Innovation

Going Global? Seven rules for online businesses heading cross-border

Many Australian brands are eager to sell overseas, building new websites and domains targeting different markets. But e-commerce export and coach Paul Waddy believes many are setting themselves up for failure heading cross-border before they are ready, targeting markets without actually knowing why – or even understanding them in some cases. 

“Here’s the truth – forced international expansion can lose you money for a sustained period,” says Waddy, who wrote the book Shopify for Dummies and this year launched training courses for would-be e-commerce entrepreneurs. 

“If you’re pushing into a new market, and you don’t have existing organic traction, then you’re likely to experience a few problems. It’s important to understand that it is easier than it was, but not necessarily easy.”

Waddy shares seven golden rules of selling cross-border: 

Wait for some organic traction – don’t rush it

If you’re going to spend money on paid media ads, and you’re currently making less than $5000-$10,000 a month in that market, you’re probably going to burn cash for a good year at least. Paying your way to success is never a good idea. You may be surprised to know that good news travels and plenty of good brands get international sales without really knowing how they’re getting them, and this is a good sign you’re getting some true organic traction with little to no effort.

Address local currencies and payments

If you’re planning to sell internationally, you’ll need to be able to accept foreign currencies. This is now pretty straightforward, if you’re using Shopify you can add foreign currencies with the flick of a switch in your settings. If you’re not using Shopify, my go-to for solving this problem would be Reach Payments. 

Calculate your international pricing correctly

A lot of brands get this wrong. Some brands will simply change the currency symbol in front of their pricing, for example: if I sell jeans for A$100 and then sell the same jeans in the UK for GBP100, this often leaves a large disparity between currencies when the price is converted, and can be confusing for customers. The more common approach is to convert the price to the new currency and round up for any taxes and duties. For example, if there is a 10 per cent sales tax in Australia, but a 20 per cent sales tax in the UK, an Australian brand selling into the UK might convert its pricing to GBP at the current exchange rate, and then round up an additional 10 per cent to allow for the higher sales tax.

Fast, affordable shipping

If you’re planning to compete with local brands, you’re going to need to offer a reasonably fast shipping service and fair shipping pricing. It doesn’t have to be free shipping necessarily but it does need to be on par with your main local competitors.  

Easy returns

It’s one thing to send orders out quickly and economically, but it’s important to remember that the returns experience can be equally important. It’s not a bad idea to use a local returns hub, or 3PL to process your returns so that your customer doesn’t have to ship them across the country or wait a long time for their return to be processed.  

Tackling taxes and duties

Depending on where you’re planning to sell to, you or your customer could be liable for taxes and or duties. For example, if you’re selling into the UK or EU, there is a very low threshold for duties, so your order will get held at customs if you haven’t paid them on behalf of your customer. There are two ways to send orders when it comes to taxes and duties:

• DDP (Delivered Duties Paid) which means you have paid the taxes and duties on behalf of the customer, so there is no delay to the customer
• DDU (Delivered Duties Unpaid) which means duties haven’t been addressed, so the customer may get a phone call or email from their local customs, asking for them to pay. This causes an unpleasant experience and is a key reason why brands struggle to retain customers in countries where they have no duties solution. 

Target your native languages first

It is much easier to sell into countries where your customers speak the same language. Tackling a new country that requires translation is going to be a tough ask, not only do you need to translate your website, but you’ll need to consider how your advertising and social media appeal to markets where people do not speak the same language as you.

Waddy says the internet offers huge opportunities for e-commerce companies – “We’re living in a golden age and there’s a lot of money to be made” – but he warns local companies not to be too quick to make the cross-border leap. 

“For Australian businesses, larger e-commerce brands tend to reach around the $20 million a year mark in sales, and then switch to the US and UK markets, as they push to $100 million,” says Waddy. 

“So the size of your home market does matter. If you’re doing $2-3 million a year in sales, then it’s unlikely that you’re anywhere near the ceiling of your market, so you should probably focus on reaching your potential in your home market before investing too much in a new market.”