PayPal And Everything About Cross-Border Commerce You Were Afraid To Ask

For merchants in the U.S. and around the world winding up for the holiday season — and getting ready to put a pin in 2016 — the cross-border opportunity looms large, both in terms of opportunities and challenges.

That is the takeaway of 2016’s annual PayPal/Ipsos eCommerce report. Back and bigger than ever in its third iteration, this year’s edition took in data from 33 countries and the online domestic and cross-border shopping habits of more than 28,000 customers worldwide.

Customers whose behavior should give merchants a very strong incentive to get into global digital commerce, because the eInk on the wall is clear — more customers are shopping online, leveraging mobile and spending real money outside their home territories.

Over the the last two years, PayPal Director of Global Initiatives Melissa O’Malley told Karen Webster in a recent deep dive into the data, PayPal has seen its third quarter cross-border volume alone grow from $14 billion to $19 billion. And that spend is increasingly coming from mobile devices. In the last year alone, mobile volume has increased 56 percent.

And in some regions — particularly Asia-Pacific — that growth is coming exponentially quickly as consumers are leap-frogging into mobile ownership and commerce without making a concurrent foray into desktop computing. And, O’Malley noted, as PayPal has added nations like Thailand — surveyed for the first time in the report in 2016 — the nuances of the growth are becoming clear.

A bare majority of Thai consumers (51 percent) are still transacting via desktop web, but the really big growth numbers are coming in as 68 percent of consumers report having made at least one mobile purchase in the last year.

“It’s a big move from previously and those new entrants we used in the study, like Thailand, and the growth is very exciting.”

But for all the exciting, cross-border digital commerce is also challenging. It takes all the normal friction points and conversion problems that plague day-to-day domestic eCommerce and then adds potential language barriers, currency confusion, shipping uncertainty and security hassles that tend to push consumers out of the conversion state of mind.

So, what’s the smart merchant to do? Well, according to the PayPal and Ipsos data…

Watch Those Asia-Pacific Trend Lines

Asia-Pacific consumers make almost one-third of their cross-border purchases on a smartphone, a number that is increasingly on the rise. In China alone, 29 percent of consumers are routinely cross-border shopping via their phone — up from 27 percent a year ago.

“[Asia-Pacific consumers] are the early mobile adopters, and they are really leading the way,” O’Malley told Webster. “It is also an indication that this is where things are going in regards to cross-border shopping.”

That is good news for American and European merchants that have a chance to tap into a very wired-in base of mobile commerce-friendly customers, but that opportunity comes with a big “if.” The sites have to be mobile-optimized and ready to complete purchases fairly seamlessly.

Because, O’Malley noted, the optimization is going to keep getting both more important and more specialized.

Why specialized?

The Current Cross-Border Shopper

The cross-border shopper can be divided many ways, O’Malley noted, but one way that is often forgotten is the difference between those that exist — i.e., customers who already routinely tap into international eCommerce — and those that don’t exist but could be converted under the right circumstances.

Among the current population of cross-border shoppers, O’Malley noted, price is the dominant decider. First and foremost, to hold onto that international audience, “the merchant better be offering a good deal.” Second to that consideration is access, she noted — customers looking for things they can not get in their home markets.

And apart from telling merchants how to lure customers, the data on what is drawing cross-border shoppers from their home markets today is also useful in those domestic markets.

“If you look at the top five markets for U.S. customers shopping overseas, you get toys, hobbies, jewelry and watches, “ she told Webster, noting that these are not the top five general categories for the U.S.

“So, what a merchant can see here is a great chance to gain and keep new domestic customers by offering better pricing and better product offering.”

But while price and product work well for the already converted…

Potential Customers Are Less Worried About Price Than Certainty

Those customers that aren’t shopping cross-border online aren’t so much worried about getting a good deal, O’Malley noted, so much as they are concerned about transparency and security. Customers are looking for free shipping and free returns, offered in a language they understand, with a price list in a currency they are used to working in and a payment method that they recognize and trust.

“If you want to retain a cross-border shopper, you do it with price,” O’Malley told Webster “If you want to motivate a new shopper, it is about free shipping and a secure way to pay.”

And Customers Don’t Just Want Free Shipping One-Way

Consumers in the U.S. who shop online have certain expectations, and one of them is that, when the order doesn’t go right, it can be returned easily and for free. This is especially true in cross-border eCommerce, where the leading category of goods is clothing and apparel and returns are a way of life.

“We’ve done merchant surveys, and it is clear they often don’t see how important easy free returns really are to converting the customer.”

This is one of the reasons that PayPal is once again bringing back — and expanding to 40 nations — the “Returns On Us” program this year. The program allows customers to return unwanted goods, with PayPal reimbursing the customer for up to 11 items per customer.

“The consumer sends us the return shipping receipt, and we will reimburse them. We are seeing a lot of bigger retailers drive online sales by offering free return shipping, and it is almost impossible for smaller merchants to match or mirror that.”

And, possibly, offer slightly better and more competitive terms.

Security Is King When It Comes Time To Pay

Apart from a remarkable dedication to free shipping and returns, the potential cross-border shopper is often held back by security concerns. Consumers first face the issue of blatant fraud — sites that look like legitimate commerce sites that are, in fact, fraud operations meant to siphon payments data.

Then, there are just the international friction points that crop up when consumers are faced with foreign language sites, with currency denominations they can not read and payment buttons they don’t really understand or recognize.

“Security really is driven by the choice of payment method. It leads far and away, with convenience and accessibility coming in behind it.”

O’Malley noted: “It is not just a physical good. We have digital goods and services that are not just a matter of a return, and that is when customers need to know they have a payment system they can work with on those kinds of complex commerce issues.”

A partner like, say, PayPal.

Making Cross-Border Commerce Almost Invisible

Done right, O’Malley noted as she tied up her remarks, cross-border commerce doesn’t cross borders. It just feels like digital commerce.

When customers in the U.S. shop on ASOS, Net-A-Porter or Steam, they don’t necessarily think of themselves as having participated in cross-border commerce, though they have in all three cases, since all of those firms are HQed in the U.K.

As merchants get better at understanding their customers from all over the globe — and optimizing their services for borderless digital customers — those cross-border experiences increasingly feel like every other retail experience.

It’s not an easy challenge to live up to, and there are many friction points on a planet as large as Earth.

But the data doesn’t lie, and it shows that those barriers are falling as merchants get smarter at making their sites say “Welcome, Spend Here” in as many languages as they can write in.

PayPal is hoping to enable all of those new transactions.