US Passport 2016 Cross-Border Trading Report Your guide to international e-trading
A report researched & compiled by eCommerce Worldwide in conjunction with IMRG, supported by
1 2 The US Cross-Border Trading Passport is our latest publication in a series of international trading guides produced and maintained by eCommerce Worldwide, our sister associations and supporters for a variety of key territories around the globe.
These passports are designed to operate as comprehensive guides for cross-border e-Trading, exclusively focusing on the B2C markets in their subject territories.
The complete set of published Passports are available for download on the eCommerce Worldwide website at ecommerceworldwide.com/countries and on the websites of our sister associations.
For more information please visit www.ecommerceworldwide.com or you can email [email protected]
3 4 CONTENTS
Foreword 6 Executive summary 8 Territory overview 12 Political & socio-economic environment 19 Online & mobile statistics overview 21 Marketing 34 Optimising customer experience 37 Legal framework & regulation 43 Taxation 55 Logistics & delivery 62 References 68 About eCommerce Worldwide 69 About wnDirect 70 Section supporters 71
5 FOREWORD By wnDirect
The US has, historically, been an extremely challenging country to conquer in retail terms due to its size and diverse culture.
However, technology has made the world a smaller place and globalisation of consumer culture has resulted in an alignment of desires. Consumers in the US are also avid cross-border shoppers. You can find more information about wnDirect’s services at: A study by PayPal estimated that the share of cross-border purchases www.wndirect.com from the US is 45% making them the first choice for international shopping, with customers snapping up clothes, shoes, beauty products and jewellery,
6 US shoppers are happy to spend their money abroad Despite the challenges of expanding into a country with the UK being their favoured destination (49%) that spans 3.5 million square miles, those brands that followed by China (39%), Canada (34%), Hong Kong have cut their teeth on smaller geographies may well (20%) and Australia (18%). feel more than ready to take on the might of the US.
This appetite for cross-border shopping can be fuelled So should we all follow in Columbus’ footsteps and go by a brand playing to the strengths of their home and discover America? The reality is that the US comes nation. This association can be seen for example by with the same challenges and pitfalls seen with other the high regard among US shoppers for British goods foreign markets. There are the usual duty and customs and services. The ‘Made in Britain’ stamp is a valuable issues to be dealt with, the varied landscape and the asset in the US with consumers associating the UK with sheer vastness of the country, combined with the need innovation and creativity. Topshop, Boohoo, ASOS and to tailor your services to the local market. However, Jack Wills have paved the way for British brands, with some informed thinking, a detailed plan, and the having all achieved success there. right partners the US could be the perfect place to fly your international brand. Retailers do need to bear in mind that many international brands have little or no recognition there, which is why the national ‘card’ often features in marketing campaigns as this enables a positive perception to be created despite the lack of awareness.
The rise of online retail has also meant that foreign retailers can embark on a successful and lucrative international expansion plan without having to lay one brick. This has not only lessened the risk and enabled the US to now be seen as a potential expansion target, it has also meant that smaller retailers can consider launching there – something that would once have been far out of their reach. 18% 20% AUSTRALIA HONG KONG
34% CANADA
39% CHINA 49% UK
7 EXECUTIVE SUMMARY
The United States of America (US) needs very little in the way of introduction. Representing the largest global economy ($16.77trn per annum), it is a very attractive market for businesses looking to trade cross-border.
As a global leader in technology and being home to 76% of US customers who shop online have made a many of the world’s best known ecommerce brands, cross-border purchase, with price and product merchants offering a cross-border digital proposition selection being the biggest drivers for this behaviour. should find a willing market. However the distances to There are a number of important aspects to consider cover, population spread and wide variety of cultures before launching in the US (see following overview). offer challenges as well as opportunities.
8 POLITICAL & SOCIO-ECONOMIC Trading into the US is not the same as trading into Federal government provides a degree of one country. The US is made up of 50 states and harmonisation on certain areas but individual states governed at the federal level, where three arms have their own governance structures, their own laws of legislature ensure that there are checks and and their own taxes. However, it is a stable political balances in government. system which suits investment. GDP per capita is good at $53,000, although there are big regional variations.
ONLINE & MOBILE STATISTICAL OVERVIEW
As would be expected, there is a high level of internet Mobile is increasingly important as well with penetration at 87%. Retail is a strong sector in this $19bn worth of sales going through mobile devices; consumer-driven country and represents total sales interestingly, there is almost a 50:50 spilt between of $3.5trn per annum. Of this, ecommerce accounts smartphone and tablet making up these sales. for approximately 10% of sales or $350bn.
MARKETING Digital ad-spend exceeded $49bn in 2014. Of this mobile represented £12.5bn, up 76% on the previous year and showing no signs of slowing. Email is still an important marketing tool although its overall performance is slipping. The other marketing tools such as display, affiliate, behavioural and search are still performing strongly. Google is by-far the biggest search engine although social is starting to make serious in-roads into the marketing mix. Vouchers are playing an important role with 55% of internet users saying they used coupons online while 93% of all shoppers use coupons; there is plenty of room for growth.
OPTIMISING CUSTOMER EXPERIENCE Overall confidence in the experience of shopping online is high at 83% satisfaction, compared to 62% for store-based sales. Privacy is a key concern with 92% of customers worried about how their data is stored, used and shared. For customer support, 82% still prefer telephone support with email ranking second. Marketplaces are playing an important role in the customer experience with Amazon, eBay and Walmart being the most popular.
9 LEGAL FRAMEWORK & REGULATION 50 states represent a mixed legal picture with most However, the state of California has its own acts contract law being set at this level. The Uniform covering data protection which will impact any Commercial Code is an effort to harmonise business that trades into the state; effectively requirements across the 50 states, but is not federal making it a compliance requirement for most law and it is up to the individual states to adopt. website operators aiming at the US market. Data protection is an issue decided at federal level Intellectual property rights are well covered in with the Federal Trade Commission having overall the US at a federal level and there are a number of responsibility for its implementation. other important elements to take notice of; such as the PCI DSS payment card rules and those relating to the provision of credit.
FINANCE & PAYMENTS Payment cards (credit / debit) represent 45% of all online payments while PayPal is used in another 15% of cases. Online card fraud runs at 0.98%, while the recent introduction (phasing in) of ‘chip and pin’ cards is expected to push fraudsters online.
TAXATION A complex area in any country, but in the US it is Common examples include a physical presence such exacerbated by there being over 12,000 sales tax as a warehouse or store. Others might be regularly jurisdictions, with each state having its own rules attending a trade show or advertising to consumers over which products sales tax is applied to and at in a state. Taxation is a complex but manageable what rate. Nexus, or the rules which determine challenge for a business trading into the US. a business’s presence in a certain state, can be triggered by different activities.
10 LOGISTICS & DELIVERY 134 million households and an 87% internet It will be no surprise that 56% of customers penetration give some idea of the scale of the logistics respond to a ‘free delivery’ offer and there is a element of distance-selling. The geographical spread general expectation that delivery costs are clearly of the population centres also adds its own challenges. communicated early on in the shopping process. Many of the global carriers have big operations in Carriers offering a ‘fully-landed’ price ensure that the US, offering competitive services to importing customers know exactly what the cost to them is so businesses and a consumer base that is prepared there is no surprise at the door step. Likewise, for to wait six days for a paid-for delivery. While click the business, carriers offering ‘wheels-up’ customs & collect services will not be an option for most clearance provides surety around cost and process; importers, using locker boxes or drop-off points the customer will get their order promptly, rather than is gaining in popularity. it being held up waiting for clearance.
Overall, the US offers an exciting marketplace to trade into and, while the administrative and logistical challenges can appear daunting, the opportunity outweighs this. Choosing the right partners to help with the process, understanding the cultural differences and adopting a proposition to suit could lead to a rewarding foray into this vast and rapidly-developing market.
11 TERRITORY OVERVIEW Supported by wnDirect
OVERALL Gross domestic product : $16.77 trn World ecommerce rank: 1 Currency: US Dollars (USD/$) Population: 309 million Internet: .us .gov .mil .edu .com Components: 50 States Official language: None; English is the language of Government, Spanish (12.9%) also spoken widely
12 COUNTRY STATISTICAL PROFILE: UNITED STATES OF AMERICA
With the largest global economy, a world-leading The cultural makeup stems from the Americas’ mixed technology sector and affluent middle class, the US is past, with colonial influences from Britain and France an attractive market to enter. Its population of over 309 and South American, Caribbean and African cultures million also represents a mixed cultural society and influencing widely. whilst English is spoken by 72.6% of the population, 12.9% speak Spanish.
Figure 1: Regional map of the US. Source: US Department of Commerce
13 The table below (Table 1) lists all of the states, their approved abbreviations and postal codes. The eastern coast is made up of many smaller states whilst the central belt is made up of fewer, much larger states.
State Abbreviation Postal code State Abbreviation Postal code Alabama Ala. AL Montana Mont. MT Alaska Alaska AK Nebraska Nebr. NE American Samoa AS Nevada Nev. NV Arizona Ariz. AZ New Hampshire N.H. NH Arkansas Ark. AR New Jersey N.J. NJ California Calif. CA New Mexico N.M. NM Colorado Colo. CO New York N.Y. NY Connecticut Conn. CT North Carolina N.C. NC Delaware Del. DE North Dakota N.D. ND Dist. of Columbia D.C. DC Northern Marianas MP Florida Fla. FL Ohio Ohio OH Georgia Ga. GA Oklahoma Okla. OK Guam Guam GU Oregon Ore. OR Hawaii Hawaii HI Palau PW Idaho Idaho ID Pennsylvania Pa. PA Illinois Ill. IL Puerto Rico P.R. PR Indiana Ind. IN Rhode Island R.I. RI Iowa Iowa IA South Carolina S.C. SC Kansas Kans. KS South Dakota S.D. SD Kentucky Ky. KY Tennessee Tenn. TN Louisiana La. LA Texas Tex. TX Maine Maine ME Utah Utah UT Maryland Md. MD Vermont Vt. VT Marshall Islands MH Virginia Va. VA Massachusetts Mass. MA Virgin Islands V.I. VI Michigan Mich. MI Washington Wash. WA Micronesia FM West Virginia W.Va. WV Minnesota Minn. MN Wisconsin Wis. WI Mississippi Miss. MS Wyoming Wyo. WY Missouri Mo. MO
Table 1: Approved abbreviations and postal codes for US states. Source: US Postal Service
14 To give some sense of the economic substance of each state, the following Economist map (Figure 2) compares the GDP of each state with a country of similar size.
Comparative country based Comparative country State State on GDP ($) based on GDP ($) Alabama Nigeria Montana Lebanon Alaska Oman Nebraska Slovakia Arizona Thailand Nevada Peru Arkansas Kazakhstan New Hampshire Ecuador California Italy New Jersey Switzerland Colorado Thailand New Mexico Angola Connecticut UAE New York Australia Delaware Libia North Carolina Sweden Dist. of Columbia Kuwait North Dakota Uruguay Florida Netherlands Ohio Belgium Georgia Austria Oklahoma Chile Hawaii Croatia Oregon Pakistan Idaho Sudan Pennsylvania Indonesia Illinois Turkey Rhode Island Bulgaria Indiana Thailand South Carolina Romania Iowa Algeria South Dakota Sri Lanka Kansas New Zealand Tennessee Finland Kentucky Philippines Texas Russia Louisiana Israel Utah Ukraine Maine Luxembourg Vermont Yemen Maryland South Africa Virginia Poland Massachusetts Saudi Arabia Washington Greece Michigan Taiwan West Virginia Iraq Minnesota Thailand Wisconsin Finland Mississippi Bangladesh Wyoming Lithuania Missouri Finland
Figure 2: Map comparing US states with countries of a comparable GDP. Source: economist.com
15 ECONOMICAL STATISTICAL OVERVIEW
Country statistical profiles: key tables from OECD - ISSN 2075-2288 - © OECD 2015 Country statistical profile: US 2015 Unit 2010 2011 2012 2013 2014 Production and income GDP per capita USD current PPPs 48 307 49 732 51 435 52 985 .. Gross national income (GNI) USD current PPPs 48 813 50 645 52 824 54 364 .. per capita Household disposable Annual growth % 1.3 2.7 3.2 -0.3 .. income Economic growth Real GDP growth Annual growth % 2.5 1.6 2.3 2.2 2.4 e Net saving rate in household % 5.8 6.2 7.5 5.0 .. disposable income Gross fixed capital formation % of GDP 1.1 3.7 5.3 2.7 .. Economic structure: share of real value added Agriculture, forestry, fishing % 1.2 1.4 1.3 1.4 .. Industry % 16.5 16.8 16.7 16.6 .. Trade, transport, accomm., % 21.9 21.8 21.9 21.9 .. restaurants, communication Finance, insurance, real % 29.7 29.8 30.1 30.4 .. estate, business Other services (ISIC Rev.4 % 26.9 26.6 26.1 25.7 .. O - U) Taxes Taxes on the average worker % of labour cost 30.5 29.7 29.8 31.4 31.5 Trade Imports of goods and % of GDP 15.8 17.3 17.1 16.5 .. services Exports of goods and % of GDP 12.4 13.6 13.6 13.5 .. services Goods trade balance: exports Bln USD -689.4 .. -788.2 .. .. minus imports of goods Foreign direct investment
(FDI) Outward FDI stocks Mln USD 4 273 559 4 663 142 5 077 750 .. .. Inward FDI stocks Mln USD 2 623 646 2 879 531 3 057 326 3 178 693 .. Inflows of foreign direct Mln USD 205 851 230 224 166 411 193 361 .. investment Outflows of foreign direct Mln USD 301 079 409 005 388 293 359 641 .. investment
16 Unit 2010 2011 2012 2013 2014 Prices and interest rates Inflation rate: all items Annual growth % 1.6 3.2 2.1 1.5 1.6 Inflation rate: all items non- Annual growth % 1.0 1.7 2.1 1.8 1.7 food non-energy Inflation rate: food Annual growth % 0.3 4.8 2.5 0.9 2.4 Inflation rate: energy Annual growth % 9.5 15.4 0.9 -0.7 -0.3 Producer Price Indices (PPI): Annual growth % 5.0 7.8 2.1 0.4 0.8 manufacturing Long-term interest rates % 3.21 2.79 1.80 2.35 2.54 Purchasing power and exchange rates Exchange rates USD per USD 1.00 1.00 1.00 1.00 1.00 Labour compensation and hours worked
Labour compensation per unit labour input, total Annual growth % ...... economy
Average time worked per Hours per year 1 777 1 786 1 789 1 788 .. person in employment Research and
Development (R&D) Gross domestic expenditure Mln USD 372 233 382 106 396 711 .. .. on R&D Population Total population ‘000 persons 309 326 311 583 313 874 316 129 | 318 892 Population growth rates % 0.8 0.7 0.7 0.7 | .. Total fertility rates Children 1.9 1.9 1.9 .. .. Youth population aged less % of population 19.8 19.6 19.5 19.3 | 19.4 than 15 Elderly population aged 65 % of population 13.1 13.3 13.7 14.1 | 14.5 and over Last updated: 12 May 2015; disclaimer: http://oe.cd/disclaimer .. Not available | Break in series e Estimated value
Source: OECD Factbook statistics. For explanatory notes, see OECD Factbook 2014 (DOI: 10.1787/factbook-2014-en)
17 Largest cities:
According to the 2012 US census there are 745 places where more than 50,000 people live. Each state has a capital city but the following table shows the most populous cities in the US.
Rank City; state 2012 population 1 New York City; New York 8,336,697 2 Los Angeles; California 3,857,799 3 Chicago; Illinois 2,714,856 4 Houston; Texas 2,160,821 5 Philadelphia; Pennsylvania 1,547,607 6 Phoenix; Arizona 1,488,750 7 San Antonio; Texas 1,382,951 8 San Diego; California 1,338,348 9 Dallas; Texas 1,241,162 10 San Jose; California 982,765
Table 2: Top 10 US cities by population. Source: www.citymayors.com
The population distribution is very much concentrated on the eastern seaboard with vast tracts of the central/ western parts of the country being sparsely populated. There are also population centres on the western coast. This spread plays to the benefits of the digital economy but also presents some of its greatest challenges – creating as it does, cultural differences, four time zones and demands on logistics.
Source 1: www.census.gov
18 POLITICAL & SOCIO-ECONOMIC ENVIRONMENT
The US consists of 50 states, is governed as a federal constitutional republic and is the second largest democracy in the world by size of electorate (after India).
The three branches of government, at the national A president is elected every four years and can level, are designed to balance power between each. serve a maximum of two terms. Senators are However, being a federation, each individual state has elected every six years and the House of its own government with the power to set its own laws Representatives every two years. State elections, and taxation. In the context of this report, the state with some exceptions, are held at the same time system means that any business trading into the US as the federal presidential or midterm elections. cannot treat the country as one homogeneous whole. The next presidential election is due in Generally speaking, US politics is dominated November 2016. by two main parties; Republicans and Democrats. This position creates a stable political system and environment suitable for investment.
19 Figure 3: Structure of US government and legislature. Source: www.bbc.co.uk
Economically, the US is currently the largest country in the world and whilst not having the biggest population, is still an attractive marketplace for international business. With an average GDP per capita of over $53,000, consumers have considerable spending power – but as the table below shows, there is a big discrepancy between the main states. These regional differences highlight the need for targeted marketing techniques.
Median money Median money Rank State Rank State income income 1 Maryland 69,826 11 Washington 60,692 2 New Hampshire 69,453 12 Hawaii 59,882 3 Connecticut 66,905 13 Utah 59,877 4 Virginia 66,015 14 California 56,883 5 New Jersey 64,670 15 Wyoming 56,835 6 Massachusetts 64,373 16 North Dakota 55,946 7 Alaska 61,731 17 Rhode Island 55,159 District of 8 61,365 18 Vermont 54,982 Columbia 9 Minnesota 61,162 19 Nebraska 54,777 10 Colorado 60,727 20 Wisconsin 54,342
Table 3: Top 20 US cities by median income Source: www.census.gov
20 Online & Mobile Statistical Overview OVERALL
The technology pedigree of the US needs little introduction. Many of the globally-known, household names, have originated from the country. Internet penetration at nearly 87% is as high as in most European countries although geography can make supplying the infrastructure difficult and expensive. Increasing at a rate of 7%, the total connected population is still showing signs of healthy growth as the same issues with rolling out the infrastructure also make use of the internet and ecommerce attractive; in some areas it is difficult to physically visit the stores of the most popular brands.
Year Internet User New users Country Population Penetration Country’s Country’s Global (July 1) users** growth population change (% of share of share of rank pop. with world world internet) population internet users
2014* 279,834,232 7% 17,754,869 322,583,006 0.79% 86.75% 4.45% 9.58% 2
2013* 262,079,363 2% 4,820,086 320,050,716 0.80% 81.89% 4.47% 9.66% 2
2012 257,259,277 5% 12,059,473 317,505,266 0.82% 81.03% 4.48% 10.21% 2
2011 245,199,804 6% 14,136,938 314,911,752 0.85% 77.86% 4.50% 10.74% 2
2010 231,062,866 5% 11,323,622 312,247,116 0.89% 74.00% 4.51% 11.29% 2
2009 219,739,244 -3% -7,187,049 309,491,893 0.92% 71.00% 4.53% 12.44% 2
2008 226,926,293 0% -913,771 306,657,153 0.94% 74.00% 4.54% 14.44% 2
Table 4: Status of internet usage in the US Source: www.internetlivestats.com
* estimate
** Internet User = individual who can access the Internet at home, via any device type and connection. Source: Internet Live Stats (www.InternetLiveStats.com)
Whilst the number of internet users is demonstrating healthy growth, the World Bank shows that the number of internet subscribers per 100 people has only grown marginally between 2010 and 2014 whilst the UK has increased substantially, increasing the gap over the US.
2010 2011 2012 2013 2014 UK 30.86 32.98 34.54 36.49 37.38 US 27.07 28.04 29.14 30.00 30.37
Table 5: World Bank: internet subscribers per 100 people Source: http://data.worldbank.org
Recent analysis by A.T. Kearney has also shown that the US online market is ranked as number one for attractiveness – being scored particularly strongly in terms of growth potential and with consumer behaviour indicating an openness to engage more fully in digital channels, the country has infrastructure to support this.
21 Rank Change Country Online Consumer Growth Infrastructure Online market in rank market behaviour potential (20%) attractiveness size (40%) (20%) (20%) score 1 +2 United States 100.0 83.2 22.0 91.5 79.3 2 -1 China 100.0 59.4 86.1 43.6 77.8 3 +1 United Kingdom 87.9 98.6 11.3 86.4 74.4 4 -2 Japan 77.6 87.8 10.1 97.7 70.1 5 +1 Germany 63.9 92.6 20.5 83.1 66.6 6 +1 France 51.9 89.5 21.0 82.1 59.3 7 -2 South Korea 44.9 98.4 11.3 95.0 58.9 8 +5 Russia 29.6 66.4 51.8 66.2 48.7 9 +15 Belgium 8.3 82.0 48.3 81.1 45.6 10 -1 Australia 11.9 80.8 28.6 84.8 43.6 11 -1 Canada 10.6 81.4 23.6 88.9 43.1
Table 6: Top 11 countries for ecommerce. Source: A.T. Kearney analysis, 2015
Web Sales Growth Although estimates of the percentage of total retail sales made ($ 000,) through ecommerce vary between 7-10%, the US Department of Commerce report total ecommerce sales to the value of $350bn 2014 $304,913 15.40% in 2014, growing at a rate of 15% which is slightly down on the 2013 $264,279 16.50% previous year. See (Table 7).
2012 $226,878 14.70% Overall retail sales, as reported by the US Department of 2011 $197,883 17.20% Commerce, totalled $3.5trn in 2013. 2010 $168,895 16.60% Source: US Commerce Department 2009 $144,908 2.60% 2008 $141,233 3.80% 2007 $136,126 20.50% 2006 $112,994 24.00% 2005 £91,080 26.00% 2004 $72,340
Table 7: US e-Retail Sales. Source: US Department of Commerce
22 Estimated annual sales of US retail and food services firms by kind of business: 2013 (Estimates are shown in millions of dollars and are based on data from the Annual Retail Trade Survey. Estimates have been adjusted using preliminary results of the 2012 Economic Census.)
NAICS Code Kind of business 2013 Retail and food services sales, total 5,011,740 Total (excl. motor vehicle and parts dealers) 4,049,759 Retail sales, total 4,469,022 Retail sales, total (excl. motor vehicle and 3,507,041 parts dealers) GAFO¹ 1,213,518 442 Furniture and home furnishings stores 94,879 443 Electronics and appliance stores 103,744 Building mat. and garden equip. and 444 302,150 supplies dealers 445 Food and beverage stores 643,520 446 Health and personal care stores 283,761 448 Clothing and clothing access. stores 244,548 Sporting goods, hobby, book, and music 451 84,393 stores 452 General merchandise stores 653,093 453 Miscellaneous store retailers 112,618 454 Non-store retailers 432,759 722 Food services and drinking places 542,718
Footnotes: 1GAFO represents stores classified in the following NAICS codes: 442, 443, 448, 451, 452, and 4532. NAICS code 4532 includes office supplies, stationery, and gift stores.
Revised Data. Note: Estimated measures of sample variability can be found at www2.census.gov/retail/releases/current/arts/salescvs.xls.
Note: Retail and food services total and other subsector totals may include data for kinds of business not shown. Estimates have not been adjusted for price changes. Additional information on confidentiality protection, sampling error, nonsampling error, sample design, and definitions can be found on the Internet at www.census.gov/retail/arts/how_surveys_are_collected.html.
Table 8: Total retail sales for 2013. Source: www.census.gov
23 Value of retail sales Merchandise Lines 2013 (sales shown in millions of dollars) Total Sales Ecommerce
Total Electronic Shopping and Mail-Order Houses (NAICS 4541) 348,126 219,417
Books and magazines 11,381 10,210 Clothing and clothing accessories (includes footwear) 46,545 40,032 Computer hardware 26,299 14,731 Computer software 8,291 5,410 Drugs, health aids, and beauty aids 90,742 17,026 Electronics and appliances 26,546 22,753 Food, beer, and wine 7,365 5,153 Furniture and home furnishings 23,158 20,030 Music and videos 11,185 10,253 Office equipment and supplies 8,067 N/A Sporting goods 9,749 7,844 Toys, hobby goods, and games 8,704 N/A Other merchandise2 47,798 33,981 Non-merchandise receipts3 22,296 18,354
2Includes other merchandise such as collectibles, souvenirs, auto parts and accessories, hardware, lawn and garden equipment and supplies, and jewellery.
3 Includes non-merchandise receipts such as auction commissions, customer training, customer support, advertising, and shipping and handling.
Table 9: Table showing category distance sales; total and those via ecommerce. Source: www.census.gov
In distance-selling, individual categories perform Other territories have seen this sector slow and differently and the latest (2013) figures from the US table 8 shows percentage of market share growing Department of Commerce reporting distance sales consistently. Electricals and fashion are the two core (catalogue and ecommerce) show fashion to be one categories for online retail although it would not be of the strongest individual sectors online. By way of unexpected for fashion to take the biggest share in contrast, the drugs, health and beauty aids sector is the not-to-distant future. the largest mail-order retail sector whilst ecommerce sales are only a small proportion of the total.
Providing a more focused view on the online retail picture, the following tables highlight the key product categories and market share of each. In contrast to other global markets, electronics (including computing) still outperforms fashion (apparel and accessories) even when projected out to 2018.
24 US Retail Ecommerce Sales, by Product Category, 2012-2018 billions 2012 2013 2014 2015 2016 2017 2018
Computer $49.0 $57.4 $66.4 $76.4 $86.1 $96.9 $108.4 & consumer electronics Apparel & $38.0 $44.7 $52.0 $59.7 $67.9 $76.6 $86.0 accessories Auto & parts $23.3 $27.3 $31.6 $36.2 $41.1 $46.2 $51.6
Books/music/ $19.6 $23.2 $27.2 $31.5 $36.0 $41.0 $46.2 video Furniture & home $15.6 $17.7 $20.3 $23.1 $26.0 $29.1 $32.3 furnishings Health & personal $12.9 $15.0 $17.3 $19.6 $22.1 $24.7 $27.4 care Toys & hobby $8.9 $10.5 $12.1 $13.8 $15.6 $17.5 $19.5
Office equipment $6.3 $7.3 $8.3 $9.3 $10.4 $11.4 $12.6 & supplies Food & beverage $5.3 $6.1 $7.0 $7.9 $8.8 $9.7 $10.9
Other $46.7 $54.1 $62.0 $70.1 $78.5 $87.3 $96.6
Total $225.3 $263.3 $304.1 $347.3 $392.5 $440.4 $491.5
Table 10: Showing US online retail sales by product category Source: www.emarketer.com
US Retail Ecommerce Sales Share, by Product Category, 2010-2016 % of total 2010 2011 2012 2013 2014 2015 2016
Computer 21.4% 21.6% 31.7% 21.8% 22.0% 22.1% 22.2% & consumer electronics Apparel & 16.7% 17.6% 18.3% 19.0% 19.5% 19.9% 20.2% accessories Auto & parts 8.6% 8.9% 9;1% 9.3£ 9.4% 9.5% 9.6%
Books/music/ 9.7% 8.7% 8.2% 7.7% 7.3% 6.9% 6.6% video Furniture & home 7.1% 7.3% 7.3% 7.3% 7.3% 7.4% 7.4% furnishings Health & personal 4.5% 4.5% 4.5% 4.5% 4.5% 4.5% 4.4% care Toys & hobby 3.8% 3.6% 3.5% 3.4% 3.2% 3.1% 2.9%
Office equipment 3.4% 3.4% 3.5% 3.5% 3.6% 3.6% 3.7% & supplies Food & beverage 2.2% 2.3% 2.3% 2.3% 2.3% 2.4% 2.4%
Other 22.6% 22.1% 21.7% 21.2% 20.8% 20.6% 20.7%
Table 11: US online retail sales share by product category Source: www.emarketer.com
25 The table below illustrates the generally advanced nature of online consumption by US consumers. Apart from five sectors, US consumers are ahead of the global average of their peers in terms of having made a category purchase online in the three months prior to the survey being undertaken.
Category Global Average United States > 75% have bought category online (%) (%) < 50% have bought category online Electronics 77 83 50 - 75% have bought category online Home appliances 59 46 Home furnishings 53 56 Table 12: Fashion and apparel 76 87 % respondents to A.T. Kearney Consumer Survey who have bought online Sports and outdoor 52 56 in the past 3 months. Source: A.T Kearney Beauty products 57 50 Connected Consumer Study Household items 45 36 Groceries 45 26 Toys, kids and baby 49 48 Tickets 64 74 Music and games 62 74 Books 73 82 Services 76 80
TOP 10 US ONLINE RETAILERS BY UNIQUE MONTHLY VISITORS
164 MILLION 27 MILLION
92 MILLION 21 MILLION
57 MILLION 20 MILLION
55 MILLION 20 MILLION
40 MILLION 19 MILLION
Figure 4: Top 10 US online retailers by unique monthly visitors Source: mckenzieworldwide.com
Previous data-points have shown the overall trends for ecommerce growth in the US. It should not come as a surprise to note that the leading online retailers – with two notable exceptions – are multi-category.
As with other markets, there are peak trading days for retail in the US and these are reflected online. The main holiday-based shopping days are around Thanksgiving and Christmas. Thanksgiving is celebrated on the fourth Thursday of November, with the following Friday being Black Friday.
26 10PM Cyber Monday Black Friday Thanksgiving 11AM
10PM
TUE WED THU FRI SAT SUN MON TUE
Figure 5 Peak online shopping hours over the festive period. Source: SLI systems 2014
The following Monday is Cyber Monday, Mobile commerce sales traditionally the peak online trading day. as % of all U.S. e-commerce sales 2015 Cyber Monday scores strongly as consumers can do a lot of research over the preceding few days and then look online to make sure they are getting the best deal. It was originally a day designed by pure-play merchants to counteract the peak for in- 29.7% store shopping – Black Friday. Recent years have seen an increase in promotional activity online for Black Friday.
Other retail days are important but not to the same extent. According to the National Retail Federation’s Retail Insight Centre, average spending on back- to-school items has increased by 31% since 2004 to Mobile commerce sales as % of all U.S. e-commerce $72.5bn (€57.9bn). Mother’s Day and Valentine’s sales 2014 Day are significantly more popular than Easter, while Halloween is growing in popularity. The Super Bowl (final) weekend in February is also a major US retail event. 24.6%
Ecommerce, as a percentage of total retail sales, is growing strongly in the US. However, mobile commerce is making the biggest gains. Early growth has been particularly strong and in 2015 Internet Retailer is expecting nearly 30% of all ecommerce to be conducted via a mobile device.
Figure 6: Mobile commerce as a percentage of total ecommerce Source: Internet Retailer 2015 Mobile 500 Guide
27 Smartphone shopping is preferred in Asia, while tablets are important in the West
Smartphone and Tablet share of eCommerce transactions Smartphone usage is slightly ahead South Korea 45% • Asia 1% of tablet in the US and 4th overall in terms of usage for shopping. Japan 44% 5% • Asia leads the way in smartphone purchases with close to 45% UK 16% 25% of eCommerce transactions happening on smartphones and Spain 15% 13% very little tablet share. In the rest of the world, tablet is US 14% • 13% significant, and sometimes still representing more than half of Western Italy 12% Markets 11% mobile transactions. UK leads the Western markets in Germany 10% • 15% Smartphones share of both smartphone and tablet transactions. Netherlands 9% 16% • Brazil and Russia have fairly low Tablets levels of smartphone purchasing. France 8% 13% However, share of tablet 7% transactions in Russia is high and Russia 13% similar to most Western markets. Emerging Markets 6% Brazil 4%
Figure 7 Global comparison of tablet vs smartphone as a proportion of ecommerce spend Source: Criteo mobile commerce report Q4 2014
Mobile commerce, as a term, covers two distinct and very different device types – tablet and smartphone. It is not unusual for a consumer to own both types of device and increasingly retailers are seeing customer journeys involving both before a purchase is made. Figure 7 shows that the proportion of total ecommerce spend being made through a tablet is 13%; someway behind the UK at 25%. Smartphone usage is actually marginally ahead of tablet.
Rank Retailer Mobile Unique % Reach In a similar picture to the popularity of Visitors (000) ecommerce brands, the Top 15 online retail site visits by mobile unique visitor Total Mobile (Smartphone & Tablet, 176,841 100.0% in 2014 reflects many of the global Browser & App brands known for their online presence. Retail 158,355 89.5% Similarly, the big US retail brands also 1 Amazon Sites 106,305 60.1% figure highly in the comScore report. 2 eBay 70,840 40.1% 3 Apple Sites 69,155 39.1% During the month of the survey 4 Wal-Mart 44,281 25.0% (August 2014) over 158 million US consumers interacted with retail brands 5 Netflix 30,913 17.5% via their mobile apps and websites. 6 Target 30,029 17.0% 7 Ticketmaster 19,905 11.3% 8 Samsung 17,615 10.0% 9 Liberty Interactive (QVC) 16,673 9.4% 10 Nike 16,444 9.3% 11 Best Buy Sites 14,816 8.4% 12 Redbox 12,893 7.3% 13 ShopzillaAisle A Sites 12,602 7.1% 14 Walgreens 12,516 7.1% 15 Etsy 12,405 7.0%
Figure 8: Mobile unique visitors to US retail brands via app or mobile browser Source: comScore Inc. (September 2014)
28 With smartphones representing a significant proportion of total ecommerce sales, it is worth remembering that not all smartphones are created equal. This is not to say that one is better than another. Rather, it is meant to illustrate that they all require slightly different technical features in order to work properly. As such, brands need to understand what type of device their customers are most likely to use and prioritise development of apps and 158 web presence around those devices. million
Towards the end of 2014 comScore reported that the Android smartphone operating US consumers interacted system had a 52.1% market share in the US, slightly above where it was in the middle with retail brands via their mobile apps and websites of 2014 and gaining versus Apple iOS at 41.7%.
Smartphone Platform June 2015 Sept 2014
Android 51.9% 52.1% Apple iOS 42.1% 41.7% Windows 3.4% 2.6% Blackberry 2.4% 2.3% Symbian 0.1% 0.2%
Figure 9: US smartphone market share by operating system Source: comScore Inc. (November 2014)
To put these figures into context, smartphone-enabled online retail sales in the US are expected to be nearly $28bn in 2015 with Statista reporting expectations of circa $60bn during 2019.
2019*
2018*
2017*
2016*
2015*
2014
2013
0 10 20 30 40 50 60 70
Billion (US$)
Figure 10: Retail mobile commerce sales via smartphone in the US from 2013 to 2019 (in billion US dollars) Source: Statista (2015)
29 The Federal Reserve also reports on the wide range of activities that smartphones are being used for. Tasks include checking availability of funds before making a purchase; looking for vouchers and discount codes and, increasingly, benefits based on location. This insight on tasks and location provides merchants with insight for targeting activities and budget. For example, checking for prices gives international merchants the opportunity to compete with local, multi-channel brands.
Share of respondents that already do or would like to use mobile phones for the following purposes
Compare prices when shopping 30% 24%
Receive and manage discount offers and coupons 23% 26%
Track your finances, purchases, or expenses 29% 13%
Receive offers and promotions based on your location 18% 24%
Organize, track and store gift cards, memberships, 13% loyalty and reward points 19%
I already do Note: The number of respondents with mobile phones was 2,603. I would like to
Figure 11: Examples of tasks carried out by consumers on their mobile phones. Source: www.federalreserve.gov
According to the UPS ‘Pulse of the Online Shopper Tablets are also an important part of the mobile (2015)’, one in four smartphone owners are using commerce story, representing 13% of total ecommerce their devices to locate a store, 22% are using it to retail sales. Research shows that the number of tablet research purchases and 53% have made purchases users is expected to increase. via the device.
200
63.9% 150 63.0% 60.6% 61.9% 58.5%
100
147.2 155.5 161.5 166.5 171.3 50 million million million million million
0 2014 2015 2016 2017 2018
TABLET USERS % REPRESENTED
Figure 12: The number of tablet users in the US and percentage of internet users represented, 2014 – 2018 Source: www.internetretailer.com
Projections for total number of US tablet users show relatively modest levels of growth. However, the total size of the user group represents significant market opportunities for brands and require the appropriate consideration when designing the web experience. With nearly 64% of all internet users in the US utilising a tablet as one of their connected devices, a tablet offering will be key to success in this market.
30 SOCIAL MEDIA
With over 170 million social media users in the US in 2014 and the figure projected to exceed 200 million by 2020, social media is as much a part of theNumber retail of social landscape network users in asthe United in many States from other 2013 to territories. 2019 (in millions)
250
195.9 200.1 200 186 191.2 180.3 173.6 165.7
150
100
50
0 2013 2014 2015* 2016* 2017* 2018* 2019*
Figure 13: Number of social network users in the United States from 2013 to 2019 (in millions)
Facebook is by-far the most dominant US social media platform with a share of over 45% of total visits to social media during August 2015 in the US market. With such a dominance, Facebook is the place for shoppers to discover discounts and news. The video sharing website, YouTube, is also an important player with 21% share. Other platforms are relevant to certain sectors. For example Pinterest works well in the fashion space. Pinterest has assisted 56% of active female Pinterest users ‘at least once or twice’ with a purchase of hair care or beauty products. This percentage is 20% higher than for male Pinterest users.
Leading social media websites in the United States in August 2015, share of visits
Facebook 45.6%
YouTube 21.6%
Twitter 4.77%
Reddit 4.26%
Pinterest 1.5%
Tumblr 1.43%
LinkedIn 1.37%
Instagram 1.33%
Yahoo! Answers 1.22%
Google+ 1.08%
Figure 14: Leading social media websites in the United States in August 2015, share of visits.
The type of device used to access social media also has an impact. LinkedIn is particularly strong on desktop, probably a reflection of its use within business. Facebook and Twitter are predominantly accessed via mobile devices whilst Snapchat is only available via mobile.
31 Social Network Activity: Mobile vs. Desktop % of time spent on social networks in the United States, by platform*
14% 2% 32% 32%
74% 86% 68% 98% Facebook Twitter Instagram LinkedIn
8% 1% 100%
46% 54%
92% 99% Pinterest Tumblr Vine Snapchat
Figure 15: Mix of social media activity by device Source: The Wall Street Journal
The prevalence of mobile devices Electronics 31% is also reflected in social media Home furnishing 40% interactions within the physical retail environment. Automotive 32% Entertainment 18% A recent report by Deloitte Digital showed that shoppers purchasing baby / toddler and home furnishing categories Baby / toddler 56% were particular likely to engage in social media. This has Apparel 29% obvious implications for marketers in these categories, both in terms of brands wanting customers to convert Health / wellness 33% in-store and those pure-plays looking to tempt consumers with an online purchase. Food / beverage 21%
Table 13: Percentage of consumers that use social media during their shopping journey by category Source: Deloitte Digital
32 SEARCH
Google dominates the search landscape in the US with 64% of total search traffic. However providers such as Bing and Yahoo!, whilst not the majority players in the market, still represent millions of users.
comScore Explicit Core Search Share Report* (Desktop Only) July 2015 vs. June 2015 Total US – desktop home & work locations Explicit core search share (%) Core search entity Jun-15 Jul-15 Point change Total explicit core search 100.0% 100.0% N/A Google sites 64.0% 64.0% 0.0 Microsoft sites 20.3% 20.4% 0.1 Yahoo sites 12.7% 12.7% 0.0 Ask network 1.7% 1.8% 0.1 AOL Inc. 1.2% 1.2% 0.0
Table 14: comScore Explicit Core Search Share Report*
*“Explicit Core Search” excludes contextually driven searches that do not reflect specific user intent to interact with the search results.
From a performance perspective, the same rules As with other territories, localisation should include around SEO and advertising apply as they do in the URL / domain name. ‘.com’ is used as the US top other territories. One important element though is level domain. If this is available to a business then it recognising localisation and terminology. From a further lends credence to US consumers wishing to search perspective this includes recognising that purchase from a merchant, in addition to the positive American English can be very different from British impact on SEO. English. For example, ‘colour’ vs ‘color’ and ‘pants’ versus ‘trousers’. These are more obvious examples but serve to highlight the subtleties that could impact the effectiveness of search marketing.
CROSS-BORDER SHOPPING
According to a study conducted by Forrester Consulting on behalf of FedEx (2014), 76% of US online shoppers have made a purchase from a merchant outside of their territory.
Figures reported by Paypers.com showed that in 2013, 34.1 million cross-border online shoppers would buy $40.6bn worth of goods growing to 41.8 million buying $80.2bn by 2018. US online consumers primarily shopped with the UK (49%), China (39%), Canada (34%), Hong Kong (20%) and Australia (18%).
$40.6 BILLION
33 Reasons to shop from international retailers
49% The price is better internationally
43% The brands or products I like are not available in the U.S.
35% I wanted something unique not found in stores in the U.S.
20% The price is better internationally
11% The price is better internationally
10% The price is better internationally
Figure 16: Reasons cited by online US consumers for shopping cross-border; Source: UPS Pulse of the Online Shopper Survey, 2015
Typically, choice, price and uniqueness are top of the list as reasons for shoppers purchasing cross-border.
MARKETING
Digital advertising in the US rose 16% in 2014 to $49.5bn according to the Interactive Advertising Bureau (IAB).
Reflecting the increasing importance of mobile, Search revenues have stabilised, being a more the IAB also reported that mobile advertising grew established advertising channel. However, they still by 76% on the previous year, now accounting for represented $19bn of revenues in 2014, an increase $12.5bn and 25% of total spend; a figure that is of 3% over 2013. sure to increase as mobile becomes more entrenched in digital interactions. The benefits of display advertising have been debated but revenues of $13.5bn in 2014 prove Social media advertising, still largely an unknown that they are still an important feature of the quantity for many merchants, represented returns digital marketing landscape. of $7bn in 2014, an increase of 57% over the previous year. The retail vertical is still the strongest sector for digital advertising, responsible for 21% of the total digital ad spend.
Full Year 2013 Full Year 2014 % $ % $ REVENUE (AD FORMATS) Search 43% $18,365 38% $18,955 Classifieds and Directories 6% $2,597 5% $2,690 Lead Generation 4% $1,749 4% $1,866 Email* 0% $165 n/a Mobile 17% $7,084 25% $12,453
34 Full Year 2013 Full Year 2014 % $ % $ DISPLAY-RELATED Digital video commercials 7% $2,784 7% $3,254 Ad banners/display ads 19% $7,943 16% $8,049 sponsorships 2% $766 2% $774 Rich Media 3% $1,328 3% $1,410 Total display-related 30% $12,821 27% $13,487 REVENUE (PRICING MODELS) Impression-based 33% $14,297 33% $16,506 Performance Based 65% $27,788 66% $32,434 Hybrid 2% $696 1% $511
Table 15: IAB.com report on 2014 digital advertising spend
EMAIL MARKETING
As part of the marketing mix, email marketing still provides an important tool for driving sales, both online and offline. As with all marcomms activity, the key to effectiveness is in the offer. US consumers respond well to free delivery offers, with 54% in a recent UPS survey saying that this would prompt a purchase. Marginally behind, at 53%, was a discount offer. Interestingly, store events and direct mail still played an important role for many consumers.
Likelihood that these promotional vehicles will prompt shopping
54% Emails offering free shipping Emails with 53% Emails offering a discount promotions are more 34% Emails reminding you that you left items in your cart that includes an incentive likely to prompt shoppers to buy 31% Store events from a retailer 28% Direct mail than other formats 25% Text messages with promotions 23% Emails with product recommendations based on past purchasing 22% Emails reminding you that you left items in your cart without purchasing 21% Emails with product recommendations based on what others have purchased 19% Posts on social media 18% Ads that seem to follow you around the internet showing you a product you recently viewed
Q: How likely are the following forms of retailer advertising to prompt you to shop with a retailer?
Figure 17: Role of promotional tools in prompting a purchase; Source: UPS Pulse of the Online Shopper Survey, 2015.
Of all verticals, research shows that retail customers are being the most proactive in adapting to the emergence of mobile and tablet devices, leading the way in numbers opened on tablet and second only to media and entrainment on mobile. By contrast, only 41% of emails are opened by retail customers on a desktop.
35 Desktop Mobile* Tablet This mix of contact points and devices means that there are more opportunities for brands Business products & services 72% 22% 6% to have conversations with prospective Publishers 69% 25% 6% customers. US consumers are still using Travel 49% 35% 16% desktop so whilst mobile is important, Consumer products & services 43% 43% 14% brands should not neglect the ‘traditional’ Multichannel retailers 41% 45% 14% email experience, but rather adapt and Media & entertainment 40% 50% 10% acknowledge the different requirements of each device. Total 49% 39% 12% According to a study by Listrak, US women are Table 16: Email open rates by industry and device more likely to respond to ‘on sale’ messaging Source: Experian/emarketer.com than men (84% to 78%) while men are more drawn to ‘new product’ (45% to 33%) and ‘most popular’ (36% to 26%) content, versus women.
Men prefer emails with recommendations Q1 2014 Q1 2015 % change based on purchase history (83% to 73%) Total open rate 25.9% 25.5% -1.5% while women (72% to 71%) prefer based on viewing behaviour, but not purchased. • Unique open rate 17.5% 17.1% -2.3% Men also respond better to personalised • Click-to-open rate 11.4% 11.1% -2.2% email content (71% to 66%) Total click rate 2.8% 2.9% 2.6% Overall open rates appear to be slipping • Unique click rate 2.1% 2.0% -4.1% slightly but transaction to click rate is Transaction-to-click rate 6.4% 6.6% 2.1% improving. However, average order value Transaction rate 0.09% 0.09% -0.9% (AOV) is reducing but this is in-line with AOV Revenue per email $0.12 $0.11 -1.5% on web. Customers tend to be shopping more Average order $121.89 $113.75 -6.7% frequently but spending less each time. Bounce rate 3.3% 3.1% -5.8% Even with these declining trends, email still Unsubscribe rate 0.16% 0.15% -3.8% provides additional sales in the US market. The ongoing difficulty for marketers is how Table 17: A selection of performance metrics for email to ensure that any communication retains a campaigns in the US market commercial and customer benefit. Customers respond to the right offer.
45% 78% 84% 33%
US women respond to US men respond to ON SALE NEW PRODUCT
36 DISPLAY ADS
Early use of banner ads did not provide much difference to their offline equivalents. However, as publishers get better at tracking, placing and relevance, advertisers in the US can get much better impact from their use. Relevance is still key but US consumers are interacting and purchasing. The following table shows total revenues from display advertising for the main publishing platforms in the US.
2013 2014 2015 2016 2017
Facebook $3.28 $5.29 $6.82 $8.50 $10.03 % change 50.5% 61.0% 29.0% 24.6% 18.1% % of total 18.6% 23.8% 2.52% 26.2% 26.9% Google $2.54 $3.05 $3.52 $3.81 $4.13 % change 15.4% 20.2% 15.1% 8.3% 8.6% % of total 14.4% 13.7% 13.0% 11.8% 11.1% Twitter $0.43 $0.83 $1.34 $1.92 $2.54 % change 95.5% 91.0% 62.1% 43.0% 32.9% % of total 2.4% 3.7% 5.0% 5.9% 6.8% Yahoo $1.27 $1.23 $1.24 $1.27 $1.29 Facebooks dominance in revenue terms % change -6.4% -2.9% 1.0% 2.0% 2.0% illustrates the value that brands put on this % of total 7.2% 5.5% 4.6% 3.9% 3.5% platform as a tool for building consumer AOL $0.76 $0.83 $0.94 $1.07 $1.19 awareness. Google meanwhile is probably % change 9.5% 8.1% 14.0% 13.2% 11.9% driving more direct commercial benefit and % of total 4.3% 3.7% 3.5% 3.3% 3.2% being more targeted, could offer a better Amazon $0.46 $0.66 $0.82 $0.99 $1.19 ROI. Merchants trading into the US could use % change 73.3% 42.3% 23.4% 21.9% 19.2% Facebook as the brand awreness tool, whilst % of total 2.6% 3.0% 3.0% 3.1% 3.2% using Google ad-spend to drive direct sales. Microsoft $0.68 $0.49 $0.46 $0.44 $0.44 % change -21.6% -28.2% -5.6% -4.9% -0.1% % of total 3.9% 2.2% 1.7% 1.4% 1.2% LinkedIn $0.21 $0.27 $0.31 $0.37 $0.43 % change 37.2% 29.7% 14.1% 19.7% 14.7% % of total 1.2% 1.2% 1.1% 1.1% 1.1% IAC $0.08 $0.11 $0.12 $0.13 $0.14 % change -21.0% 46.8% 6.3% 10.3% 10.1% % of total 0.4% 0.5% 0.4% 0.4% 0.4% Table 18: Display ad revenues by TOTAL DIGITAL $17.68 $22.20 $27.05 $32.39 $37.36 DISPLAY company, to date and projected OPTIMISING CUSTOMER EXPERIENCE
Retailing is always about the customer experience and this should be in-line with a merchant’s proposition. US consumers are no different in this regard and generally have high expectations. US customers are generally happy with the local retail experience, both online and offline. Figures from the UPS Pulse of the Online Shopper Survey (2015) showed that 62% of those questioned were happy with the in-store experience while 83% said the same about online. However, the online picture was varied and satisfaction depended on device. The ‘traditional’ desktop experience was felt satisfactory by 84% of those surveyed while 75% said the same about tablet and only 65% about smartphone interactions. The main issues cited were screen size, size of imagery and security concerns.
37 Shopper satisfaction with channels and devices varies
62% 84% Desktop/Laptop Physical Store
74% Table
83% Online shopping 65% Smartphone
Figure 18: US shopper satisfaction by channel and device; Source: UPS Pulse of the Online Shopper Survey 2015
From a digital perspective, customers are particularly 44% were satisfied with the ability to find a retailer’s concerned with the availability of support information. live chat option, and 43% were satisfied with access For example, 66% of the shoppers surveyed said that to live chat within the checkout experience. The last they were happy with the availability and clarity of two points around live chat have some way to go and information relating to returns. Furthermore, 59% of the various contact points are even more important shoppers were satisfied with the ease of finding a for a foreign business looking to trade into a territory; retailer’s customer service phone or contact option they all provide potential consumers with confidence via the website. in the brand.
CONSUMER CONFIDENCE
Consumer confidence in online is affected by many Solutions to this are not easy but steps include factors but the main areas of concern are fraud, clarity of data use, gaining consent and giving delivery, returns, refunds and data protection. customers the option to change their preferences – According to a study commissioned by Truste, which all provide confidence that the brand is trying 92% of US internet users worry about privacy online, to do the right thing. an increase on the 89% of 2013. Along the same theme, only just over half (55%) of US consumers There are also a number of trust marks and quality trust businesses with their data online and 58% seals available in the US market that would help worry about businesses sharing their information reassure consumers – particularly foreign brands with other businesses. The more worrying trend is trading in to the country. that 74% of internet users are more worried about online privacy than a year ago.
38 FEAR OF FRAUD
The fear of private data being lost by businesses feeds the fear of fraud; particularly as data loss is most often associated with payment card details.
57% of American consumers are concerned about Visa Inc’s 2015 digital commerce study found that identity theft according to the 2014 Unisys Security 37% of consumers questioned were not making Index. 60% of US consumers also say that they are purchases via a mobile device due to security unlikely to trade with a business again after there concerns. 21% didn’t make a purchase via a mobile has been a data breach. device because they didn’t know if their usual merchant accepted card payments via mobile. A privacy survey by GFK highlighted 48% of consumers avoiding at least one type of online Clear communciations around processes and service; with 18% avoiding auctions, 17% online protection will go some way to assuaging banking and 16% social networks. these fears.
CUSTOMER CARE EXPECTATIONS
Customer care is an essential element for any business-to-consumer retailer and the digital eco-system enables good and bad experiences to be shared widely and quickly. However, American Express reported in a 2012 study that 38% felt that businesses were paying less attention to this important area than in 2010.
In this current economy, do you think that...?
38% Businesses pay less 32% attention to providing good customer service 26% 28%
29% Businesses have increased 32% their focus on providing 32% good customer service 37%
26% Businesses’ attitudes 29% towards customer service have not changed 34% 27%
2010 2012 2011 2014
39 Customer service begins during the purchase In the 2015 US State of Multichannel Customer Service process. Insight from Forrester shows that 55% of US Report by Microsoft, consumers provided insight on online users will abandon their purchase if they cannot their customer service preferences. For example, easily find answers to queries. 77% also say that signs 81% regularly used the telephone for customer the merchants value their time is the most important service contact followed by email at 78%. indicator of good customer service. By way of contrast, 89% of consumers have stopped using a merchant after a poor customer service experience (RightNow Customer Experience Impact Report).
Customer service channels used on a regular basis Support Channel
81 78 64 62 51 46
23 18 14 9
Telephone Live Chat Telephone In Person Mobile App Social Media Search Engine Support Tickets Online Community
Figure 19: US shopper satisfaction by channel and device Source: UPS Pulse of the Online Shopper Study 2015
Interestingly, the interactions reported in this survey 100 also reflect customer preferences, with telephone being 90 90 89 89 the preferred contact point for 36% of respondents, live 88 88 87 87 87 87 87 86 86 86 86 chat for 33% and email at 25%. The mainstay of early 80 ‘pure-play’ customer support, the self-help online portal, scored badly at 5% while social media channels were only preferred by 2% of the multichannel customers surveyed. 60 Telephone might be the most popular communications channel for customer support but response times must be fast. Only 18% of customers are prepared to hold for more 40 than 10 minutes and 43% were only prepared to wait 1-5 minutes. 20 Merchants looking to trade into the US could be advised to look at the types and levels of customer service offered Amazon L Bean Apple Publix QVC Shutterfly Etsy Keurig Newegg Scholastic Vitacost Shops Base Pro Costco Nordstrom Vistaprint by incumbents in the market. This chart reporting Foresee 0 insights shows the top 15 brands by customer satisfaction; a key bell-weather as to why a business is doing well Top 15 Retailers: Holiday Customer Satisfaction locally and what new entrants should emulate or improve Satisfaction rating on a company level, upon. on a 100-point scale, among the US, largest retailers Foreign merchants could still look at providing email customer support, as this is still widely accepted. To add a competitive edge, it could also be worth outsourcing telephone based customer service. There are a number of providers who now offer a ‘follow the sun’ service so that your brand is ready whereever your customer is based.
40 MARKETPLACES
The benefits of online marketplaces are numerous but the biggest for a merchant looking to trade in to a new territory is the power of its brand.
Even a well-known domestic brand will struggle Many of the globally-known brands are US-based against established local brands in foreign territories. and for 65% of shoppers, their reviews are major The marketplace provides a degree of legitimacy and contributors to a purchase decision (UPS Online comfort that reduces the barriers to purchase for a Consumer Pulse survey 2015). local consumer. Whether they represent a short- or long-term partner really depends on the merchant’s The top US marketplaces are illustrated in the plans and brand strategy. In the short-term the following table. marketplace provides a low-risk method of entering a new market and learning from the experience.
Table 19: Top US online marketplaces by unique Million unique visitors monthly visitors. Source: practicalecommerce.com Amazon 129 eBay 84 Walmart.com 57 BestBuy.com 22 Sears.com 21 Newegg 3.4 Rakuten.com 1.5
41 LOYALTY & VOUCHERS
Customer acquisition and retention strategies can be very similar globally. However, the American retail market has long been known to be dominated by vouchers and coupons as a promotional tool. Some consumers are avid collectors and users of vouchers and according to ilovecouponmonth.com, 37% of surveyed shoppers want all coupons to be digital.
Digital and mobile coupons Values
Projected number of US smartphone mobile coupon users by 2015 74.1m Projected number of digital coupon users in the US by 2016 126.9m Percentage of adult internet users in the US who use digital coupons 55%
Consumer behaviour Values
Share of respondents who use any type of coupon when shopping 93% People living in households that used coupons for groceries 181.37m
Table 20: Overview coupon statistics Source: Statista.com
Not only are vouchers / coupons widely available, Rank Website Estimated monthly visitors 93% of shoppers surveyed about their couponing 1 GroupOn 30,000,000 use said that they use coupons at 93% of their transactions. To set some context, 55% of US 2 RetailMeNot 24,000,000 internet users use coupons. 3 Zulily 20,000,000 As a promotional tool they certainly have their place 4 Coupons 18,250,000 and distribution can be achieved via a number 5 ShopAtHome 18,000,000 of focused voucher websites. The following table 6 SlickDeals 17,000,000 highlights the top 10 by estimated monthly visitors. Each have their benefits and slightly different way 7 LivingSocial 12,000,000 of operating. Choice will be down to a merchant’s 8 Woot 10,000,000 retail proposition and appetite for discounting or value differentiation. 9 eBates 7,500,000 10 FatWallet 6,000,000
Table 21 – Most popular voucher / deal websites in the US market Source: www.ebizmba.com
Where mobile devices meet digital couponing, women are more engaged than men when using applications for ‘voucher’ sites. King Retail Solutions report that 14% of US female smartphone owners use the Groupon app versus 9% of men, 9% use the RetailMeNot app and 4% use the LivingSocial app. Only 1% of the men surveyed used the latter two.
Not all vouchers have the same impact and there are regional differences to take into account. According to the UPS Pulse of the Online Shopper Study (2015) 61% of respondents in the US wanted a free product / gift certificate / cashback offer based on frequent purchases. Product discounts came in second at 58% and free shipping a close third at 57%.
Table 22 – Regional differences in consumer preferences for voucher benefit Source: eMarketer.com
42 LEGAL FRAMEWORK & REGULATION
The US constitution establishes a federal system of government. Disclaimer The constitution gives specific powers to the federal (national) This section of the eCommerce government. All power not delegated to the federal government Worldwide UK Cross-Border Trading Passport document is provided for remains with the states. Each of the 50 states has its own state general information only and does not constitution and governmental structure. constitute legal or other professional advice. eCommerce Worldwide does Power in both the state and federal governments is separated into not owe any duty of care to any reader three branches – the legislative, the executive, and the judicial. of this section of the Passport document. You should consult a suitably qualified The legislative branch has the power to create laws; and the judicial lawyer on any specific legal problem branch has the power to interpret and apply these laws in individual or matter. cases and controversies.
43 Separation of government authority prevents abuse Law at the state level is a mixed picture but of power. As a control on the powers of the executive there are a number of projects that seek to bring and legislative branches, the judicial branch has the some harmonisation. For example, the Universal power of judicial review. Judicial review provides Commercial Code. the power of a court to declare legislative or executive acts invalid, if those acts are contrary to the federal or A number of the key acts that would impact a state constitutions. merchant looking to trade into the US market are displayed below in this non-exhaustive list. As a product of federalism, the US has a dual court system consisting of the federal and state courts.
The key federal level bodies involved in consumer facing business include The Federal Trade Commission who are responsible for ensuring consumers are treated fairly; the Federal Communications Commission who regulate interstate and international communications by radio, television, wire, satellite and cable; the United States Copyright Office and the United States Patent & Trademark Office.
I. Privacy & data protection
Topic Area Relevant Regulations Purpose
Privacy and Data The Federal Trade Commission Act (15 Regulation of the processing of personal Protection U.S.C. §§41-58) (FTC Act) data
Effects
Federal consumer protection law that prohibits unfair or deceptive practices and has been applied to offline and online privacy and data security policies. The FTC also issue Behavioural Advertising Principles which include letting consumers know they can opt-out of such mechanisms.
Topic Area Relevant Regulations Purpose
Privacy and Data Children's Online Privacy Protection Act Applies to the online collection of Protection (COPPA) (15 U.S.C. §§6501-6506) information from children, and the Self- Regulatory Principles for Behavioural Advertising.
Effects
Requires the FTC to issue and enforce regulations concerning children’s online privacy. An amended Rule took effect on July 1, 2013.
The aim is to put parents in control of what information is collected from their children who are under 13 years of age. Operators of websites and Apps that are aimed at this age group, and those operators whose content is more general but will include the applicable audience, fall under the remit of this Act.
Topic Area Relevant Regulations Purpose
Privacy and Data The California Online Privacy Protection Transparency around data security and Protection Act (CalOPPA); Cal. BPC §§22575 - 22579 usage practices affecting consumers residing in California
Effects
Data Protection requirements that any business must enact if their website is available and can be used by consumers in California. Potentially offering delivery options which enable a foreign business to trade into the US could open them up to this requirement.
44 Topic Area Relevant Regulations Purpose
Privacy and Data California Civil Code Section 1798.82 Notification of breach of data security Protection
Effects
A person or business that conducts business in California, and that owns or licenses computerized data that includes personal information, shall disclose a breach of the security of the system following discovery or notification of the breach in the security of the data to a resident of California whose unencrypted personal information was, or is reasonably believed to have been, acquired by an unauthorized person. The disclosure shall be made in the most expedient time possible and without unreasonable delay, consistent with the legitimate needs of law enforcement, as provided in subdivision (c), or any measures necessary to determine the scope of the breach and restore the reasonable integrity of the data system.
Topic Area Relevant Regulations Purpose
Privacy and data “Shine the Light” law (Cal. Civil Code. Visibility of data disclosure to third protection §§1798.83-1798.84) parties
Effects
California Civil Code section 1798.83 imposes a specific disclosure requirement on many businesses that share their customers’ personal information with other businesses for direct marketing purposes. This includes mechanisms by which consumers can contact the business to enquire how their data is shared.
Topic Area Relevant Regulations Purpose
Privacy and Data Financial Services Modernization Act Regulates the collection, use and Protection (Gramm-Leach-Bliley Act (GLB)) (15 disclosure of financial information. U.S.C. §§6801-6827
Effects
Predominantly aimed at the financial services sector, businesses that accept or process payments or provide credit facilities might fall under the remit of GLB. The Act also places limitation on what data can be shared, with whom and security/privacy requirements
Topic Area Relevant Regulations Purpose
Privacy and Data Health Insurance Portability and Act determining the use, storage , Protection Accountability Act (HIPAA) processing and security of health (42 U.S.C. §1301 et seq.) related personal information
Effects
Regulates medical information. It can apply broadly to health care providers, data processors, pharmacies and other entities that come into contact with medical information.
45 Topic Area Relevant Regulations Purpose
Privacy and Data Fair Credit Reporting Act (15 U.S.C. Notification of breach of data security Protection §1681)
Effects
The Fair Credit Reporting Act (15 U.S.C. §1681) applies to consumer reporting agencies, those who use consumer reports (such as a lender) and those who provide consumer reporting information (such as a credit card company). Credit reports are information that is used to evaluate a consumer's eligibility for credit. For example, offering a line of credit to a retail purchaser might mean that the retailer falls under the scope of this Act.
Topic Area Relevant Regulations Purpose
Privacy and Data Controlling the Assault of Non-Solicited Regulates unsolicited commercial e-mail Protection Pornography and Marketing Act of 2003 (“CAN-SPAM Act”), 15 U.S.C. 7701-7713
Effects
Impacts email content and doesn’t just apply to bulk emails; individual emails can be included. Mixing transactional and promotional content could cause a communication to be in breach of requirements. Act also includes messages sent to wireless devices e.g. SMS. Act includes requirements around ‘opt-out’; sender’s information (physical address) and being clear about purpose of communication. There is also a ‘National do-not-mail database’.
Topic Area Relevant Regulations Purpose
Privacy and Data Electronic Communications Privacy Act Regulates interception of electronic Protection of 1986 (ECPA), 18 U.S.C. § 2510-22 communications
Effects
Protects wire, oral, and electronic communications while those communications are being made, are in transit, and when they are stored on computers. The Act applies to email, telephone conversations, and data stored electronically.
Topic Area Relevant Regulations Purpose
Privacy and Data Computer Fraud and Abuse Act (18 Provides structure around the use/misuse Protection U.S.C. §1030) of computers
Effects
Builds upon the Comprehensive Crime Control Act of 1984. Clarifying existing law and including developments to reflect changes in technology. For example, providing possible legal grounds for; challenging unauthorized access to computers; access to data via a website using scrapping technologies and using computers to access another without authorisation.
46 II. Consumer protection
Topic Area Relevant Regulations Purpose
Consumer The Federal Trade Commission: 16 Protect consumers from any “unfair” Protection CFR Part 435 Act; The Mail, Internet, or trade practice Telephone Order Rule
Effects
Requires a business that advertises availability of a product to be able to deliver the product to the consumer within 30 Days. If there are reasons for non-compliance with this timeframe then the business can extend the delivery ‘window’ with the consent of the consumer. Should the consumer decline then a refund should be made available.
Topic Area Relevant Regulations Purpose
Consumer Section 5 of the FTC Act (15 U.S.C. Sec. Protect consumers from “unfair or Protection 45(a)(1)) deceptive acts or practices in or affecting commerce”
Effects
Activities that fall under this remit are wide ranging and include how products / services are described; pricing and advertising. Suggested reading includes the FTC’s publication .Com Disclosures, Information about online advertising.
III. IP protection
Topic Area Relevant Regulations Purpose
Intellectual American Inventors Protection Act of Specifies the subject matter for which Property Rights 1999 (AIPA), a patent may be obtained and the (Patents) conditions for patentability
Effects
“Securing for limited times to authors and inventors the exclusive right to their respective writings and discoveries." And administered by the United States Patent and Trademark Office. No U.S. patent can be obtained if the invention was patented abroad before applying in the United States by the inventor or his or her legal representatives if the foreign application was filed more than 12 months before filing in the United States. Six months are allowed in the case of designs. 35 U.S.C. 172. Source: www.uspto.gov
Topic Area Relevant Regulations Purpose
Intellectual The Copyright Act of 1976 Protect consumers from “unfair or Property Rights deceptive acts or practices in or (Patents) affecting commerce”
Effects
United States copyright law is contained in chapters 1 through 8 and 10 through 12 of title 17 of the United States Code. The Copyright Act of 1976, which provides the basic framework for the current copyright law and covers Patents, Trademarks and Copyright.
This Act give rights owner’s protections under law for differing periods of time. Copyrights need to be registered with the United States Copyright Office whilst Patents and Trademarks are registered at the United States Patent & Trademark Office.
47 VI. Electronic Signatures and Authentication
Topic Area Relevant Regulations Purpose
Electronic UETA: Uniform Electronic Transactions Remove barriers to electronic commerce Signatures & Act by validating and effectuating electronic Authentication records and signatures whilst also abiding by other requirements such as retaining records
Effects
Enables two parties, by agreement, to enter a contract using digital means. Examples might include accepting a contract via a ‘buy now’ button. This isn’t a Federal law but rather one developed by the National Conference of Commissioners on Uniform State Laws
Topic Area Relevant Regulations Purpose
Electronic UCITA: Uniform Computer Information Provide a uniform State level law around Signatures & Transactions Act software licensing which is not covered Authentication under Article 2 of the UCC.
Effects
Proposed by National Conference of Commissioners on Uniform State Laws but only enacted in Maryland and Virginia
V. Contracts
Topic Area Relevant Regulations Purpose
Contracts UCC: Uniform Commercial Contracts Provides comparative laws across 50 (Article 2) states around the sale of goods (only)
Effects
Written and proposed by the National Conference of Commissioners on Uniform State Laws (NCCUSL) and the American Law Institute (ALI). The Code isn’t law in its own right but sets out suggested laws to be adopted by the individual States. Once adopted, they can then become law in that State. The UCC creates a framework for the creation of contracts for the sale of goods.
48 This section is provided to give a broad overview One example is around data protection where of some of the key legislative considerations that compliance is based around the possibility of a businesses could be advised to address before Californian resident accessing the website and trading into the US. This text is not given as legal making a purchase; a specific approach to the advice and professional input should be sought privacy policy is then required. before acting on any of the information provided here. There are also a number of other codes or guidelines What is clear is that the two-tier legal system does not that business should / could comply with. For example, make it easy to comply with all of the states’ individual the Payment Card Industry Data Security Scheme requirements. At the national level, the Federal Trade (PCI DSS) and the Direct Marketing Association’s Commission takes an over-arching view on consumer (DMA) ‘do not mail’ and ‘do not email’ opt-out lists. protection, particularly focused on making sure that traders do not misinform customers, protect their Overall, US law should not be a barrier to market entry information and trade in a fair manner. At the ‘local’ and a legitimate business looking to offer a strong level, there are a number of initiatives or projects that customer proposition will often find compliance a provide a degree of harmonisation across different ‘fine-tuning’ exercise rather than a major overhaul. states. For example, contract law via the UCC.
California often has differing views on legislation and, once trading in to the US, particular attention should be paid to where their law differs from other states; or even federal law.
Sources:
U.S. Courts State of California Department of Justice Office www.uscourts.gov of the Attorney General www.privacy.ca.gov U.S. Federal Trade Commission www.ftc.gov California Legislative Information www.leginfo.legislature.ca.gov U.S. Patents & Trademarks Office www.uspto.gov www.lexology.com
U.S. Copyright Office Reed Smith LLP www.copyright.gov www.reedsmith.com
US Small Business Administration U.S. Government Publishing Office www.sba.gov www.ecfr.gov
Venable LLP Practical Law www.venable.com www.uk.practicallaw.com
49 FINANCE & PAYMENTS
The US online payments space is dominated by payment cards. According to Visa, 8% of all consumer retail spending is carried out online. The same report also showed that 58% of in-store transactions are carried out by card.
In the offline arena, cards are still predominantly magnetic stripe versions without a chip. Chip and pin or EMV payments are just being rolled out across the US in-store retail estate. The card schemes (Visa Inc, MasterCard and American Express) had a deadline of 1 October 2015 for businesses to install point-of-sale equipment that would allow chip and pin transactions. Failure to do so saw the liability for fraudulent transactions shift from the bank to the retailer
50 DigitalDigital payments payments are are already already 12% 12% of of consumer consumer retail retail spending spending ShareShare of ofrecurring recurring and non-recurring and non-recurring retail spending retail volume spending volume
2% 2% Share of Total consumer spending spending ($ billion) 3% 8% 27% Cash and checks 27% $1,417 Card in store 58% $3,058 Call Center 3% $155
Non-digital 88% $4,630 58% Online 8% $420 Mobile in-store 2% $113 Cash and checks Online Mobile not-in-store 2% $107 Card in-store Mobile in-store Digital 12% $640 Call center Mobile not-in-store
Figure 20: Source: Note: Percent of Breakdown total annual spending of overall conducted consumer using each payment retail spendmethod among bankedwww.visa.com consumers, assuming and about AT Kearney $5.3 tillion annualU.S. retail spending Sources: 2015 Visa Digital Commerce Study, U.S. Census Bureau monthly sales for retail and food services: A.T. Kearney analysis It is expected that the introduction of EMV-enabled cards will see attempted fraud move online. Using ‘Chip-and Pin’ or EMV enabled cards at point of purchase makes it much easier for the retailer to stop transactions from stolen cards. Raising this barrier in the physical environment has seen card fraud migrate online. Implementation
Many payment service providers (PSPs) have a global presence and accepting card payments though these organisations should not be difficult to organise. Many of these PSPs can also integrate with alternative payment methods so as to provide a streamlined service.
There are also a number of US-based acquiring banks. For example: First Data, Chase Paymentech, Vantiv, Elavon, Global Payments, Heartland, WorldPay, TSYS, BA Merchant Services, Citi Merchant Services and Wells Fargo.
Common payment types
As with the online market in the UK, credit and debit The Economist recently reported that in the US there cards make up the mainstay of online payments in were 1.2 billion debit, credit and pre-paid cards in the US. Whilst these represent 45% of all e-payments, circulation at the end of 2013; equating to an average PayPal has considerable market share at 15%. of 5 per person. 4% 4% 3% 3% 5% Credit/Debit Card 5% Credit/Debit Card 4% PayPal 4% PayPal 4% Cash or cheque 4% Cash or cheque 45% Bank Transfer 5% 45% Bank Transfer 5% Prepaid card Prepaid card 6% Other money transfer e.g. Western Union 6% Other money transfer e.g. Western Union Prepaid Voucher 9% Prepaid Voucher 9% Other Other Secure Vault 15% Secure Vault 15% Click & Buy Click & Buy
Figure 21: Graph showing online market share of each payment type Source: www.datamonitor.com
51 Alternative payment methods
As with other markets, there is an ever-expanding Likewise, more traditional payment types, such as list of payment innovators looking to disrupt the cards, are looking to become more ‘digital’ in their market. The biggest driver behind these is the rise form factor and avoid the ‘hassle’ of customers having of mobile technology and the ‘always-on’ shopping to add their card details on a small digital device. opportunities that multiple devices bring. There is also an increasing crossover between digital and The following is a non-exhaustive list of some physical channels where ‘pure-play’ digital payment examples of alternative payment types with a methods are looking to become more relevant in the presence in the US market: physical retailing world.
Customers use their Amazon accounts to purchase from other Amazon Payments US-based merchants
Marketing payment solution enabling customers to pay by PayPal Credit (formerly Bill Me Later) instalments using their existing credit card facilities but without having to enter their card details
Users can store credit, loyalty and gift cards and make payments Google Wallet through MasterCard PayPass – online and offline
Customers can choose which stored payment details MasterCard MasterPass to apply against a purchase
Spreads the cost of a purchase by instalments taken against PayItSimple stored credit card details
Users can use funds from a payment card, stored in their PayPal account or transfer between accounts
Skrill Digital wallet provider with 36 million account holders
Wallet system that stores payment details and allows payment to Visa Checkout be made using username and password: no card details shared with merchants
As in most markets, these ‘alternatives’ are gaining momentum in the US but choosing which ones to accept should be based on expected customer usage and insight; dependent on the merchant’s brand, not what the overall market is doing.
52 Payments fraud
Nielson estimated that, in 2012, the US accounted for 23.5% of the global payment card volume, but 47.3% of card fraud. The majority of this risk is down to the reliance on mag-stripe cards in the physical store environment. The introduction in 2015 of chip and pin (EMV) services, will bring down fraud levels in the cardholder present arena. However, it is expected to increase the pressure on merchants online as fraudsters look to capitalise on the card information they possess.
Country Attempted fraud rate Country Attempted fraud rate
Luxembourg (1.39%) Netherlands (0.50%) Australia (1.35%) UK (0.49%) Brazil (1.22%) Belgium (0.46%) Mexico (1.21%) Switzerland (0.43%) China (1.05%) Italy (0.42%) US (0.94%) Ireland (0.38%) Canada (0.90%) Germany (0.34%) Japan (0.88%) Sweden (0.31%)
Turkey (0.68%) Spain (0.26%) France (0.59%) Saudi Arabia (0.16%)
Figure 22: Attempted fraud rate (EUR) by value, by card-issuing country Source: ACI Worldwide Customer Survey
US-issued cards rank highly in the fraud survey conducted by ACI Worldwide while other research carried out by the organisation also showed that 41% of US customers had experienced card fraud in the past five years. This further illustrates why merchants trading into the US need to have the appropriate fraud management tools in place while also looking at ways to give US consumers confidence in shopping with them.
53 U.A.E 44%
CHINA 42%
INDIA 41%
UNITED STATES 41%
MEXICO 33%
AUSTRALIA 31%
SOUTH AFRICA 30%
BRAZIL 30%
UNITED KINGDOM 28%
SINGAPORE 28%
FRANCE 26%
RUSSIA 23%
INDONESIA 22%
CANADA 21%
ITALY 20%
POLAND 18%
NEW ZEALAND 17%
GERMANY 16%
NETHERLANDS 13%
SWEDEN 10%
Figure 23: Percentage of respondents who have experienced card fraud in the past 5 years Source: ACI Worldwide Customer Survey
Over 29% of all US ecommerce transactions in 2015 In their 2015 Online Fraud Report, CyberSource are expected to be conducted via a mobile device. report that the overall fraud rate was 0.9% of all This growth has not gone unnoticed by fraudsters, ecommerce transactions. 81% of US merchants with an article by Bloomberg citing that 21% of all perform manual reviews and 27% of their online online fraud is perpetrated via a mobile device. orders undergo this process. After this process of While this is based on data from a LexisNexis automated and manual review about 2.3% of orders report using a smaller mobile market share of 14%, are rejected. With mobile in mind, the study also the message still resonates. showed that device finger-printing and geo-location were among the most effective tools available to merchants looking to control mobile transaction fraud.
54 TAXATION Supported by Avalara
Avalara helps businesses of all sizes achieve A privately held company, Avalara’s venture capital compliance with sales and excise tax, VAT, and investors include Sageview Capital, Battery Ventures, other transactional tax requirements by delivering Warburg Pincus, Technology Crossover Ventures, comprehensive, automated, cloud-based solutions Arthur Ventures and other institutional and individual that are fast, accurate and easy to use. investors. Avalara employs more than 1000 people Avalara’s end-to-end suite of solutions is designed to at its headquarters on Bainbridge Island, WA and in effectively manage complicated and burdensome tax offices across the U.S. and in London, England and compliance obligations imposed by state, local, and Pune, India. other taxing authorities in the US and internationally. For more information please visit www.avalara.co.uk Avalara offers hundreds of pre-built connectors into leading accounting, ERP, ecommerce and other business applications. The company processes millions of tax transactions for customers and free users every day, files hundreds of thousands of transactional tax returns per year, and manages millions of exemption certificates and other compliance related documents.
55 With over 12,000 taxing jurisdictions throughout the US, each empowered to alter rates and rules with little oversight, the complexity for companies trading in the US is a major challenge. In addition, 100,000+ rules and boundary changes annually make keeping up-to-date with the latest requirements difficult.
What is sales tax? Just how complex is sales tax?
As an indirect tax (a tax levied on goods and services), Depending on the state in which a customer is based, sales tax requires the seller to collect funds from the different items may be taxed at different rates. In some consumer at the point of purchase. states for example, food is not taxed, while in others the same item may be classified differently. • Today, there are over 12,000 state, county and city jurisdictions in the US charging a sales tax In New York, clothing and footwear costing less than • 45 states and the District of Columbia now impose a $110 per item / pair is exempt from state sales tax, sales tax on retail sales and some services. The bulk yet it is still subject to local sales tax in some of their revenue is now generated from sales taxes, jurisdictions. Local jurisdictions can change their not income taxes. As an indication of the importance of sales tax to a state, in Texas, sales tax accounted tax policy towards clothing once a year. for 54.3% of all its revenue in 2013 Exemptions might include “most fabric, thread, yarn, Five states do not have a state-wide general sales • buttons, snaps, hooks, zippers and similar items that tax; Alaska, Delaware, Montana, New Hampshire and Oregon. Alaska and Montana do allow become a physical component of clothing” or are localities to charge local sales taxes used to repair it.
Sales tax differs from Value Added Tax (VAT)
VAT is applied every time value is added at each stage during the supply chain, whereas sales tax is collected only at the time of the final sale.
If a seller has nexus in a state they must collect sales tax on all taxable sales regardless of the channel.
Taxable Non -Taxable Shower Caps Swimming Caps Bicycle gloves Gardening, ski, tennis, hockey, and baseball gloves Shoulder pads for ladie’s clothing ? Shoulder pads in sports gear Walking boots Hiking boots Sweat bands Headbands not designed to absorb sweat
To be compliant, a retailer needs to know the correct classification of an item in each state to ensure it collects and remits the correct level of tax. Collecting too much in one state will make it uncompetitive, while not collecting enough increases its exposure to potential fines. Adding to the complexity, in some states the rates can vary by city, county, or even street. Two adjacent properties can have different tax rates.
56 The risk of audit In an effort to safeguard sales revenue, each state conducts audits of businesses, which may result in penalties and interest. Businesses must keep records of sales in each US city, county and state in which they sell.
As more businesses sell in the US, auditors are also turning to international sellers to ensure they do not have a competitive advantage over domestic retailers. The financial importance of collecting sales tax on a state cannot be underestimated. The more auditors assessing international business, the more revenue a state can make in penalties and unpaid tax.
Average audits cost as much as €79,000* ($100,000) so compliance is key. *source: Wakefield Research
Nexus: Do I have to collect US sales tax?
International businesses selling in the US are not required to collect sales tax in a state unless they have ‘nexus.’ Nexus is defined as a connection or business presence in a state or jurisdiction. If a business has nexus in a state, they need to collect and remit sales tax according to the state regulations. Activities leading to having nexus vary per state and can include activities such as opening offices, stores or franchises, storing items in warehouses or even attending meetings or tradeshows.
Once you have determined where nexus exists for your business, you are required to calculate, collect, report and remit that state’s sales tax. For this reason, sales taxes are remitted based on where your business is actually located because it is the physical structure of the business that actually creates nexus. However, there are several other scenarios where nexus can be applied and these should also be considered.
What constitutes a ‘significant physical presence’?
Nexus rules are established Recently, in an effort to avoid These laws expanded definitions by individual states and every losing taxes to companies that of nexus to include online-specific state defines them uniquely. locate themselves in areas with relationships such as affiliate and Determining exactly how a rule low or no tax rates, many states web advertising. applies to a business is critical; have enacted Amazon laws the regular presence of a single to require more national and sales person is enough to create international online retailers to tax nexus, therefore requiring the collect sales tax for the first time. collection of sales tax.
Scenarios that could trigger Nexus and sales tax obligations:
Scenario #1 Scenario #2 Scenario #3 An international business has a Nexus can be created by employing Regularly attending tradeshows presence in multiple states. It could sales people who work in the or advertising in the US can be take the form of a store, or even a states. For example, if employees or considered nexus in certain states. concession within a larger retail contractors conduct any work for a establishment. In this case, they will customer in the US, this may have more than likely have sales tax created nexus in that state. obligations in each location.
Additional factors that can create nexus obligations are: • Property ownership: Owning or leasing any real or personal property in the US • Product delivery: Having company personnel deliver / install products in the US • Product storage: Renting or owning storage, warehousing or drop-shipping facilities
57 Top 8 areas to consider in your business plan for selling in the US
1. Keep up-to-date with each state’s tax requirements Businesses need to keep up-to-speed on all the changes made by states and municipalities each year. These changes include rate increases / decreases as well as new sales taxes added to jurisdictions and boundary changes.
2. Establish processes for recordkeeping The best way to stay compliant is to keep up-to-date on filing sales tax returns and payments (quarterly or monthly, depending on the state’s requirements) and keep accurate and detailed sales records.
Recordkeeping requirements
• Sales invoices • Cancelled cheques and similar original documents • Paid bills • Contracts • Depreciation schedules and other fixed asset records • Purchase orders • Documents supporting tax-exempt • Register tapes sales, such as resale and other • Bank statements exemption certificates • Freight bills indicating shipments to addresses across states
3. Understand nexus requirements Every state has the right to define who has to collect sales tax, what those taxes are and any allowable exemptions. However, there are limits to how states can define nexus.
Merchants must have a connection to a state in which a customer resides for the merchant to be liable for sales tax. However, states define nexus in different ways.
The fulfilment method for goods sold can also have an impact on tax obligations. Many European businesses selling in the US use drop-shippers to deliver goods, creating complicated tax obligations. Using any third party, whether it is a drop-shipper, supply chain or online affiliate, can trigger nexus for a business.
Nexus-triggering events can include:
Travelling salespeople Agents or distributors Employees on payroll Training Trade show attendance Inventory/warehousing (owned or 3rd party) Servicing tangible personal property Affiliates (e.g. marketing agencies, web hosting, advertising agencies, etc.)
58 4. Plan to use geolocation over zip codes While the US Postal Service has established zip codes for mail delivery, tax jurisdictions do not generally follow zip codes. Going down to street level is essential to get it right. Businesses relying solely on zip code often find big discrepancies during audits. Without the use of geospatial technology, there is limited chance of accurately determining which jurisdiction applies to a transaction.
5. Set out a returns filing and remittance schedule Each US state has its own set of rules and regulations for filing and remitting tax, which may differ from other states. In addition to state rules, cities and counties may impose and manage sales tax returns on their own. Responsibility lies with businesses to not only determine if they have to file with specific cities and counties, but also to register of their own accord.
Moreover, filing frequencies vary by jurisdiction so not all returns are due on the same day of the month.
Filing methods can vary just as much, even within the same state or municipality. Some states now require sales tax returns to be filed electronically; others still require hard-copy submission, while a few states offer online filing along with an electronic data interchange (EDI) option.
6. Collect and store all exemption certificates Not everyone is required to pay sales tax. Depending on the rules in the taxing jurisdiction, certain businesses and individuals may be exempt from sales tax. The vendor must collect and keep on file a valid exemption certificate for each business, organisation or individual with an exemption.
Vendors are required to ensure that exemption certificates are valid for each sales transaction. This requires businesses to keep a copy of each exemption certificate and ensure that they are renewed when they expire.
59 7. Identify if the ‘Streamlined Sales & Use Tax Agreement’ is right for you? Around half of the states have worked together on an agreement called the Streamlined Sales and Use Tax Agreement (SST), designed to “simplify and modernise sales and use tax administration in order to substantially reduce the burden of tax compliance.” Signing up to SST requires only one form to register across all SST states. Once registered, businesses then have to file returns every month in all SST states.
For companies selling, or looking to sell in the US, or that have affiliate relationships in a number of states, registering as an SST volunteer can save a lot of time, effort and money. There is no cost for registration and if a business qualifies, filing is a free service across the SST states. SST volunteers have limited audit exposure (no negative audits possible). As of early 2015, SST member states include:
Arkansas Nebraska South Dakota Georgia Nevada Utah Indiana New Jersey Vermont Iowa North Carolina Washington Kansas North Dakota West Virginia Kentucky Oklahoma Wisconsin Michigan Ohio Wyoming Minnesota Rhode Island
8. Plan for sales tax holidays A number of states can declare sales tax holidays. Some states offer tax reprieves for products like school supplies for kids, while others give consumers a tax break on hurricane preparedness items, like plywood and nails. In states where hunting is a big business, tax holidays might be in place for firearms, ammunition and hunting supplies.
The holidays are varied, often taking place over specified dates and limiting the number of items that can be purchased tax-free.
In Virginia,( http://avlr.co/1F1r9G9) for example, during the sales tax holiday for clothing and school supplies, many items are singled out as exempt. For clothing, this includes clerical vestments, choir and altar clothing, corsets, girdles, lingerie, purchased costumes, steel-toed shoes, suspenders, formal wear, etc. However, protective gloves, hard hats and helmets are taxable. School supplies that are exempt include calculators, binders, erasers, lunch boxes, highlighters, notebooks, paintbrushes, scissors etc.
60 To summarise, the top eight areas of tax to consider in a business plan for selling in the US:
Whilst this section highlights some of the challenges that managing taxation exposure in the US involves, it should not detract from the opportunities that exist in the US market. Selecting a specialist partner, such as Avalara, can remove the burden and enable the merchant to focus on developing a market presence.
Keep up-to-date with each 1. state’s tax requirements
Establish processes for 2. water-tight record keeping
Understand your 3. nexus requirements
Plan to use geolocation 4. over zip codes
Set out your returns filing 5. and remittance schedule
Collect and store all 6. exemption certificates
Identify if the ‘Streamlined 7. Sales & Use Tax Agreement’ is right for you
8. Plan for sales tax holidays
61 LOGISTICS & DELIVERY Supported by wnDirect
As one would imagine, the US market presents some very real logistics challenges – largely due to its size and scale across a number of dimensions: • A population of 320 million within 134 million households and 84% of the population active online • A physical geographical area of 3.5 million square miles and coast to coast line haul distances of up to 3,200 miles • Four time zones so that the concept of same day / next day takes on a whole new meaning • The different view of home delivery with click & collect still in its infancy As a result, B2C home delivery in the US is dominated by companies able to create an infrastructure able to reach all, or the majority of consumers – notably the domestic postal service and the biggest global carriers: • The United States Postal Service – USPS • United Parcel Service – UPS • Federal Express – Fed Ex • DHL There are of course regional carriers covering specific cities, states or multi-state areas but these may be harder to directly access for any non-US based retailer.
62 There are ecommerce fulfilment specialists, such as Newgistics, which can help retailers ‘zone skip’ their customer parcels to inject into parcel networks closer to the delivery destination.
There are also companies who create a national coverage network by contracting with regional carriers who could provide an import gateway with the necessary controls.
XPO Logistics is an example of one such integrated service provider using 3rd party final mile contractors to provide a range of delivery services (supported by pre-delivery alert, tracking etc) including: • Heavy goods – including installation, removal and clean up • Courier – legal, accounting, luxury retail • Ecommerce – direct to consumer with options as fast as next day / same day These sorts of organisation certainly become an option when a retailer reaches the point where they wish to consider holding inventory and handling returns ‘in country’.
However, for the most part retailers seeking entry into the US market for the first time will find that there are effectively five ways in which non-domestic retailers can access the US delivery market.
Logistics choices Post Using USPS as the final delivery agent, the retailer’s own domestic postal company can provide this link. Example – via Royal Mail (UK). • International Tracked and Signed – 5-7 working days • International Tracked – 5-7 working days • International Standard – 5-7 working days • International Economy – 6-12 weeks
Global carriers The four companies mentioned above provide domestic delivery services but also cross-border integration services. By way of an example, the services available to UK retailers are summarised below:
UPS
• UPS Express Plus – 1-2 business days – delivery by 09:00 • UPS Express – 1-3 business days – delivery typically by 10:30, by 12:00 noon or by end of day • UPS Expedited – 2-5 business days – delivery by end of day • UPS Express Saver – 1-5 business days – delivery by end of day • UPS Standard – day definite by date scheduled – delivery during the day
Fed Ex
• International First – next morning • International Priority – next day • International Economy – 4 days
DHL
• Delivery in 1-3 days – subject to destination
63 Domestic carriers Domestic carriers will accept online retail orders and ship them to the US to be handed to local agents for delivery, often the four companies mentioned above. Service times will vary depending on the line haul arrangements in place and the US service partner chosen. Retailers already having a service contract with a domestic retailer should start by finding out what options they provide and can use this as a benchmark.
Parcel brokers Parcel brokers provide a way of accessing better pre-contract rates through global and domestic carriers and, in the UK for example, companies such as Parcel2Go and Parcel Monkey provide this channel.
Direct access Increasingly this solution is being used to consolidate volumes to achieve better air transport rates and provide a managed service that includes: • Customs clearance – often ‘wheels up’ in advance of arrival • Multiple points of entry – reducing ‘in country’ line haul costs and lead times • Calculation and payment of duties • HTS (Harmonised Tariff Schedule) code classification • Tracked returns – for unwanted and undeliverables There are a number of companies providing such services but perhaps the fore-runner is wnDirect, currently providing services to the US from France, Germany and China and directly into the US from the UK through LAX (Los Angles) and JFK (New York). wnDirect also ‘zone skips’ to ORD (Chicago), DFW (Dallas) and ATL(Atlanta) to provide further savings in time wnDirect arrange the end-to-end process – from collection in the UK, optimum routing and shipping, to clearance, tracking, delivery, customer service support, returns and performance reporting.
In all cases delivery time estimates are dependent on successful first-time clearance through customs, the final destination and where the goods enter the country. It is therefore important to consider how orders will be transported from the country of dispatch and how the necessary clearances will be obtained.
Weight and dimension restrictions may also apply by service so these need to be checked in advance, as do any prohibitions on products that can be sent.
Contract rates and terms will be available for all of the logistics options above but retailers with smaller cross- border volumes may initially be restricted to postal or public rate card or parcel broker options because most contracts will require a minimum volume.
Integrators
Retailers with a reasonable volume of orders going to the US may wish to consider the option of parcel management service integrators who can provide immediate integration with a wide range of service providers delivering in the US market. These will include most of the options above (excluding parcel brokers) and many others.
The retailer will need to have or enter into a contract with the service provider but then the integrator will offer the ability to allocate orders to the most appropriate service – using agreed business rules, printing labels and customs documentation, providing tracking and helping to manage returns. For smaller retailers some integrators offer a parcel broker option that can help obtain better rates.
In the UK providers of such services include MetaPack, Electio and Hypaship’s Parcelworks.
64 Delivery in the US As mentioned previously, the domestic home delivery The range of services available to US retailers through market in the US is dominated by four big players and these companies are more extensive than those they retailers need to look at them if only to assess their offer to importing retailers. These are summarised potential delivery offer against that provided by US below (correct as of November 2015): retailers using these companies.
24 hour Specified Pick-up Carrier Economy 48-72 hour Same day (next day) day and time options
Standard Post Priority Mail Express Mail USPS 2-8 day 1-3 day Money-back delivery delivery guarantee
UPS Ground UPS 3 Day UPS 2nd Day UPS Next Day UPS Express UPS My UPS* Up to 5 days Select by 10:30 or end by 08:00, 10:30 Critical Choice of day or 15:00 SmartPost Home Delivery Fedex 2 Day or Fedex Express Home Delivery Fedex Express Hold at 2-7 days 1-5 days Fedex Express overnight Evening or time same-day FedEx Saver (3 day) Location FedEx tracked Saturday no by 08:00, 10:30 arranged USPS used for premium Money-back or 15:00 2,400 offices delivery guarantee
Ground Expedited 3-8 days 2-5 days DHL Saturday no Saturday no premium premium
* UPS provides the option for consumers to sign up to UPS My Choice which allows:
• Proactive pre-delivery alerts • Online signature for when the recipient cannot sign for the goods in person • Re-routing or re-scheduling of deliveries • Viewing of inbound shipping information
Customs clearance
For delivery into the US there is a current duty This will become the primary system through threshold of $200, below which no import duty is due. which the trade community will report imports As an example – the duty calculated for a man’s t-shirt and exports and the government will determine is currently 16.5%. admissibility. The system is designed to automate the customs clearance process and provide For the US, companies like wnDirect use ‘wheels up’ accurate shipment information, leaving less room clearance – meaning parcels are customs cleared in for uncertainties. flight, before they arrive in country. It is important to make sure that the chosen logistics partner has a Certainly if the shipper or agent a retailer has customs broker on the ground who is able to manage appointed to handle their shipments to the US is commercial clearance with US customs. not ACE-compliant by the due date, orders will be delayed as they will have to be processed as slower However, this is an area that will require continuing ‘paper’ transactions – so this will be a key question close attention because by the end of 2016, to ask. the US Government will introduce ACE (Automated Commercial Environment).
65 US consumer delivery requirements
When a retailer is deciding on the delivery offer to More good news for non-US retailers is that, despite provide it is important to consider the needs and the hype about same day delivery, the majority of US wants of US online shoppers and to recognise that shoppers are prepared to wait an average of 6 days any importing retailer is competing with domestic for a ‘paid for’ delivery and 8 days if shipping is free, retailers already providing such services. although 1 in 2 expect a reasonably tight delivery window to be advised at checkout. This puts this Perhaps the most relevant information to help market well within the expectation range of a well understand this area is provided by the logistics organised international retailer4. company UPS – with its Pulse of the Online Shopper research1. The good news from this research is that 4 As is the case in most other markets, including the UK, out of 10 shoppers are happy to buy from international returns are an area coming under increasing scrutiny retailers2. The important things to note for these by US consumers. Only 66% are satisfied with the customers are here: clarity of returns policies and fewer (62%) are happy with the actual process. • US shoppers appreciate ‘free’ shipping (or at least the appearance of): In a cross-border environment with longer returns ––54% are likely to take advantage of an email offer lead-times and extended refund periods, the that involves free shipping opportunity to get this wrong and upset the customer ––40% have searched online for a free shipping is magnified and therefore this important issue is promotion code given more attention later on. ––52% have added items to their basket to qualify for free shipping while 45% abandoned their cart when Finally, when considering the shipping partner, their order did not qualify for free shipping it is worth understanding what they can arrange when the customer is not at home (the most popular • However, perhaps more important is to be up front about shipping costs3: delivery location) when their order first arrives. This is especially important in the US market because ––59% consider it important to see shipping costs early in the process of the distances many shoppers have to deal with. ––56% have abandoned their cart when the later A US shopper who is away from home / out at work, addition of shipping costs made the order more may easily be ‘out of town’ and not available to receive expensive than expected, yet; a delivery for several days. Therefore, the following ––57% have decided to pay the extra for shipping solutions need to be considered – with popularity when the order still represents good value ratings provided by the UPS Pulse of the Online »»49% think that international retailers offer Shopper survey: better prices Hold the package until home to receive it – 51% »»43% can find things they cannot get from • US retailers • Leave the package (neighbour or safe-place) – 50% • Take to the carrier’s local depot / office – 36% • An increasingly popular means of reducing or avoiding shipping costs is ‘collect from store’ with an increase of • Take to another address (work, etc) – 36% 8.5% in the proportion of shoppers who have used this • Take to a ‘pick-up’ / click & collect store – 32% over the previous 12 months – at 38%, up from 35% Take to a locker – 27% • Clearly this option is not available for an importing retailer with no store presence but non-store click & collect or ‘curb side’ pick-up and returns is finding favour with a third of UPS survey respondents and these networks are becoming available to non-US retailers. Given the importance of this opportunity it is covered in more detail a little later.
1 The most recent Pulse of the Online Shopper research covers 5,118 US online shoppers in January and February 2015
2 A commissioned study by Forrester Research on behalf of FedEx in September 2014 also reported that 76% of US respondents had shopped with a non-US retailer
3 A commissioned study by Forrester Research on behalf of FedEx in September 2014 reported that high shipping costs were the foremost barrier (63%) for US consumers seeking to shop with non-US retailers
4 Although a commissioned study by Forrester Research on behalf of FedEx in September 2014 reported that concerns over long delivery times were the 2nd biggest barrier (53%) for US consumers when shopping internationally
66 Click & Collect Providing all of these elements in a cross-border environment means selecting a shipping partner The use of click & collect / ‘curb-side’ pick-up is an who can get goods to the US but also back just as important consideration for an international retailer efficiently. For example, can they: looking to serve the US market because perhaps a • Consolidate returns in the US and report third of US shoppers find some appeal when it is used their receipt / condition allowing a prompt as an alternative primary delivery address, a place to acknowledgement to the customer and possibly take a delivery when the recipient is not at home or a faster credit? a convenient way to drop-off a return. While click & • Track returns back to the UK? collect from store network continues to grow, parcel • Provide access to a curb-side drop-off network? shops and locker networks are still in their infancy. • Arrange / support duty repatriation Choosing the right partner for this service option is Solutions are at hand through many of the service also important, because if the consumer knows and providers already mentioned but this is an area that trusts the brand operating the click & collect network, a retailer needs to look into carefully. this trust transfers to the retailer. This is particularly important for small-to-medium sized retailers. The repatriation of returns can be expensive, A commissioned study by Forrester Research on especially in light of the fact that it often constitutes behalf of FedEx in September 2014 reported that a a sale that has not been successfully converted. significant proportion of US consumers express a low For example: preference to buy from SME retailers because of: • Single parcel returns will cost more than those that can • Difficult to verify seller reputation – 45% be consolidated into bulk shipments • Lack of [brand] recognition – 35% • Goods coming back to the country of destination may not be recognised as returns but rather as imports • Challenging returns – 44% which mean that duty already paid is not recovered and new duties are imposed Using a locally trusted Fortunately, this area is being addressed by the industry and 3rd party service providers are providing click & collect brand solutions including: • White label / multilingual returns portals matching up can help overcome the original order with the return • Consumer returns option selection, allowing these concerns. the customer to choose the returns route most convenient for them Returns • Tracking • In-country consolidation, allowing faster According to the UPS Pulse of the Online Shopper acknowledgement of receipt and lower return study, fewer than two-thirds of US shoppers are shipping costs currently happy with the process they experience Again a leading provider of such services is with online returns. This provides an opportunity wnDirect with its wnReturns tracked returns solution. for new retailers entering their market, especially Such solutions offer the retailer a branded portal, because almost 70% will look at the returns policy maintaining the shopping experience for both 5 before they start to browse . purchase and return.
Of course, the majority (66%) consider free returns Such portals make it is easier for the customer to make to be a key component in a good returns experience returns, offering multiple payment options such as but a clear ‘hassle-free’ policy and an easy process customer or retailer paid. The customer can print the (pre-printed or easily downloadable label) label, see when a return has been received and when with convenient drop-off, will go a long way to their refund is due. winning the initial sale. In the case of solutions like wnReturns, retailers Once the return is made, keeping the customer benefit from additional cost savings as parcels are informed as to when they can get their refund is consolidated and returned via a central facility, and critical and a major reason why the customer may this also provides a real-time view of stock. come back and shop again.
5 A commissioned study by Forrester Research on behalf of FedEx in September 2014 reported that concerns over the ability to make hassle free returns was the 3rd biggest barrier (52%) to US consumers looking to shop with non-US retailers
67 REFERENCES
This report uses content from a variety of sources, as set out in the list below. Many of these sources are available to the general public, and can be consulted for further information surrounding a specific topic.
The sources consulted include, but are not limited to: • Country statistical profiles: key • www.federalreserve.gov • http://copyright.gov tables from OECD - ISSN 2075-2288 • Experian • www.sba.gov - © OECD 2015 • The Wall Street Journal • www.veneable.com • US department of Commerce • Deloitte Digital • www.privacy.ca.gov • www.economist.com • comScore Explicit Core Search • http://leginfo.legislature.ca.gov • www.citymayors.com Share Report • www.lexology.com • www.census.gov • UPS Pulse of the Online Shopper • www.reedsmith.com • www.bbc.co.uk Survey, 2015 • www.ecfr.gov • www.internetlivestats.com • Internet Advertising Bureau • http://uk.practicallaw.com • www.emarketer.com • www.americanexpress.com • VISA Inc. • http://data.worldbank.org • Microsoft: Multichannel • www.datamonitor.com • A.T.Kearney Survey 2015 • www.foresee.com • ACI Worldwide Customer Service • www.mckenzieworldwide.com Survey 2014 • www.practicalecommerce.com • SLI Systems • www.avalara.co.uk • www.ebizmba.com • Internet Retailer • Forrester Research on behalf of • Criteo • www.uscourts.gov FedEx; September 2014 • comScore Inc. • www.ftc.gov • www.statista.com • www.uspto.gov
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68 ABOUT ECOMMERCE WORLDWIDE
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Our dedicated Cross-Border Trading Passports constitute invaluable A-Z guides for retailers looking to set up and run successful eCommerce channels abroad (and potentially at home, too). All this is backed up by our annual Summit. eCommerce Worldwide is the one stop shop, to help you trade successfully across borders.
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69 MAIN SPONSOR
ABOUT WNDIRECT More than just a logistics partner wnDirect came to market determined to do things differently. Its international logistics offering quickly gained traction with a number of leading e-Retailers and it has since become renowned for its disruptive way of thinking.
Since launch wnDirect has evolved to offer a broad range of solutions designed to enable e-Retailers to ‘go global’. Its comprehensive services can support both large and small retailers alike to realise their international aspirations and achieve success in A full range of added value services: global markets. • Unique fully integrated customs service More than just a logistics partner; wnDirect is a – a paperless solution at the pack bench retailer’s key to global success. • Full tracking and visibility throughout the entire delivery lifecycle We don’t just understand international logistics; • Automated email and SMS updates to the consumer we also understand retail. As a business many of in their local language the Board members, managers and staff have worked • Can be integrated into a retailer’s online in retail and, therefore, understand you and your shopping solution business – not just how to deliver your parcels. • Duty Payment & ID Upload solutions Combining young, flexible and entrepreneurial • Access to a Global PUDO network thinking with leading edge technological • Solution to support entry to the developments to provide turn-key solutions which China Tmall marketplace enable retailers to ‘switch on’ their global expansion • Simple Returns solution plans. Supporting retailers successfully navigate the • Comprehensive bespoke reporting complexities of cross border trade in key markets to your requirements quickly, easily, reliably and cost effectively. • Best-in-class, independent delivery partners trusted by your consumer
For more information, please visit wndirect.com or email [email protected] to speak to one of the wnDirect team.
70 SECTION SUPPORTERS
AVALARA Avalara helps businesses of all sizes achieve compliance with sales and excise tax, VAT, and other transactional tax requirements by delivering comprehensive, automated, cloud-based solutions that are fast, accurate and easy to use. Avalara’s end-to-end suite of solutions is designed to effectively manage complicated and burdensome tax compliance obligations imposed by state, local, and other taxing authorities in the United States and internationally.
Avalara offers hundreds of A privately held company, pre-built connectors into leading Avalara’s venture capital investors accounting, ERP, ecommerce and include Sageview Capital, other business applications. Battery Ventures, Warburg The company processes Pincus, Technology Crossover millions of tax transactions for Ventures, Arthur Ventures and customers and free users every other institutional and individual day, files hundreds of thousands investors. Avalara employs of transactional tax returns per more than 1000 people at its year, and manages millions of headquarters on Bainbridge exemption certificates and other Island, WA and in offices across the compliance related documents. U.S. and in London, England and Pune, India.
For more information, please visit www.avalara.co.uk
71 US Passport 2016 Cross-Border Trading Report eCommerce Worldwide 2 Ching Court, 49-53 Monmouth Street, A report researched & compiled by Covent Garden, London, WC2H 9 EY. eCommerce Worldwide, supported by T +44(0) 203 696 0980 E [email protected] Published January 2016 ecommerceworldwide.com
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