Domesticated markets, including imminent Brexit, are picking up steam around the world and fundamentally impacting how companies approach growth in the global economy. In this increasingly global market, a new search for a regional and local identity has become highly important to consumers.
In spite of this, retailers still need to find a way to scale and expand into new markets. To do so, they’ll need a sharpened focus on market localization, and their ability to successfully expand and thrive in new markets will increasingly rely on their level of local expertise.
As a global retailer, it’s important to consider and understand the elemental differences between local markets. This is especially true when looking through the perspective of payments. Money is rooted in culture and tradition, and in order for retailers to succeed in new markets, they need to first let go of their own cultural norms and understand local payment preferences. With this in mind, retailers need to prioritize their payment strategy and should consider it a pillar of any expansion plans.
These are the four questions retailers need to ask when breaking into a new local market:
- Are we offering a unified experience across different markets?
As a retailer, it’s hugely important to tailor the payments experience to local markets. But why stop there? You can go the extra mile by delivering a consistent, personalized payment experience to customers anywhere in the world, across any channel — in essence, providing them with all the comforts of home, even from thousands of miles away.
For example, a retail brand that uses a unified payments partner can provide customers from all around the world with a familiar transaction experience, regardless of their location. So whether you pop into a retail brand’s brick-and-mortar store in Paris or Los Angeles, you will be offered products in your local currency and through your preferred local payment method, all of which contributes to an exceptional retail experience.
But the opportunities extend beyond brick-and-mortar stores. According to a recent survey, the majority of consumers want the flexibility to browse, buy, pick up and return orders in-store, online and through mobile. In order to keep these shoppers happy, it’s critical for retailers to create a unified experience that brings together the best parts of online and in-store shopping to give them the frictionless experience they’re looking for.
- Are our offerings available through the preferred local payment methods?
Coming from a card-driven market like the U.S., it’s easy to assume the majority of the world’s consumers use credit cards, but that sentiment doesn’t always ring true — even in some of the largest markets. As you expand, it’s important to partner with local acquirers to not only offer preferred payment methods but also understand the cultural underpinnings behind them.
Many consumers in key global markets consider credit to be a negative thing and instead utilize an array of preferred methods, ranging from vouchers to cash-based systems. Take Brazil, where many consumers rely on Boleto Bancário, a cash-based payment method with 15 percent market share that enables online shoppers to print an invoice at the time of purchase and complete the transaction at a bank or convenience store using cash.
In New Zealand and Australia, EFTPOS — electric funds transfer at point of sale — is one of the most popular payment systems, seeing more than six million transactions every day. The system, which does not connect to MasterCard or Visa, digitally transfers funds via payment cards at EFTPOS payment terminals.
Working directly with local acquirers is critical for market penetration. Even if the preferred methods seem more cumbersome or less technologically advanced, it makes all the difference for retailers in terms of return and local success on a global scale.
- Are we in compliance with local regulations?
Countries all over the world have different regulations when it comes to payments, and for retailers, it’s crucial to understand these expectations and how they can affect the payment experience.
The European Union’s second Payment Service Directive, or PSD2, serves as a prime example. Established in 2015 with the goal to create a single European payments area, PSD2 effectively establishes a standard for payments, with new rules around authentication and fraud. In a similar way that merchants need to consider the local preferred payment methods, they also need to understand the expectations of regulations in the regions they’re entering, and how that impacts the payment experience.
- Are we pricing fairly?
When breaking into a new market, you need to consider how to translate costs and price items fairly. Customers don’t want to feel cheated because of conversion rates that result in wildly different pricing. On the other side of the coin, as a retailer you don’t want certain markets to pay less and benefit more from varying exchange rates. Thus, determining a clear, impartial pricing structure is crucial.
Along with determining a fair price, it should go without saying that you need to offer products in the market’s local currency. This is non-negotiable and needs to happen right off the bat, as it has a direct effect on conversions and sales. For many U.S.-centric retailers, pricing outside of U.S. dollars is unfamiliar, but its importance can’t be overstated. Think of it this way: the odds are, consumers won’t buy an item without understanding how much it costs. If your products aren’t presented in the local currency, you’re adding an element of friction to the shopping experience and are in danger of losing sales.
The idea of a “global economy” is, in many ways, slowing down as we continue to see a renewed push for domesticated markets in countries all around the world. With these changes comes the need for a new approach. Rather than take an international, “citizens of the world” view when expanding globally, retailers need to hone local expertise to thrive in new markets, and this starts and ends with their payments strategy.
Sam Halse is chief operating officer at Adyen.
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