FX International Payments
By Bill Camarda
According to the Boston Consulting Group (BCG), digital technology will influence $4 trillion in emerging markets retail purchases by 2022, reflecting roughly half of all retail spending throughout Asia, Latin America, and Africa.1 That growth rides a wave of 900 million new Internet users, bringing the total of emerging market consumers on the Internet to three billion by 2022—three times as many as expected in developed markets.
Meanwhile, according to Shopify, a recent six-month evaluation showed that the majority of online shoppers on every continent except North America had made cross-border e-commerce purchases.2 Overall, the global average of online shoppers who made cross-border purchases was 57 percent.
Emerging markets are experiencing a major digital revolution, says BCG Partner Nimisha Jain—but they differ significantly, so sellers’ cross-border e-ecommerce strategies must be customized for each.3
BCG identifies three stages in emerging markets’ digital commerce evolution:
Countries can move between stages very quickly, BCG says. India has experienced 59 percent e-retail growth per year since 2012. As SMEs plan their strategies, it’s useful to consider the factors BCG found to correlate with especially rapid growth: lower-cost smartphones, more working women, more middle-income and “banked” households, higher costs for physical retail space, well-developed package delivery systems, and a robust startup environment.
Euromonitor International observes that many emerging markets are disproportionately young. Together, China and India offered 600 million millennial consumers by 2015.4 In Vietnam, where imports from the U.S. have grown by 330 percent in a decade, over half the population is under 35.5
But digital commerce penetration and preferences can vary widely by country, and even within a country, BCG notes. Worldwide, for example, urban buyers show strong willingness to purchase apparel and footwear online, but greater reluctance about big-ticket items. China’s consumers are unusually willing to purchase food online, while Brazil’s show a high propensity to purchase small appliances. BCG also found regional domestic variations within larger countries, reinforcing the need to carefully understand markets before entering them.
Shopify’s Aaron Orendorff suggests that, to start testing foreign and emerging markets e-commerce opportunities, companies can create multiple country- and language-specific accounts and online marketing campaigns through Instagram, Facebook, and Google Ads, and track engagement as well as sales.
Orendorff’s idea correlates with BCG’s note that consumers in immature “digital-aware” markets rely predominantly on social media for information about online products and services. Then, as markets evolve, consumers increasingly turn to complementary information sources such as search engines, online shopping websites, and marketplaces.
Gaining emerging market access is often easiest through online marketplaces. According to Pitney Bowes, these now account for more than 60 percent of cross-border Internet purchases, with the proportion approaching 70 percent in China, India, Japan, and Mexico.6 Costs are associated with selling through online marketplaces, and it can be more challenging to control brand presentation or capture customer data.7 Nevertheless, online marketplaces can make it far easier to set up local storefronts, manage payments and delivery to unfamiliar locations, and reach large groups of consumers who already buy online.8
Most U.S. SMEs are familiar with the online marketplaces of Amazon and eBay. These operate worldwide, but they don’t dominate everywhere. Local alternatives exist, such as China’s Alibaba (including its TMall subsidiary) and JD.com, Latin America’s MercadoLibre, Brazil’s B2W Digital, India’s Flipkart, Nigeria’s Jumia, and South Africa’s Takealot (Naspers).9
Emerging markets vary widely in the forms of cross border e-commerce payments preferred by consumers. In less mature “digital aware” emerging markets such as Morocco and the Philippines, BCG reports 60 percent of purchases are still cash on delivery. In some regions, consumers wish to use alternative payment services like Africa’s m-pesa.10 Most Brazilians prefer to pay by credit card, while most Chinese consumers choose digital wallets.
As Forrester has noted, shipping costs and delivery times are key consumer concerns as they consider cross-border e-commerce purchases.11 SMEs may wish to closely coordinate with one or more trustworthy shipping partners (which may vary depending on market). Such partners may be able to advise on customs issues, which can present surprises even in an era of relatively free trade. For example, as DHL notes, Algeria (like the U.S.) won’t permit certain pharmaceutical imports. Nigeria, a fast growing import market, bans plastic flowers.12
Payments and logistics are part of the broader issue of consumer experience. According to BCG, as emerging digital markets mature, consumers’ concerns tend to move from price and variety to a better shopping experience. Such concerns can take the form of practical features like reliable recommendation engines, or “fun” features like seeing themselves in the clothing they’re considering. Customer service is also a critical element, and emerging tools and services can help SMEs deliver it in multiple languages even if they only speak one.13
In their growing focus on experience, emerging market consumers increasingly resemble developed-market customers. That means SMEs already competing on consumer experience may have skills they can transfer and strategies they can adapt fairly easily.
Rapid digital growth in emerging markets offers SMEs profitable new cross-border e-commerce opportunities—provided they carefully plan and market their offerings, and focus on seamless payments, logistics, and customer experience.
Bill Camarda is a professional writer with more than 30 years’ experience focusing on business and technology. He is author or co-author of 19 books on information technology and has written for clients including American Express Private Bank, Ernst & Young, Financial Times Knowledge and IBM.
1. “Digital Consumers, Emerging Markets, and the $4 Trillion Future,” Boston Consulting Group; http://image-src.bcg.com/Images/BCG-Digital-Consumers-Emerging-Markets-and-the-%244-Trillion-Future-Sep-2018_tcm9-202652.pdf
2. “Global Ecommerce Statistics and Trends to Launch Your Business Beyond Borders,” ShopifyPlus; https://www.shopify.com/enterprise/global-ecommerce-statistics
3. “Digital Will Influence $4 Trillion in Retail Purchases in Emerging Markets by 2022,” Boston Consulting Group press release; https://www.apnews.com/fd40dc35a8c156d737395974193ade4c
4. “Strategies for Expanding Into Emerging Markets with E-Commerce,” Euromonitor International; https://unctad.org/meetings/en/Contribution/dtl-eWeek2017c08-euromonitor_en.pdf
5. “5 Global Markets To Consider Doing Business With in 2019,” DHL Expressed; https://goglobal.dhl-usa.com/blog/shipping/5-global-markets-to-consider-doing-business-with-in-2019/
6. “2018 Global E-Commerce Study,” Pitney Bowes; https://www.pitneybowes.com/content/dam/pitneybowes/us/en/ecommerce-study/2018-global-ecommerce-study-overview.pdf
7. “Global Ecommerce Statistics and Trends to Launch Your Business Beyond Borders,” ShopifyPlus; https://www.shopify.com/enterprise/global-ecommerce-statistics
8. “Strategies for Expanding Into Emerging Markets with E-Commerce,” Euromonitor International; https://unctad.org/meetings/en/Contribution/dtl-eWeek2017c08-euromonitor_en.pdf
9. “What's Going on with Global Online Marketplaces?,” eMarketer Retail; https://retail.emarketer.com/article/whats-going-on-with-global-online-marketplaces/5b80286bebd40005bc4dc78b
10. “Three Digital Commerce Growth Opportunities,” Forbes; https://www.forbes.com/sites/jordanmckee/2018/11/19/three-digital-commerce-growth-opportunities/#3bdda96a3822
11. “Seizing the Cross-Border Opportunity,” Forrester Consulting; https://smallbusiness.fedex.com/content/dam/SMB/general/pdf/whitepaper.pdf
12. “Video: Top 5 Things Your Business Should Do to Be a Global Player,” DHL Expressed; https://goglobal.dhl-usa.com/blog/small-business-insights/top-5-things-your-business-should-do-to-be-a-global-player/
13. “If You're Going Global, Localization Is Key -- Here's How To Do It Right,” Forbes; https://www.forbes.com/sites/forbesagencycouncil/2016/07/06/if-youre-going-global-localization-is-key-heres-how-to-do-it-right/#487bd9b6531b