Practical Ecommerce

Cisco Exec on Growth of Worldwide Ecommerce, Cultural Differences

Industrialized countries like the United States and the United Kingdom lead the world in the development of online retailing. But many other countries are gaining ground, with their own cultural differences and habits in doing business online.

The state of worldwide ecommerce is the topic we discussed recently with Joanne Bethlamy. She’s with Cisco, the worldwide technology firm, serving as a director in its Internet Business Solutions Group, which advises large, multi-billion dollar companies on Internet matters.

Practical eCommerce: What is the rough dollar volume of global ecommerce versus brick-and-mortar retailing?

Joanne Bethlamy

Joanne Bethlamy

Joanne Bethlamy: “Well, you see lots of different numbers. The way we are looking at it is by 2015, we think that the global ecommerce market is going to reach almost $1.4 trillion. That may be a larger number than your readers will see elsewhere. We include in that things like travel and auto. When you think about that $1.4 trillion in ecommerce, the United States will probably be a little over $450 billion, or 33 percent of that, still the largest market even in 2015. How predominant or how big a proportion ecommerce is of total retailing looking at brick-and-mortar varies by part of the world. In the U.S., again, you’ll see different estimates, but we say that ecommerce will probably be somewhere around 8 percent of total retail, so obviously brick-and-mortar still predominates dramatically, but ecommerce is growing at a much faster rate. If you look on a global basis, it’s even lower. Ecommerce is probably going to be about 4 percent of total retail, but, again, the growth rates typically that you’ll see online are much higher than comparable rates in the physical world.”

PEC: Beyond 2015, does Cisco see a leveling off of ecommerce growth, or can you project beyond 2015?

Bethlamy: “Between now and 2015, we think the growth rate globally will average somewhere around a 13.5 percent each year. In those markets that are more developed — like the U.S. and the U.K. — we’ll see lower growth rates, though still much higher than physical stores. Whereas other parts of the world that are really just getting on board with this — places like Spain, China, India, Brazil and Mexico — will be growing at a much higher rate.”

PEC: What about specific products and services? Are there product or service categories that you see growing relatively more quickly?

Bethlamy: “Yes, absolutely. First, regardless of what your readers sell, every product segment is going to grow online for the foreseeable future. It doesn’t matter what you’re selling, you need to be online because all categories are going to grow somewhere between 10 and 15 percent per year for the next several years. There are some categories that are higher than that, such as motor vehicles, which we expect to grow about 15 percent, food and beverage about 13 percent, and furniture at 13 percent. Those are some of the higher growth sectors.”

PEC: You mentioned that by 2015, somewhere in the neighborhood of 8 percent of total retailing in the U.S will be ecommerce. How does that compare with other industrialized countries?

Bethlamy: “I don’t have those numbers right on hand, but it’s in the middle. So, for example, in the U.K., they’re at about 11 percent today. Eleven percent in the U.K. today of retail is ecommerce; so they’re out ahead of us. Other parts of the world, for example Japan, they still prefer to shop in person even though they have very strong ecommerce, they’re going to be a little lower. So, it will depend culturally.”

PEC: Among industrialized countries, the U.S. is somewhere in the middle?

Bethlamy: “Yes.”

PEC: Let’s discuss consumer buying habits in other parts of the world. Do those consumer habits vary?

Bethlamy: “There are tremendous differences between countries. For larger retailers and those of your readership who are thinking about actually creating separate country websites, you have to be very in tune with each country’s differences. To highlight some of the ways that they differ, [here are some examples.]

“We’ve talked about payment customs. Payment preferences vary dramatically across cultures, usually based on that country’s history. For example, Germany, which had tremendous inflation after the last wars, don’t tend to use credit cards as much. They want to pay for their online purchases with online bank transfers and PayPal more than they want to pay via credit card. Some places like Japan, Taiwan, and Mexico, a lot of people want to pay cash on delivery (COD), which is very different than the United States, where we use primarily credit card or PayPal.

“So, payment preferences really need to be looked at if you’re going to open a separate country operation because you want to really unlock the revenue potential in any particular country. You want people to be able to pay in the way they want to pay so they want to shop with you. Now, for a smaller website, you won’t get into that complication quite as much.”

PEC: There are ecommerce merchants in different countries that sell products on a COD basis?

Bethlamy: “COD is quite common in Mexico, Japan and Taiwan. That is one of the major ways to pay for ecommerce, in those three countries.”

PEC: Interesting.

Bethlamy: “So, for example, you asked differences, well, here are more differences. Different countries have actually more sophisticated shipment and pickup options than we do in the United States. Japan has a very sophisticated, fast and cheap delivery system for ecommerce. People expect delivery either that day or in one day, and they like to pick up their packages at a local convenience store. That’s because there’s much denser housing, so you just don’t want packages sitting at your door when you’re out working for the day. So, in Japan, many people pick up their ecommerce packages at local convenience stores and then they can pay cash on delivery at that time. The ecommerce providers have worked out agreements with the delivery carriers and the convenience store chains act as basically retail pickup for them.”

PEC: Let’s change directions and ask you to put on your entrepreneur hat. Assume you’re a smaller merchant — the opposite of Cisco. You have a couple of employees, and you sell a product line based in the U.S. Let’s say you do between $0.5 and $1 million a year in U.S. sales. What would be your strategy for international sales, or would you even attempt international sales?

Bethlamy: “Well, first of all, I’d ask myself what I sell, who is it interesting to? Do I sell things that are so unique that lots of people around the world would like it? Do I have a special piece that is in demand in other places and if so, where? And if that’s true, then you start to ask yourself, well, what do I need to do? What can I do in relatively straightforward way to enable people from around the world to buy from me? How do I make it easy for them?

“The number one thing you can do is figure out how to ship to them globally. So, for example, a friend of mine has a small company in the Los Angeles area. This company is expert at embedding things like badges and memorabilia in Lucite. He now has orders from all over the world and his website looks like any small business website, but he does ship anywhere and he’s worked out with companies like FedEx and DHL and the post office to ship anywhere. So, that’s easy, that’s the number one thing.

“Beyond that, you might want to consider closer-in international markets, Canada and Mexico. There are third-party suppliers out there who specialize in helping businesses just ship and deal with the customs and tariffs and currency conversions and so forth to Canada and to Mexico, or anywhere around the world now. If you have something in particular that the Hispanic market would be interested in, then perhaps you’re going to want a Spanish version of your site or be able to ship easily into Mexico.”

PEC: Does your friend’s site translate any content into another language?

Bethlamy: “No. First, if you’re going to do anything, just do one thing well. You’re a small business. Just make sure that you have the capability to ship globally. If you’re going to order from another country, you need to know it’s going to get to you. You need to know that you can pay. In this case, keep it simple. You’re going to offer credit cards or PayPal, and then much farther down the line, because it’s fairly expensive, would be translation.”

PEC: Any other thoughts for smaller merchants as they contemplate international sales?

Bethlamy: “Yes. Understand that it’s a very interconnected world now. The world is much smaller. People are now ordering routinely from other countries, especially with things like eBay. So, not only is it smart because you want to get a global audience, but also realizing that you’re now competing in a global market because merchants from around the world are actively soliciting U.S. consumers. So, it’s defensive as well as offensive to think about gaining a global audience.”

Practical Ecommerce

Practical Ecommerce

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