is by dealing directly with the people who live there. That`s why the retailer launched several European e-commerce sites last year to learn about the market before opening stores in Europe. It`s part of a plan to use the web to gather information about European tastes before it opens stores on the continent, says Dennis Hernreich, executive vice president, chief operating officer and chief financial officer.

"We have to know not just the total dollars, but what is the style in Europe, what styles do they show a propensity for that we don`t have in the U.S., what sizes are important in Europe that are not in the U.S.," he says.

It`s one thing to launch an e-commerce site to learn about different tastes and cultures of foreign consumers, but offering quality customer service to shoppers abroad can be a whole other hurdle. Retailers that operate globally must establish a way to get help—for themselves and their customers—at all hours of the day. "If you have a web site in Japanese, and customers are having problems and your vendor is in bed in Boston, you`re going to have problems," Max says.

To support its new global customers, DNA 11 says it had to expand its customer service. It uses an outsourced call center for customer support after hours in English and French.

"When we do get German or Spanish requests we sometimes use software such as Babelfish or internal resources to handle the requests as best we can, but it`s not how I recommend doing things," Salamunovic says. "Being globalized means that you will likely experience some customer support growing pains, but it`s important to get creative on how you deal with things on a case-by-case basis."

Deliver me
While tackling country regulations, language barriers and marketing styles is no easy feat, many retailers say it`s a cakewalk compared to international shipping and fulfillment.

For retailers that don`t want to deal with the complexity of customs, taxes, duties and international shipping, there is help. Services like iShopUSA and Bongo International LLC will take over international shipping, often with no fee to the retailer. These services are designed for U.S.-focused retailers that aren`t prepared to build web sites targeted at other markets, but don`t want to miss out on occasional international sales.

Fred Hord, CEO of online shoe shops MyGlassSlipper.com, BridalShoes.com and PromShoes.com, added Bongo to his retail site because of the headaches he experienced with international shipping. "The amount of papers to fill out was horrible and time-consuming," Hord says. "You have to provide tax numbers and country of origin. Every time I tried to do it for a customer there was a problem."

About 3% to 5% of Hord`s sales come from international customers, which amount to about $50,000 annually. That was money Hord didn`t want to leave on the table, so when he heard about Bongo, he jumped on it.

International shoppers pay a fee to Bongo to register for a domestic address, which they can then provide to a U.S.-based e-retailer when ordering. Bongo takes receipt of goods at the U.S. location and ships them to the consumer. Users can register at Bongous.com or through an e-retailer that offers Bongo on its site.

Shipping conundrum
While such services help with international shipping woes, there`s another shipping conundrum retailers must face: customs and duties. Depending on the country of origin, the product type and other factors, global shoppers may have to pay a significant charge—above and beyond international shipping fees—to get their goods once they arrive in their home countries, says Greg Sack, president of sales for Bongo.

Bongo tells shoppers in its FAQs and in a registration e-mail that they are responsible for duties and taxes, which can vary greatly by country and product type. IShop USA gives shoppers the option to include duty and taxes when checking out online.

While these fees can be steep, Hord and Sack point out that many foreign shoppers are willing to pay significantly more for products from the U.S. because they often simply can`t find them anywhere else. "Sometimes it`s a $50 shoe, sometimes its $500, but if a bride falls in love with it, she is willing to pay," Hord says.

To get around having to charge customs and fees, some retailers partner with manufacturers in other countries that can produce goods locally, thus avoiding duties. For example, DNA 11 has engaged a canvas printing company in the U.K. that has the same equipment as the retailer`s North American facilities. It sends packages to European consumers from that warehouse to get around customs and duties, the retailer says.

"When you are starting out in these European regions, you don`t need to spend a ton of money on overhead and setting up a warehouse," says Nazim Ahmed, co-founder of DNA 11. "Just focus on sales and revenue first. When the volumes really pick up and it then makes sense to set up your own warehouse or manufacturing in those regions, look at it then."

Where to begin?
Getting started can be one of the hardest parts of a retailer`s global trek, especially for smaller merchants. For help with this, Salamunovic suggests retailers look within first—at their analytics data.

For example, DNA 11 looked at countries it was already getting orders from, and countries that had high bounce rates. For example, if a significant number of French consumers are ordering from a retailer`s English site, that means that France is likely a good foreign market to enter, as consumers are already willing to overcome language and cultural barriers to place an order.

Salamunovic, who uses Google Analytics, also recommends using analytics data to check on bounce rates for foreign visitors. If many visitors are coming from Greece, but leaving right away, it might make sense to create a Greek e-commerce site, he says.

Salamunovic also uses Google to see the language on consumers` PCs. If most visitors coming from China have their computers set to English, a retailer might not need to foot the expensive bill to translate its site into Chinese.

While there are services that can make it easier to go global, it`s still not easy, and for some U.S. retailers the benefits simply didn`t come fast enough.

Goodbye, Britain
After investing four years and millions of dollars, eBags.com, a handbag retailer, shut down its e-commerce site in the U.K. earlier this year. The company expected to use the U.K. site as a springboard into Europe, but the economic downturn forced it to pull back from that strategy, says Peter Cobb, co-founder and senior vice president.

Cobb says eBags.co.uk never broke even. He says it was expensive to finance heavy paid search campaigns to build its brand name, particularly when currency exchange rates worked against the retailer for most of the time the U.K. unit operated. He also noted generally higher costs for facilities and personnel in Britain.

"As you roll out country by country, you do need translation, you need customer service in the appropriate language, you need to file taxes in individual countries, and you probably want keyword purchases for each language," Cobb says. "Each country becomes its own little startup business."

Operating one startup is tough; many can create a monster. To make global sales a boon and not a burden, merchants must plan properly, set attainable goals, and take advantage of any outside help they can get at a fair price.

katie@verticalwebmedia.com