Best practice considerations for cross-border expansion & moving money globally
Published: 4 November 2020
Tapping into international markets remains a huge opportunity to grow your online business. It diversfies your risk of selling into a single market, and future-proofs your business by driving additional revenue opportunities.
But one thing to remember is you're not just simply removing the barrier and allowing international customers to purchase from your current online store. You are taking your entire business operations over to another country, which means launching a completely new storefront that is specific to the region or country you’re expanding into.
With that in mind, it’s important to know that the aspect of managing money and your business operations in general is not something you can easily duplicate and expect to work seamlessly. We find this can be a big change for retailers when they start selling overseas, but with some planning, can be a smooth transition.
You need to carefully consider and plan your international launch. If you don’t — you risk devaluing your brand, decreasing profit margins, and cannibalising your SEO traffic.
We have helped a number of Australia's most-loved brands launch successfully into international markets. Below, we've highlighted some key things to consider before making the move off-shore.
Strategic planning involves:
- Understanding how to best handle multi-currencies in your business including foreign exchange fees and rates
- Developing an international SEO strategy that addresses important technical considerations
- Implementing a frictionless customer experience, including region redirection and multi-currency
Let’s discuss each of these areas in more detail.
Mastering multi-currency & finding marginal wins
The day-to-day aspect of moving money — using services like Airwallex — can take the hassle out of managing your global accounts, help with currency conversion, and manage foreign currency payments. That part is pretty straightforward.
Offering multi-currency means that shoppers can pay for your products using their local currency. Without this, the online experience can be jarring and the unknown final price caused by foreign exchange fees make the shopper less likely to complete their transaction.
While selling in a local currency is great for consumers, it can add complexity for the business. One of the most common issues is double conversion of currency. For example, if you are earning USD for one store it can be beneficial to keep that money in USD, rather than repatriating it into AUD and then needing to convert it once more to pay US-based suppliers and staff.
Beyond currency conversion, there are some ways you can use exchange rates and multi-currency selling to help you boost revenue and profit margins.
Use exchange rates to your advantage
For many brands, going global is often about reaching a larger audience and the customer experience benefits of localised selling. Done properly, selling in foreign currencies may also help to insulate the business against exchange rate fluctuations, or in some cases, lead to higher margins in cases where the local currency is prone to devaluation (such as AUD vs USD).
However, these structural exchange rate differences have an impact on pricing strategy.
Exchange rates — particularly AUD to USD conversions — can make your products appear too cheap. When converted to USD, the price may be too low and have an impact on your brand internationally.
Alternatively, imagine you’re an Australian brand that sells a dress for AU$100 and decide to launch a US store. If you keep that same $100 price point, but in USD — you’re actually creating a comparatively higher price point and profit margin for that dress. This is called vanity pricing, which is when a brand will sell a product at a certain price in multiple markets regardless of exchange rate or currency.
Understanding the competitive landscape in the expansion region is critical when determining the appropriate pricing strategy. Using the same dress example — if you price up when expanding into the US market and don’t adjust prices for the exchange rate, it may mean your products compete against a different set of brands than you normally would in the Australian market. The reverse is also true with a lower price point, as discussed above.
The pricing strategy chosen is completely dependent on your go-to-market approach. Not every brand chooses maintains a vanity price and many instead adapt their pricing according to the exchange rate to maintain their brand positioning among competitors, and to account for any differences in landed costs. There’s no right or wrong at a generic level, but pricing strategy is a critical part of the international expansion process that needs to be considered.
We worked with Australian fashion brand KOOKAÏ to help them launch into New Zealand and the US, which involved developing a pricing strategy and an international SEO plan (which we’ll discuss soon).
KOOKAÏ adapted their pricing strategy by converting their prices to USD but still with a slight marginal increase to account for higher landed costs. However, the pricing is the same across their Australian and New Zealand stores.
Another benefit we’ve seen successful brands leverage when expanding into a new region is the ability to curate a more relevant range for local customers.
This allows you to create more specific and targeted marketing campaigns based on seasonality, and differing customer preferences. For example, if you sell swimwear, there’s always the peak season in the summer months. Going global could allow you to leverage two peak seasons per year with a more focussed marketing campaign, product portfolio and on-site experience for each region.
Australian fashion brands Zimmerman and Sir the Label both offer a year-round core selection to maximise their global selling potential.
Consider your international SEO plan up front
Lacking a well-thought out international SEO plan is one of the biggest issues we see brands face when it comes to launching a cross-border store. And if you don’t get it right the first time, it takes time to repair and rebuild your SEO.
Here are your high-level to-dos and what to think about for your International SEO strategy:
- Conduct a competitor analysis so you can properly benchmark your brand among the other brands currently operating in the market you want to enter. Look at what they are selling, where they are selling, and their messaging
- Decide between a country-specific domain (eg. co.uk) or sub-domains on an international domain (eg. uk.example.com)
- Use language tags to specify to search engines which language and country your pages are targeting
- Identify whether you need to optimize and rank for any additional search engines or marketing channels that are local to the country
- Put customer redirects in place to redirect the customers to the proper site for their region
- Making sure the messaging and communication on the site is region specific and relevant
Once these points have been resolved, next you need to consider your customer experience.
How to take your customer experience to the world stage
Generally speaking, creating a good international customer experience requires a decent level of cultural understanding as well as a good logistics plan. Here are four key areas to focus on:
On-site Store configurations
Using Shopify, it’s possible to add multi-currency selling to an existing store, or to create a separate expansion store for even greater flexibility. Shopify Plus merchants can take advantage of up to 20 expansion stores within their account to accommodate even the largest retailers. We recommend that merchants reduce risk and test international markets with an existing store, and transition to an expansion store when the business case has been proven.
In the case of expansion stores with a different storefront per region, it’s important to direct customers to the proper site for their region. Poorly implemented customer redirects risk cannibalising your local traffic, which can affect your search rankings. Even worse — you may have the situation where a customer inside Australia searches for your brand and is directed to the US website, then redirected back to the AUS website.
Improper implementation of customer redirection is something we’ve helped a number of brands repair, and an important technical consideration that’s often overlooked.
Messaging and content
Make sure the messaging and communication on your site is region specific and relevant. It’s something many brands undervalue which can be a jarring user experience, particularly when using unfamiliar terminology.
This part in particular often requires the support of a local partner and expert that can help you navigate local customs, values and culture.
Think about how you’re going to offer customer service in the right time zone, so you can respond in a timely manner. This also goes hand-in-hand with how you approach the localisation of your content and messaging, which will inform your customer service processes.
Returns policy and shipping
The first thing to consider is how you’re going to get your product to the customer. Are you going to use a local shipping solution, third-party logistics, or ship out of your home country? If you offer free express delivery in Australia, it’s a good idea to find a way to offer a similar kind of shipping service to maintain the same level of customer experience.
How are you going to manage returns? This is another part of the operations side that needs to be addressed. There are return solutions that tie into Shopify where a customer can post their returns back to a local warehouse in their region, and the business can then ship the items back to your home warehouse in bulk to reduce shipping costs.
This provides a better customer experience as the customer shouldn’t have to wait until the product is returned back to your Australian warehouse to check for quality. Most of the time, fashion items are returned due to wrong size rather than being damaged.
You need to decide on how you process returns and refunds — after you conduct a quality check? Or as soon as the product is scanned in by the courier? You should consider what is going to cause less friction in the customer experience, especially if quality checks are performed by your home country’s warehouse team.
Successfully launching into an international market is not as simple as duplicating a site with a new domain. Finance, pricing strategy, international SEO, user experience, and inventory logistics are each important areas that must be considered before making the move. By doing so, your business will be in a much better position to avoid the ‘fixing’ phase and launch with best practices from the start.
If you’re planning an international expansion and need some guidance, get in touch.