As more third party eCommerce providers join the market to assist online retailers, what is the best business path for startup retailers looking to sell their products and services cross border?
However, 1995 was a monumental year for internet retail, thanks to the ambitions of two entirely unconnected entrepreneurs. Seattle resident Jeff Bezos created an online bookstore called Amazon in July of that year. Just two months later and around 840 miles away, Pierre Omidyar founded the auction website eBay from his San Jose living room.
Both companies turn 21 this year, but they came of age long ago. Now two of the most recognizable brands on the planet, Amazon and eBay have become templates for how eCommerce businesses should operate, as well as inspiring a generation of virtual tycoons in the process.
Amazon is the leading online retailer in the United States with more than $105 billion in net sales in 2015. It has 300 million active customer accounts worldwide and more than a quarter of a million employees.
Despite eBay’s longevity and impressive market share in the consumer-to-consumer sector, it is still one of the world’s fastest growing internet businesses. Its annual net revenue doubled between 2008 and 2013, and that figure currently stands at $18 million. eBay has 25 million sellers listing more than 800 million auction items across more than 30 different international localized sites.
Bezos once said: “We’ve had three big ideas at Amazon that we’ve stuck with for 18 years, and they’re the reason we’re successful: Put the customer first. Invent. And be patient.”
Explains Omidyar: “People were doing business with one another through the internet already, through bulletin boards. But on the web, we could make it interactive, we could create an auction, we could create a real marketplace. And that’s really what triggered my imagination… and that’s what I did.”
Clearly there’s no “one size fits all” approach for startups striving for success, and what works for some startups isn’t going to work for others. The eCommerce battlefield can be merciless, and for every eBay and Amazon there are thousands of startups that fall by the wayside. A lack of investment and cash flow, a poor user interface, and limited payment and delivery options are the oft-cited reasons as to why 80% of eCommerce startups fail and 90% of all internet businesses fold within the first 120 days of their lifespan.
So how many eCommerce companies are out there? There are no official figures but research by RJMetrics, a US big data analytics company, estimates that “the largest eCommerce sites on the Internet make up about 1% of the total population and generate 34% of the total revenue.”
There also exists a middle tier of eCommerce sites that make up 51% of the total population, generating 63% of the total revenue. Meanwhile, small eCommerce companies account for 48% of the total population and contribute 3% of the total revenue to the sector.
These kinds of statistics may seem daunting, and competition may appear intense, but the potential is huge. Approximately 41% of global internet users have purchased products online, according to Statista, the online statistics portal. If, conservatively, 40% of the world’s population has an internet connection, then that’s a potential customer base of around 1.5 billion and rising.
Global “etail” sales are expected to hit $1.5 trillion by 2018, with North America currently the largest regional market for online shopping, followed by Asia/Oceania and Western Europe.
Consumers are happy to spend, but their needs and expectations are becoming ever more sophisticated, and eCommerce sites have to work harder from the outset to secure customer confidence. Research shows that 25% to 30% of online purchasers choose to abandon their shopping carts before payment is completed.
Creating a user-friendly website is obviously imperative, but conquering the domestic market is only half the battle. When it comes to exporting your products and services, take into account parochial browsing habits, heavily localized purchasing behaviors, and contrasting delivery and returns preferences from nation to nation.
One of the major problems for startups is knowing how to localize content and to what extent. Is it scalable? In an environment where every cent can make a difference, the concept of exporting into new markets means taking on a commitment to go multilingual and factoring in additional costs. Judging when the costs outweigh the potential gains is a distinct business skill.
Payvision, a global card processing company, explains in the 2015 Key Business Drivers and Opportunities in Cross-Border eCommerce that the “five Ls” are the most important drivers for online merchants that are looking to make a successful entrance into new markets.
A failure to tackle issues surrounding law, legislation and logistics helps explain why so many brick-and-mortar and online startups fail to last more than six months. However, the big two, language and localization, are also key components, and the reason why LSPs are keen to work with startups and eCommerce providers to construct bulletproof, highly localized website services.
The idea of embracing a technology that offers quick, measurable outcomes and is easy to manage offers vendors and customers a new world of opportunity. Timings and costs can be easily managed, and the wealth of options available makes the idea of outsourcing your website to a third party platform a very attractive proposition. Third party eCommerce platforms are often built using open source technology and provide online merchants with extensions to layer everything from the look to the functionality and content of their store.
So who are the big players in the third party eCommerce landscape? The first iteration of Magento appeared in 2008, Bigcommerce was founded in 2009 while Shopify was founded in 2004 — initially based on earlier software written by its founders for their online snowboarding store. There are now hundreds of hosts in the eCommerce space, each offering a vast array of extensions, plug-ins and layered on services.
Hosted solutions take the pain away from buying office technology and development staff. They offer everything from design templates, upgrades and multiple pricing options, making it easy for the ambitious startup to get selling online.
New extensions are appearing every day and tend to fall into three main categories: those that benefit the customer, the back-office applications to create efficient business operations, and performance and analytic software to monitor and interpret an online retailer’s most valuable asset — its customers. Having instant access to and being able to analyze this kind of priceless information can be the difference between success and failure.
Payment processing solutions, product cataloging tools, 3D visualization applications, email marketing and point of sale solutions, reporting and accounting tools — the list is seemingly endless. Storefronts and themes, product and inventory management systems, analytics and accounting platforms — you name it, it’s out there as an extension. Hosting platforms even offer email, newsletter and blog templates to make it easy to maximize customer engagement.
However, what really sets apart these hosting platforms is their pre-existing on-board relationships with the big players in other industries.
Prebuilt or additional payment gateways in association with the likes of PayPal, social media optimization through Facebook (extensions exist to incorporate “like” functionality to individual or group products), and basic search engine optimization capabilities through the likes of Google gives startups more than a helping hand.
There are live chat applications, label creation apps that are used by the major couriers and review platforms. Add to that the option to select preferred dispatch/carriers such as UPS or FedEx, or integrate your website with the latest email mass-marketing tools such as MailChimp, and it seems that the days of trying to build your own online retail empire from your bedroom are long gone.
Language service providers (LSPs) are naturally keen to be a part of this revolution, using their own application program interface (API) technology to offer their translation tools as simple extensions for exporters on these third party hosting platforms. According to our internal research, we know that 60% of customers prefer to browse websites in their native language, even if the non-native websites have cheaper pricing options, and that 70% of people shop on English-only websites.
eCommerce translation solutions have been proven to increase visibility with international search engine optimization while consistent branding and product terminology helps increase local traffic. Localized currency, payment options and product information, and culturally relevant content also help boost that precious conversion rate and long-term customer engagement.
PwC, the global professional services network, interviewed more than 19,000 online shoppers in 19 different territories in their influential Total Retail Survey 2015. They asked consumers about their purchasing preferences, use of different shopping channels and expectations of retailers. Huge disparities were revealed in how different countries do their shopping.
In China, a massive 96% of consumers shop online at least once a month. In the United Kingdom, it’s 81%. In Brazil it’s just 65% and in France it’s even fewer at 59%.
In the United States, 22% of shoppers research brands on social media before purchasing products and services. In China it’s considerably more, at 41%. Meanwhile 41% of Russians like to receive offers through their mobile phones, as opposed to South Africa, where it is 79%. In India 69% of customers are willing to pay a premium for same-day delivery, while just 52% of Italians are willing to pay for the same service.
Understandably, a working knowledge of how shoppers behave from country to country is something few online retail startups consider at the beginning of their journey. LSPs have been courting online retailers for many years now, offering bespoke multilingual services to large multinationals and startups alike, while stressing the benefits of highly localized content.
Nation-by-nation shopping habits are not only becoming more sophisticated but more parochial — according to the latest research, which seems to indicate that the need to localize has never been so important.
A web proxy translation service is perfect for retailers that have more static sites, and may appeal to low level startups where their product range isn’t going to alter greatly; while API solutions are perfect for large volumes of constantly changing dynamic content. The ease of API also offers great synchronicity with third party eCommerce hosts.
Professional LSPs will also no doubt enjoy the fact that free translation applications cannot possibly cope with the intricacies and complexities of producing high-quality multilingual eCommerce content. This is effectively a new sector for professional LSPs to investigate and embrace.
Evidence suggests that for online retailers big and small, the shop window to the world has never been clearer, or easier to open, but startups are operating in a market where competition has never been fiercer.
The third party eCommerce platform sector is progressing at an incredible pace. They offer online retailers large and small a leg-up like never before. As more providers arrive on the scene, third party hosting platforms’ 2016 could well echo online retail’s 1995. LSPs offering their services to these platforms continue to ensure that cross border trade has never been faster or simpler.