Research on cross-border strategies in Europe

With growing competitive pressure among e-retailers, and the maturity of domestic e-commerce markets, cross-border e-commerce is expanding rapidly. Cross-border e-commerce is expected to grow from $230 billion in 2014 up to $1 trillion in 2020 and is defined as any purchase via the Internet from a company situated in another country and jurisdiction.

In assessing (foreign) e-commerce websites, consumers use several criteria to determine who to buy from. The first is information on the website that is needed to make a rational purchase decision and to facilitate an online transaction (e.g., payment methods, return policy, and security information about online transactions). The second is cultural customization of the website. The content on a website is considered to be cultural customized when the information on the website reflects the local culture of visitors. A website perceived as cultural congruent (i.e., the website is perceived by customers as specifically developed for their own country) positively influences consumers’ trust and purchase intentions.

This leads to two important research questions:
1) To what degree have European retailers culturally customized their websites in cross-border e-commerce? (assignment 1)
2) What measures do European retailers take to enhance trust perceptions and reduce risk perceptions of foreign customers? (assignment 2)

This second research question has been studied by Stephen Lubbersen, marketing student at the Amsterdam University of Applied Sciences. The study contains an analysis of the problem; a literature study; data collection; analysis, results and suggestions for the cross-border e-commerce industry and for future research.

 Click to view the presentation of the results

Management Summary

Although the cross-border e-commerce (CBE) market is growing rapidly, there are still boundaries, making it difficult for this market to reach its full potential. E-retailers, who desire to go cross borders, occasionally end up not going because of the barriers in the market. Examples of these barriers are, for instance, logistical issues, language barriers, and legal issues.

From a consumer perspective, an often-mentioned barrier is trust. The consumer finds it difficult to trust a cross-border e-retailer compared with an e-retailer who is established in his or her home country. As a Dutch ING article describes, only 2% of the consumers would choose an e-retailer from another country over a Dutch e-retailer. Based on this information, the following problem statement can be formulated:

“What measures can e-retailers, who want to participate in CBE, take on their websites to gain trust from new customers from other countries?”

The goal of this research is to determine what measures e-retailers can take to enhance the consumer’s trust level. In the theoretical framework, it is established that trust on CBE is influenced by four factors. These four different factors are website security, website layout, personal characteristics, and country statistics and have been combined into a conceptual model.

Furthermore, in the methodology chapter, the chosen research methods are explained. This research consists out of literature overview, desk research, quantitative, and qualitative research. For the research, two elements from the conceptual model are used; these elements are website security and country statistics.

Desk research

The desk research provides e-retailers information about trends and developments on the market of CBE. To illustrate, the shift of payment methods attracted a great deal of attention. In particular, an emerging alternative payment option is e-wallets.

In addition, it is evident that most European countries still favour the use of laptops when purchasing products on the Internet; the market share for tablets and smartphones is remarkably lower.

Finally, it is noticeable that many e-retailers still use geo-blocking to rule out potential customers from other countries, making it more beneficial for e-retailers who do aim to cross borders. This way, consumers are more likely to find the company’s website.

Qualitative Data

Interviews conducted within the e-commerce landscape resulted in the collection of relevant information. Within the dimension security, it appears that privacy is the least trust factor, while, according to the experts, delivery is the most crucial trust factor.

Next to delivery being the most important trust factor, experts expect most developments and trends to be related to delivery. Examples are last mile deliveries, drop shipments, and predictive intelligence.

From interviews with experts in the field, it also becomes apparent that the food market will breakthrough in the e-commerce landscape. Moreover, services combined with the product will also become more influential, customers do not simply desire the product but they also want a total package. As a case in point, a customer does not only want to purchase paint but also wants the service of painting the walls.

Quantitative Data

The quantitative research is the most decisive part of this study. Within this research, 20 European countries have been analysed with the help of 28 questionnaire questions. This resulted into a great deal of data and made it possible to examine whether countries differ from each other.

The answer is a definitive yes; there is not a “one fits all” strategy to enter the European market, as every country has its own set of values. For example, a Dutch website places more emphasis on trust marks on his or her homepage compared to a Bulgarian website.

Furthermore, countries behave differently, which makes it possible to create a trust strategy for each country independently. Based on their scores in the survey, recommendations can be made.

The question about the possibility for consumers to return products for free is, for instance, answered differently. From the data, it is evident that 61% of the Finnish people always offer the possibility to return products for free, while numerous other countries do not score higher than 10%. As a result, an e-retailer from a different country might not be aware of this policy and offer products to Finnish consumers without the option of free returns, making the website less trustworthy for the Finnish consumer.

Additionally, the correlation of certain country statistics and the trust rankings is also explored. As such, a correlation between e-commerce maturity and the trust ranking can be observed. Hence, it seems that the more mature a country, the more information and options are available on an e-retailer’s website from that specific country.

Therefore, it is recommended for e-retailers to examine the country they aspire to operate in. Subsequently, they should consider the statistics within this report to enhance the consumer’s trust perception, which can be done on 28 different variables. Furthermore, the maturity of the country is an indication of how much trust features are required on the website.