This article previously appeared in Cross-Border Magazine 11.
Selling cross-border is a challenge. How do you gain trust with local cross-border consumers? What do they prefer and how do you create that necessary relationship based on trust to create recurring customers? Newegg, a leading global marketplace for everything tech-related, is active in 80+ countries. It has more than 38 million online customers, coming from all kinds of international destinations. Sellers on the platform have access to several tools, ranging from marketing to fulfilment to customer service that can help set up your international business. A marketplace is a relatively easy route for expanding one’s business, making it possible for sellers to test their products in new markets.
It is important to think about how marketplaces make it easy to start in a new market. Platforms like Newegg have created a service that is optimised for a local market, as you would do if you decided to expand, yourself. An important aspect of this service is payments, which can be a tricky part of doing business. It is known that cross-border consumers often prefer to pay with their local payment methods and more importantly, in their local currency. It is fortunate to know that there are service providers who can help you conquer this challenge.
One of these service providers is WorldFirst, an international payment platform that specialises in providing global money transfer solutions to online sellers. It enables them to expand into new markets, collect and convert funds either directly or via marketplaces, and send them nearly anywhere around the world. WorldFirst supports sellers on the Newegg marketplaces to process their international payments.
The world of marketplaces
We can clearly see marketplaces being dominant in a lot of markets. It has been evident for some time now that resellers, retailers, and manufacturers are adopting a marketplace-centric strategy in order to reach consumers directly. It gives credence to marketplaces that offer the necessary scalable reach, flexibility, support, and opportunities sellers are looking for. The marketplace ecosystem simplifies the e-commerce business model that has in the past been viewed as complex and, by some, risky. The marketplace approach is in stark contrast to merchants going alone and building their own following, where acquisition costs can easily sky-rocket, and expansion becomes a non-profitable endeavour. The marketplace model paves the way for merchants selling cross-border to stay in the black. With marketplaces such as Newegg being connected to numerous global partners, their network allows partners like WorldFirst to build a user-friendly retail platform that connects with local consumers in different markets. This means sellers can enhance and build their credibility by associating themselves with a premium cross-border retail platform that is secure and easy to use.
A seller going global on its own would need to consider how to list products, localise the marketing and merchandising, fulfil the orders, handle taxes, offer customer service, manage payments and much more. The complexity of such demands could deter anyone. A marketplace helps covering these facets by serving as intermediary between seller and consumer, offering a range of value-added services to sellers, e.g. fulfilment support, local customer service, return service, pay out service and more. Most of the operational and infrastructural considerations that traditionally have made cross-border selling a challenge for the average sellers are removed this way.
Cross-border payments really is something that is underestimated by cross-border merchants. Out of the top 11 challenges in doing business, five are related to moving money. The high cost, slow speed and lack of transparency in cross-border payments adds another layer of risk for sellers to realise their international ambitions. Even physical products can arrive halfway around the world before some types of payments are made. When paying suppliers in far-flung countries, payments can often be delayed or held by correspondent or recipient banks without warning, endangering those all-important buyer-supplier relationships. On top of that, the cost of converting funds into or from foreign countries can be astronomical, especially if you are relying on the marketplace’s default cross-border payment methods when repatriating those hard-earned proceeds back to home bank accounts.
Accepting and offering local payment methods
According to WorldFirst, it is important to service your customers a local experience in global e-commerce. If you are a UK-seller, asking a US-customer to make a cross-border payment can prove problematic. The customer experience can be slow and expensive while it is important to show you are fully committed to the local market. Many marketplaces will only pay out to local accounts which can mean that sellers are often forced to receive funds in their domestic currency, incurring higher costs. By having funds dispersed to local account sellers, it gives them the freedom to collect and convert funds as they wish, at a significantly lower cost and with more options to manage the risk of operating in multiple currencies.
Dealing with local currencies
There are risks involved when dealing with local currencies. Firstly, the cost of converting currencies can be very unclear, with many banks and payment providers doing everything they can to conceal the margin that they charge businesses. Secondly, the costs hidden in such a currency conversion rate can be significant, ranging from 1% all the way up to 4%+. Another risk lies in businesses that expose themselves through inaction when their costs and prices are fixed. For many sellers, a swing of 10% in the currency rate between purchasing goods from their international suppliers and realising the proceeds from marketplace sales can wipe out a sizable chunk of their profit margin. Sellers always need to be aware that such changes can occur and keep the possible impacts on their cross-border business in mind. These factors all add up to unnecessary uncertainty for cross-border online sellers.
Helping merchants with the payment challenge
WorldFirst created the World Account platform. With it, online sellers and SMEs can instantly open currency accounts based in ten countries, allowing them to receive local payments from overseas marketplaces and customers seamlessly. For example, cross-border sellers can link their US-based USD account to Newegg’s marketplace and benefit from fast, free transfers to the account and use WorldFirst’s foreign exchange risk-management tools to protect margins. At the same time, this is beneficial for a marketplace like Newegg. As stated, monetary transfer and exchange rates are complex matters that directly impacts a business’s bottom line. Many of Newegg’s high-volume sellers focus on selling electronics, tech and other hardware products. Each fraction of a percentage of margin they save from utilising a third party pay out provider like WorldFirst – providing competitive rates starting as low as 0.15% and add-on payment services – instead of wire transfer or other pay out methods makes a huge difference for their business.
Tackling the cross-border payments challenge is a very important step to exile unnecessary costs when doing business abroad. While marketplaces are an easy step when selling cross-border, you might want to think about how the platform you would like to sell through is dealing with payment matters. It can save you time, money and a lot of stress when setting up your cross-border business.