Pitfalls of global e-commerce

Conventional wisdom about Internet commerce holds that you open a Web storefront and, presto, you're tapping worldwide markets.

Unfortunately, it's not that easy. The comforting example of Amazon.com, which gets 22 percent of its sales from overseas, is the exception, not the rule.

Once you decide to pursue international customers seriously, you enter the world of import/export regulations, tariffs and duties, multiple languages, and currency exchanges.

Service providers and consultants can help, but many firms find an overseas partner.

Internet payments firm CyberCash, for example, sets up a joint venture with a partner in each nation where it operates. Many others also pursue a local contact when launching their e-commerce venture in a new country.

"We never go into these countries without a local partner who understands what the requirements are," said Denis Yaro, CyberCash executive vice president. "You do have to work closely with local authorities."

The most obvious payment issue is currency exchange rates, but since most Internet orders are paid for by credit cards, Web merchants can tap the existing financial networks. Currency issues in Europe may even be simplified when the European Union adopts the Euro as a common currency next year and requires member nations to support it--meaning goods can be priced in Euros for many countries.

The Net merchant's biggest headache for international customers is payment fraud. Most retailers use address verification services (AVS) in the United States which compare cardholder addresses to "ship to" addresses in a split second. But those services aren't generally available overseas.

Based on their experiences, Net storefronts like computer retailer Cyberian Outpost have guidelines to automatically screen suspicious charges, which are then reviewed by a live person. Such formulas may include accepting no charges from certain ISPs, extra steps for large orders, and so on. Similar fraud screen services are available from CyberSource and others.

If the point of going global is to broaden markets, merchants soon face putting their Web sites in multiple languages. Cyberian Outpost, for example, translates the key parts of its site--directions for ordering, shipping, handling charges, and so on--into nine languages. But its 25,000 catalog descriptions change too quickly to keep translations current.

Cyberian Outpost outsources translation services but avoids machine-translation software.

"We'd never fool around with machine translation," said Bob Rathbun, vice president of marketing for Cyberian Outpost, which gets 35 to 40 percent of its business overseas. "We can't trust it."

Finding an international delivery service with experience getting goods through customs is also important. Cyberian Outpost essentially outsources customs headaches to its vendor, DHL International.

DHL even pays import taxes and duties, then charges the recipient on delivery. Cyberian's computers are programmed to print, for each box and its contents, the correct documentation necessary to clear customs in each country.

Even with a sizable number of overseas customers, it's not necessary to mirror a Web site in Europe or Asia, Cyberian Outpost chief technology officer Mike Starkenberg advises.

"The amount of complexity when you add a second site is unbelievable," Starkenberg said. "A vast majority of traffic goes through the U.S. anyway." Steep telecommunications costs in Europe mean U.S.-based servers prove cost-efficient. Also, someone in France may get faster responses from a server in New Jersey than from a server located across the English Channel.

Starkenberg also advises merchants to use a hosting server rather than housing their own Web servers. "It's so much easier to grow your Web site in hosting services than in your own offices. If you need more bandwidth, you call them and they do it--you have nothing to configure, no T1 lines to install. All they've got to do is plug in the machines."

A key consideration for consumers, storefront privacy policies may take on additional import. A European expectation that personal data will not be sold or shared with others may become a requirement this fall when a strict European Union privacy directive goes into effect.

U.S. export restrictions on products with strong cryptography require sellers to ship the right versions to the right countries. But the complexities go further--the French allow strong encryption only if it's home grown.

Internet storefronts can create nightmarish "channel conflict," depending on how a manufacturer deals with distributors in the physical world. What happens when a Roman buys a product from a Web store but an Italian distributor holds exclusive rights?

Some sites, like Cyberian Outpost, indicate that a product can't be shipped to certain countries. Some software publishers cut checks to the local distributor based on what online resellers report they sell.

Finally, Web storefronts selling abroad must address customer support--answering questions from buyers or would-be buyers. Email works well, but Cyberian Outpost has both a multilingual staff and experts on call for quick help with translations. Merchants may need round-the-clock staffing to deal with customers in multiple time zones.

The World Wide Web may open global markets, but success requires an international mindset.

Tim Clark's column on Internet commerce will return April 20. In the meantime, send him email on e-commerce topics.