Page 345 - Introduction to Electronic Commerce and Social Commerce

332 11 Electronic Commerce Payment Systems and Order Fulfillment

synonymous. Sometimes, researchers and practitioners refine The Solution
the definition to exclude EC trade between countries that share
a common language, border, and currencies (Goodale 2014). Suppose a merchant wants to expand his or her online B2C
For example, trade between the USA and Canada is treated as specialty clothing and apparel business to handle overseas
international because their currencies and financial regulations buyers. Point of fact, there are more cross-border purchases
differ and the free-flow of goods is restricted by law, while for clothing and apparel than any other product category by
trade between many of the neighbors in the European Union a wide margin. Given this fact, how hard could it be to sell
are considered domestic because they share a common cur- clothing on the international market? With English and credit
rency (the Euro), common payment resolution (SEPA—see cards being de facto standards on the Internet, it seems like
Section 11.3), and open borders. Because of the polyglot nature most merchants could engage in cross-border EC by simply
of many of these countries, they often share one or more lan- adding support for international credit cards and delivery.
guages in common. When countries share common geogra- While this might work for a handful of transactions in some
phy, language, payment systems, and currencies, a number of parts of the world, experience tells us it would not work for
the key barriers to cross-border commerce are eliminated. even the average number of sales transactions handled by
According to a recent report (Alizilia 2015) by Accenture most EC retailers.
and AliResearch (the research arm of the Chinese Alibaba A recent study of a sample of 180 online B2C merchants
Group), in 2015 there were approximately 300 billion global in ten countries by Pymnts (2015) assessed the characteris-
cross-border B2C transactions which represented around tics of those already successfully engaged in international
16% of all B2C transactions. These transactions were the B2C, as well as the readiness of the sample to participate in
combined result of the purchases of 360 million B2C shop- cross-border transactions. Based on their analysis of 60 fea-
pers worldwide which was only 25% of all online buyers that tures, the number one key finding was that the top ten mer-
year. So, only one out of every seven transactions was cross- chants “think local.” They treat international customers as if
border and only one out of every four buyers made cross- they were domestic. They offer multiple languages, multiple
border purchases. currencies, and multiple payment systems. They customize
Based on additional figures from a survey of 24,000 adult pages to the customer’s country (e.g., simple things like
consumers in 29 countries across the globe (PayPal 2015), in address and phone fields). They support access through a
virtually every region of the world the USA and China are by variety of devices, especially mobile. They simplify the
far the most popular online cross-border purchase destina- checkout process, eliminating the need for extensive user
tions. The only exception is in Western Europe where cross- profiles. They also offer free shipping and rewards to encour-
border purchases tend to be made within the region. From age repeat business.
the buyer’s standpoint, the countries with the strong proclivi- The second key finding of the study (Pymnts 2015) was
ties for cross-border purchasing (i.e., those with more than that the vast majority of businesses in the sample were far
70% of their online purchases being cross-border) are scat- from ready to engage in cross-border transactions. It’s under-
tered across the globe and include Canada, Ireland, Austria, standable given that there are currently 195 countries in the
Israel, Nigeria, Singapore, and Australia. Those with the world with a combined total of 6500 spoken languages and
weakest proclivities include the USA, UK, Germany, 180 currencies, not to mention differing customs procedures,
Netherlands, Poland, Turkey, Japan, South Korea, and China. logistics, physical infrastructures, and other regulatory and
By 2020 (Alizilia 2015), the outlook for cross-border trans- legal systems.
actions is predicted to change substantially. The volume of Treating potential cross-border customers as if they were
cross-border transactions is projected to have a compound all “local” is almost an impossible task. Because the barriers
growth rate of close to 30% between now and then, so that and issues that need to be addressed in cross-border sales are
cross-border transactions will reach around 1 trillion. This will so intertwined, it is hard to do it in a phased approach or
represent about 30% of the estimated total for that year. At that piecemeal fashion. This is why most businesses start by
time, close to one out of every two of the estimated two billion offering a small segment of their product or service listings
shoppers will make cross-border purchases. For merchants and to a handful of countries. Also, instead of setting up local
sellers these estimates paint a picture of massive opportunity— legal entities within the countries of interest or creating on
the “oyster.” It also represents a substantial opportunity for their own with fully localized features for each of the coun-
banks and payment service providers, So, where’s the “sword?” tries to be served, many companies start by working with a
What’s needed to take advantage of the opportunity? partner who is conversant in the world of cross-border