While countless small business owners have had to dim their lights due to COVID-19, a surging number of Aussie retailers appears to have bucked this trend.
According to recent data from money transfer provider OFX, many of its online seller clients have responded to the pandemic by ramping up their operations - expanding beyond the local market into the global eCommerce space.
But you may be wondering, what does this expansion overseas look like on a practical level? If your business is looking to sell internationally, how can you prepare for that amid current times?
For one, there’s a host of new costs to consider, from exchange rates to shipping arrangements. And depending on your business, you may need to take advantage of different platforms to successfully break into the markets abroad.
So to help you out, we’ve put together a few tips to kickstart your migration into global eCommerce.
Pick your niche
While you may dream of having business branches in every corner of the globe, it's more realistic to cast your net narrower in the short run.
So consider the specific regions you want to target now. Separate these from long-term targets.
OFX’s Asia Pacific alliance manager, Edward Wiley says the US, Canada and the UK are traditionally good starting points for eCommerce sellers looking to trade in international markets.
He says these countries have some of the biggest eCommerce markets in the world and they’re also predominantly English-speaking, which would make the transition easier.
“You can get away with selling in those markets in English, so it’s not too hard to duplicate what you’ve already done in [the Australian or New Zealand] markets,” says Wiley.
Just bear in mind you’ll still need to factor in differences in pronunciation and colloquial terms. Wiley gives an example: “If you’re selling a barbecue in Australia, it might be called a grill in the US.”
Let your point of difference shine
When expanding overseas, you may also find yourself tossing up between which selling platforms to use, whether to create another version of your website for US consumers, or to join eCommerce marketplaces like Amazon or eBay.
Wiley recommends picking an option that adds to your competitive edge.
On the one hand, retailers that “try and put a different spin on a product” may find marketplaces like Amazon are a good fit. That’s because their product can stand out among the thousands of similar goods or services listed there.
But on the other hand, “if your products are more generic and your website is your point of difference, then a marketplace like Amazon may not be for you,” Wiley says.
Instead, it may be smarter to invest in your own website. Rather than attracting new customers with unique goods, website sellers such as fashion and skincare brands usually place more emphasis on “the experience, trust and the look and feel of the product.”
Making the right choice here can strengthen your point of difference and it can also help inform your financial resource decisions.
Sort out the logistics
Shipping costs are inevitable in eCommerce, considering that all purchases would be mailed to your customers rather than available for pickup in-store. However, with travel bans still in place around the world, the price of international delivery could prove heftier than usual.
“Because there’s not a lot of planes flying between countries at the moment, the cost of shipping [via airfreight] has gone up significantly,” Wiley says.
But he says there are two ways to combat the increased costs. Just as it was pre-pandemic, sea freight is cheaper than airfreight in most cases. But that’s only if you can afford to wait, as sea freight takes much longer for goods to reach customers.
The second solution is to “create scale” by broadening your reach and demand. That means tapping into multiple markets rather than just the Australian market.
“As you sell more, your overall costs come down per product,” Wiley says.
“If you sell, say, twice as many goods, you can go back to your supplier and negotiate a better price, since you’re ordering more products [from them].”
Consider a business loan
The good news is, access to extra finance should also be easier under the government’s SME Loan Guarantee Scheme. Under this scheme, the government guarantees 50% of all unsecured business loans of up to $250,000 from participating lenders, until September 30.
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Dodge poor exchange rates
The issue with using payment gateways like PayPal and eCommerce platforms like Amazon is that they will only pay you in US Dollars (USD) if you have a domestic US account.
So as an international online seller with an Australian bank account, you’ll find any US sales you make automatically converted back to Aussie Dollars (AUD) on a regular basis.
Given that exchange rate mark-ups and transfer fees are charged with each conversion, this could leave a substantial dent in your revenue.
“You could lose up to 4% on the conversion from US Dollars back to Australian Dollars, and then you’ll have to convert that AUD back into USD to pay your supplier, which could be up to another 4% if you go to one of the big four banks," says Wiley.
Luckily, international money transfer (IMT) specialists like OFX and WorldFirst have a solution for businesses: local currency accounts.
With these you can transfer money in multiple currencies. But unlike the multi-currency accounts issued by your local bank, they’re held in the countries where you’re selling (say, the US) rather than just in Australia, so you’ll be able to keep your US sales in USD.
Plus, sending money overseas with an IMT specialist rather than a big four bank could also give you better value.
Mozo data shows that for a AU$10,0000 transfer to USD, you could save US$282 just by hopping onto the average online IMT specialist exchange rate rather than the average big four bank rate.*
Head over to our international money transfers comparison table to weigh up your IMT specialist options today.
*Mozo data, as of 10.24am, 3 June 2020.
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