Becoming Borderless

When most companies got hold of the recipe for e-commerce, there was one ingredient missing: the global flavor. This is especially true when it comes to U.S. companies that sell products to foreign buyers. What works when marketing products to customers over the Web in the U.S. may not work when trying to sell goods online to buyers in Bangladesh, Ireland, or Hong Kong. According to Forrester Research Inc., many major retailers such as the Gap accept only U.S.-based orders for their products. "There's no way you can take a Macy's strategy global and conduct sales from North America," says Sean Kaldor, group vice president of e-business research at International Data Corp. (IDC), who works from the IT research firm's Mountain View, Calif., office. "You need to at least think regionally, if not by country. If I'm a Macy's, I certainly need at least a distribution center in Europe." Get the picture? This e-business stuff becomes a whole lot trickier once you start thinking globally. Sure, anyone can punch up your Web site from, say, Paris or Frankfurt, and see your products and the prices you're charging. But what happens when they try to place an order? The answer is, for most Web sites, not much. Most commercial sites can't even do business overseas. An estimated 85% of the commercial Web sites in the U.S. don't sell anywhere but in the U.S., according to Forrester Research, "because of the complexities of shipping across borders," states an August report from the Cambridge, Mass., research firm. "Of the 15% that can handle global orders, most are shipping to only a few countries in Europe and Asia where they can fill orders out of local warehouses," the report continues. Oddly enough, though, IDC's Kaldor believes it's not the regulatory issues that are the major hang-up. "The regulatory issues can be easily managed," he says. The real stickler is the logistics of it all. Most companies doing business in the U.S. have little capability to ship products overseas one-by-one, let alone to provide any kind of support -- -warranty, return service, repairs, etc. -- once the product is sold. According to Forrester, simple issues such as a lack of accurate international addresses and an inability to price total delivery cost are seen as prime stumbling blocks to global online trade. Regardless of the reasons, many large companies are moving slowly into foreign markets with their online sales. "We see a lot of people taking it one country at a time," Kaldor reports. Still, manufacturers that have invested in a beachhead in Europe are doing fine with Web sales. Dell Computer Corp., for instance, already had an operation in Ireland serving mail-order sales. Another reason to move slowly on the world e-commerce front is that some markets have been slow on the uptake when it comes to embracing the Web. IDC reports that only 4% of consumers in Portugal are online, vs 31% in Sweden. This kind of dramatic difference in potential markets should be considered when deciding where to operate. One problem, of course, is that many companies can't afford to set up a distribution center in every country. Even so, smaller merchants can go global by using a third-party service firm to run regulatory interference for them. Obviously, with an estimated 30% of online shoppers living outside North America, the global e-commerce imperative is clear. Companies without a local presence overseas have at least a couple of choices, Forrester suggests. One way is to team with a service vendor to handle the final piece of international logistics. Another is to purchase software to calculate actual shipping costs and provide for international regulatory compliance. And the regulatory hassles of online international trade may well become more Byzantine before they get any easier. Late last year European Union nations began weighing a new rule that would require Web-based vendors to comply with 15 different sets of national rules for consumer protection. On the flip side of the global e-business coin, other organizations are trying to ease restrictions to Web-based sales across borders. A trade group called the Alliance for Global Business recently issued an updated Global Action Plan for Electronic Commerce. The group seeks to foster a stable, secure international legal framework for e-business, while at the same time urging world governments to exercise restraint in regulating Internet-based commerce.