Selling Online Internationally (Or At Least in Canada)

If you only sell to the domestic market, you're missing a lucrative audience. Here's how some e-tailers are reaching customers outside the U.S.

In theory, selling over the Internet means reaching a global audience. After all, an online store pops up as easily in a browser in Naples, Italy, as it does in Naples, Florida.

In reality, though, many U.S.-based online merchants sell only in America. They know that selling overseas means dealing with plenty of logistical hurdles — like duty fees and hefty shipping costs, foreign languages and exotic cultural barriers. Worse, fraud rates are twice as high from international orders, according to CyberSource's 2006 Online Fraud report.

Consequently, many U.S. e-tailers are content to sell to Paris, Texas, and Moscow, Iowa, and leave all those global dollars to someone else.

Still, the international market beckons — and forward-looking sellers know it. "The industry has done an 180 degree turn around," sells Brent Rusick, CEO of Comerxia, a company that helps online merchants sell overseas. While many e-tailers once shunned selling outside the U.S., plenty are now starting to embrace it, Rusick says.

"People realize there's a market out there — the growth internationally is more than double what it is domestically," he says. "Merchants do their Web analytics and realize, "Geez, forty percent of my traffic is coming from international but I'm not selling there.'"

Suited to Sell Outside the U.S.?
PFS Web, a Dallas-based company with distribution hubs in the U.S., Canada and Holland, enables many online merchants to sell overseas.

For example, the Smithsonian Museum gift shop sells throughout the world. Likewise, the U.S. Mint — "There are heavy collectors of U.S. numismatics worldwide," says Steve Graham, PFS's CTO. One PFS client that sold Olympic-themed gear did very well: "They had 5,000 berets ready for the Winter Olympics, and we ended up shipping 350,000 - it was three weeks of incredible international demand."

Some of PFS's clients do as much as 10 percent of their business overseas; though many do just two-to-three percent internationally. "I don't know of anyone who's shipping 25 or 30 percent internationally annually, other than businesses that have exclusive access to products that you can't get anywhere else," Graham says. He has seen no dramatic jump in overseas selling, but "I see a nice build."

PFS charges its clients a onetime set up fee, which can vary widely ("anywhere from zero to hundreds of thousands of dollars," Graham says) and also charges a per-shipment fee of $2-$3.

Some e-tailers are better suited than others to sell outside the U.S., Graham says.

If a merchant hopes to sell overseas, it must consider "the ratio of the pain to the size of the order," he says. "And the pain is transportation, taxes and duties." In other words, an order's dollar value must be big enough to offset hefty international shipping costs.

The best products for non-U.S. sales are high price-point, low-weight items — this keeps shipping fees small as a percentage of order value.

Unique products are particularly good candidates for overseas sales. "If you're the only one who's got it, it'll be worth it," for customers to pay high shipping fees, Graham says. The classic case was Levi's, back when the jeans weren't sold legally outside the United States. "Even if a $20 pair of Levi's had another $20 in shipping, people would pay it," he says.

On the other hand, "if a commodity product is available world wide, why would customers pay the extra money to get it?"

A site that sells elite brands like Prada or Gucci will do well, he notes. Coin, art, and collectibles also sell briskly. "We ship coins to the Middle East and Japan - and they don't mind the extra freight."

Even a low dollar item is feasible to sell overseas if there's demand for it, says Comerxia's Rusick "One of our biggest sellers into the UK is Airborne Effervescent [a cold remedy] that sells for around $6 a bottle — people buy four or five bottles of it. And why? Because it's not available [locally]."

Furthermore, some items that are available overseas are cost comparable (or even cheaper) if bought from the U.S. Converse All-Stars shoes sell for around $30 in the U.S., but fetch between $70 to $80 at shoe stores in the UK. A British shopper can buy them over the Web from the U.S., and Comerxia can deliver them for a total cost of around $75. So the local British price and the Web price are about the same, but the Web selection is much greater.

Canada: Almost Like Home
If a merchant doesn't meet the requirements needed to justify overseas sales, they can still profitably consider the Canadian market.

"Canada and overseas are two different issues, in terms of the transportation networks and costs," Graham says. Selling to nearby Canada presents no more hurdles than selling to "a particularly difficult state," within the U.S., he says.

For example, merchants can ship to transfer agents in Buffalo, New York, who will ship 50 or more products in one carton to Toronto, to be placed in the Canadian postal system. No such simple logistical helping hand exists for other countries, he says.

Canada Post Borderfree, based in Toronto, specializes in Canada-U.S. cross border commerce, facilitating Canadian sales for American merchants like Guess, Brookstone, eBags and eCost.

The minimum average order value to be profitable selling to Canada is $70-80, says Patrick Bartlett, the company's CEO, unless an e-tailer has a unique product. The average order value of his clients is about $100-$120, "with some electronic sellers averaging $250-$300."

To justify the expense of selling to Canada, a U.S. site must have total sales at least $150,000 to $200,000 per year, he says.

Typically, an American merchant's sales in Canada will equal about ten percent of its U.S. sales. But this level of success requires American sellers to advertise in Canada just as vigorously as they do in the U.S. "There are very few people who can just show up and make that happen," Bartlett says.

Not surprisingly, shipping costs are a major issue in selling to Canadian shoppers. "Sometimes we work with merchants and say, 'Look, you need to work to get your shipping costs in line, it's coming out to 15 to 20 percent of the order - if you can't do better than that, it's going to be tough to make headway.'" Merchants need to keep shipping costs in the 10 to 15 percent range of order value, he says.

"Of course Canadians love free shipping like anyone else — those promotions are very effective up here." In fact, a free shipping offer will draw more Canadian customers than a 20 percent off sale, he says.

The average order value bought by Canadian shoppers runs about 20 percent higher than the average American order, he says. Canadians buy more because they're very sensitive to shipping costs. "Their thought process is, 'If I'm going to buy something, I'm going to make it worth my while.'" So they load up when they buy to decrease the relative value of the shipping fees.

Cross Border E-Commerce Technology
Canada Post's system integrates with the e-commerce platform of U.S. merchants by offering hosted checkout. With this system, shoppers see a "Canada Checkout" button, which takes Canadian customers to Canada Post's platform — but it looks like the e-tailer's own site. Or, alternately, the checkout process stays on the U.S. e-tailer's site, but data is routed to Canada Post's servers to tally duties and tax charges.

For U.S. merchants, Canada Post makes Canadian shoppers "look American for them," Bartlett says. And for Canadian shoppers on a U.S. site, "we make it look like a local site for them." The prices that Canadian shoppers see include all duties and taxes, "with a guaranteed price to their door."

When the U.S. merchant sends out an e-mail confirmation, Canada Post "intercepts" it, to translate the U.S. dollars to Canadian dollars. The company also provides a customer number for Canadian customers to track their order as it travels across the border.

Canada Post charges merchants a onetime set-up fee of $10,000, an annual fee of $2,000, and a percentage of each transaction, based on volume.

Beyond Canada
Comerxia, like Canada Post Borderfree and PFS Web, integrates into its clients' e-commerce platform. Florida-based Comerxia serves 55 countries, including Canada. For each of those countries, Comerxia's technology offers a "landed cost quote" — meaning a shopper in Singapore or France knows all the taxes and shipping fees before they buy from an American Web site.

Comerxia handles the overseas sales of sites like Overstock, Drugstore.com, BlueFly, Dollar Days, and many others.

Comerxia's clients ship to one of its U.S. hubs, and the company then completes the shipment. It chooses among a plethora of shippers for each order, using regional carriers like Singapore Post and Estafeta (a Mexican shipper) to get better rates.

Comerxia charges its clients a onetime integration fee that ranges between $10-25,000, depending on merchant size and the type of integration needed. Its charges a transaction on each item shipped ranging from $4-10 per item.

The Agony of Cross Border Returns
If an international customer wants to return an item, it's a logistical nightmare for U.S. e-tailers. Whenever a product crosses borders - even if it's just a return — governments view it as an imported good. "So you're really adding to the price of the product to get it back," Graham says. "Is it worth getting back?"

For example, the Bruce Springsteen T-shirt that a French buyer buys from an American Web site costs $25, plus $15 to ship, so the buyer pays $40. In the case of a return, however, it'll cost the seller $15 to get the shirt back (which probably cost $10 wholesale). So it's often cheaper to simply send another shirt.

Cheating customers could abuse this system, "but if your systems are good you can see when those patterns take place," Graham says. Furthermore, "If my agenda is to get going in Europe, I'm going to do that return because I'm trying to build customer trust and word of mouth."

Canadians return products at a lower rate than Americans do, Bartlett says, but they won't buy if they're not assured that a site has a fair return policy.

To facilitate this, Canada Post operates a Canadian return hub. The company credits the Canadian shopper's credit card, sends the product back, and gets the duty fees refunded from the Canadian government. "We take [the site's] U.S. return policy and we map them over to a Canadian experience," he says.

When In Rome...
"If you want to transact with people in a different region, you have to transact in ways that are friendly to them," Graham explains. "It's rude to ship something to someone in China using English." However, the package needs English labeling to get out of the U.S., so "you have to do both to do it right."

Styles of Web design are different across the globe. "An attractive Web site with well-designed navigation for U.S. customers, may not play in Europe," he says. "The design and the art and the feel aren't the same. If you took an award-winning Web site here in the U.S., and took it over to France, they'd say, 'This looks like crap.'"

Although the European Union gathers many European countries into one supposed umbrella, "they're individual countries with different ways of looking at things," Graham notes. For its work with Nokia, for example, PFS Web supports a series of Nokia sites that are highly country-specific. Bartlett says some U.S. merchants seeking a Canadian market offer a Canadian splash page for our northern-based neighbors, to better welcome them to the site.

It's expensive to use different style sheets for each country, Graham says, but it may be needed. "Putting a little flag in the corner and translating it into their language isn't enough," he says. "You need to pay a little bit of attention to the creative side."

He recommends studying other countries' sites to see what changes need to be made to one's American site. "Are you completely contrary to what's going on over there?" Proceed with knowledge of the natives.

James Maguire is a contributor to ECommerce-Guide.com. His column appears every Monday.

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