In this post we share best practices for online retailers looking to seize this opportunity and grow revenue from international consumers.
Exotic goods from lands afar have captivated minds since the dawn of humanity. For thousands of years, camel trains and ships carried goods from distant lands. More recently, travellers would sail or fly abroad, filling suitcases to the brim with local fashion and memorabilia. Today, we still seek the “alluring” and the “different,” and competition has added “bargain” to the list. But there’s no need to board a plane. We can simply launch a web browser from the comfort of our own homes to experience the back-to-back sales and endless choices that eCommerce has to offer.
Cross-border sales, meaning purchases made by residents of one country from a business based in another, account for 25% of all eCommerce orders today. This global market is growing rapidly and is expected to reach an astounding $2 trillion by 2018! In this post, I share best practices for online retailers looking to seize this opportunity and grow revenue from international consumers.
Why miss out on the fun?
While access to millions of potential new customers across the world presents a huge financial opportunity, cross-border eCommerce poses some challenges for merchants more adept at handling domestic orders. Cross-border consumers have unique shopping behavior and use international credit cards or other foreign payment methods. In order to best handle these orders, retailers should be sure to do the following:
Learn how to correctly interpret shopper behavior
Behavior that would be considered suspicious in the context of a domestic purchase may be completely legitimate in a cross-border transaction. Reshipping services and proxy servers are two relevant examples:
Reshippers: Using a reshipper (aka package forwarding service) in a domestic order may indicate that the buyer is trying to mask their real location. In rare scenarios, a domestic consumer may use a reshipper to avoid local sales taxes by using a reshipping service in a neighboring state. But in cross-border sales, consumers utilize reshippers to lower shipping costs or to shop from sites that don’t ship to their home country. Residents of the Caribbean island states commonly use US-based reshippers to receive goods purchased on US retail sites. Our data shows that there is 0% fraud in online fashion purchases by consumers from Barbados, the Bahamas and Jamaica who shipped to a US address.
Proxy servers: Fraudsters often connect to the Internet via proxy servers – usually through a service that assigns them with an IP address different to the true location of the computer from which the order is being placed. But just like reshippers, in addition to the fraudulent use case, there are completely valid reasons to use proxy servers. Some international customers use proxy servers to access media sites unavailable in their country, such as Netflix or the BBC. Other consumers choose to use proxy services due to privacy concerns. Chinese consumers are avid users of proxy services, as these connections allow them to gain access to websites blocked by their government, such as Facebook and Youtube. In fact, we detect proxy server usage in almost 10% of online purchases by Chinese consumers, and we still safely approve 75% of these orders. In other words, 3 of every 4 online Chinese transactions with proxy servers can and should be approved.
Don’t let biases influence your decisions
Your perception of certain overseas markets, especially after being hit with fraud from abroad, might lead to you to adopt an overly cautious policy that results in the rejection of most online orders from these markets. Unfortunately, relying on your personal idea of what is “high-risk” can lead you to reject good customers and to curb your cross-border sales.
Ukraine is ranked a dismal 130th on Transparency International’s Corruption Perception Index, so you may be surprised to learn that 93% of online purchases placed from Ukrainian IP addresses can and should be safely approved. Riskified also approves and guarantees approximately 97% of eCommerce orders from Nigeria, the birthplace of the notorious Nigerian Prince email scam. Moreover, it’s important to understand that some of the tools you utilize to manage fraud have built-in biases. For retailers relying on shared blacklists, the negative experiences of other businesses can pre-determine the way certain international orders are handled. Another example of built-in biases is IP address risk scoring tools. For example, Mexican IP addresses consistently receive high proxy scores, yet 83% of online orders placed from IP addresses in Mexico are safely approved by Riskified. To demonstrate the potentially negative impact of blindly relying on third-party scores, we created a visual showing the rate of safely approved online purchases from countries with consistently high proxy scores:
Familiarize yourself with local social networks and data sources
While fraudsters go to great lengths to conceal their true identity, good customers will often have a solid digital footprint – leaving plenty of virtual “breadcrumbs” that when collected can corroborate the legitimacy of their purchase. In some countries, Facebook isn’t the most popular social media network. To best handle orders from these markets, retailers need to be familiar with the relevant social networks, such as VK in Russia or QZone in China. Familiarity with local data sources will allow retailers to cross-check the physical addresses provided by the buyer. For example, in the UK, 192 serves as a local version of the Whitepages, while Italy and France have their own web-based phone and address registries.