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.