E-ssentials

Customer Service

Online business poses unique challenges and opportunities for customer service. Online exporters must have an effective customer service program to build and maintain a customer base, and should consider hours of operation, local hires, language differences, etc. Customer service should be integral to website design and overall business strategy.

Resolving Complaints

Disputes between buyers and sellers are inevitable, whether the transaction occurred on or offline. How customer complaints are resolved is important to building trust and confidence with an online exporter's clientele. For most companies involved in online cross-border e-commerce, the most practical way of dealing with disputes is alternative dispute resolution (ADR, also known as ODR or online dispute resolution). ADR mechanisms can be more flexible, creative, timely, and cost efficient than courts in finding solutions that satisfy both parties. There are a number of commercial websites and private service providers that maintain information on international ADR. U.S. Commercial Service officers in your target market can help you identify a country's ADR use. See also, research on the Top Internet Markets FAQ at left. Companies may also choose to participate in a trustmark program (also known as a consumer confidence seal program) that includes ADR services. For example, the Global Trustmark Alliance (GTA ) is a new membership organization created to encourage cross border e-commerce by fostering consumer trust, encouraging good online business practices, and discouraging the development of burdensome and disparate governmental regulation.

Be Responsible

In the online world, success and reliability are equal partners. Before using the Internet to export, companies should review their online practices and ensure that they are seamless with their offline business practices, that they are worthy of their customers' confidence, and that they conform to the relevant laws of the target market. Companies should pay particular attention to taxation, privacy, security, unsolicited commercial emails (UCE), advertising content and jurisdiction. Of course, companies should always deal in good faith.

Taxation

An online merchant selling to foreign customers should pay careful attention to the tax implications of those sales. In general, once a company crosses a certain threshold of activity in a foreign country, the company becomes subject to income tax in that foreign country.

Privacy

U.S. organizations that collect personally identifiable information online should display their privacy policies prominently, and offer data subjects (i.e. customers, employees, other business contacts) choices about how their personal information is used. Customers, for example, should have the opportunity to refuse having their personal information shared with others or used for promotional purposes.

Many countries have privacy laws, and organizations should take care to comply or face prosecution. For example, the European Union prohibits the transfer of personal data to non-European Union nations that do not meet the European "adequacy" standard for privacy protection. The U.S. Department of Commerce, in consultation with the European Commission and the private sector, developed a "safe harbor" framework that provides U.S. organizations with a streamlined means to comply with the European Union requirements. Companies may self-certify to the safe harbor through the safe harbor website.

Security

Compared to other forms of consumer purchasing, the Internet is safe, as long as the online merchant takes prudent business precautions.

Electronic Signatures

In legal terms, an online sale is an enforceable contract, a valid and binding agreement. However, in some overseas markets, a contract is only enforceable if it is signed "in writing." Such jurisdictions do not recognize electronic signatures and, in the event of a dispute, would not enforce an agreement made via email or through a website. While many countries have modified their laws to recognize electronic signatures, online exporters should check to be sure their target market accepts electronic signatures and, if so, if those countries impose restrictions on which signatures/technology are legally valid. More information on electronic signatures can be found at the Department of Commerce Office of Information Technology and Electronic website, or via the U.S. Commercial Service Officer in your target market.

Pricing, Tariffs, Shipping & Licensing

The methods to determine appropriate pricing, tariff rate and ideal method of shipping for your product(s) are no different for e-commerce transactions than they are for other transactions. For convenience, the following subjects link to the appropriate subjects on Export.gov.

Pricing Your Product

The process of shipping and pricing goods purchased over the Internet is identical to those purchased via other means except for products delivered digitally over the Internet (i.e., music, videos, games, software, etc.), which are downloaded from a web site.

Determining Tariff Rates

Find import tariff rates by country for your product(s). Account for tariff rates when pricing your product.

Shipping Your Product

Research information on shipping, logistics, required documentation and service providers that can help facilitate getting your products to port and through foreign customs.

Note that a Shippers Export Declaration is not required for "intangible exports of software and technology, such as downloaded software and technical data (i.e., software delivered electronically), including technology and software that requires an export license and mass market software exported electronically." This is true regardless of value.

Export License Requirements

Most export transactions do not require specific approval from the U.S. Government. The Department of Commerce has jurisdiction over "dual use" exports (commercial items which could have military applications) as well as purely commercial items. Other U.S. government agencies regulate more specialized exports. For example, the U.S. Department of State has authority over defense articles and defense services. Before shipping your product, make sure you have determined the export license requirements for your transaction.

Companies who use the Internet to reach overseas customers frequently use their website to process orders and accept payments. To ease international customers' use, companies should consider installing currency converters on the payment page. Additionally, as payment practices usually vary from country to country, it is important that the prevalent payment mechanisms be identified and incorporated into the order-processing component of the web site. U.S. Commercial Service Trade Specialists in your target market can help you identify a country's most common payment mechanisms, which you should consider before commencing cross-border e-commerce in a particular market. See also, research on the Top Internet Markets FAQ .

Covered In This Section:

• Credit Card Payments
• Account-to-Account Transfers
• Person-to-Person Transfers
• Taxation

Credit Card Payments

For B2C transactions, many overseas customers use credit cards for online purchases, but credit cards are not a universally common method of online payment. For example, regulations in some countries hold cardholders liable for fraudulent charges, other countries are culturally cash-based, and others simply do not like credit. Nonetheless, to offer credit card payment services, a company must establish a credit card merchant account with a bank. The bank will process the transactions in exchange for a fee. Companies should compare the fee structures of banks to see which works best for the size and number of transactions expected.

While fast, credit cards carry their risks. Chargebacks can be very costly for online exporters. Common chargeback reasons are: fraud, dispute over the quality of merchandise, non-receipt of merchandise, or amount charged to card was incorrect. Companies accepting online credit card transactions should be knowledgeable about their credit card and bank's policies toward chargebacks and how to avoid them.

Account-to-Account (A2A) Transfers

A2A transfers, in which money is transferred electronically between the customer’s and merchant’s bank, are popular in many countries. A2A transactions offer the advantages of occurring in real time and reduce the potential for fraud and chargebacks. Unfortunately, because A2A transactions are rare in the U.S., few U.S. banks currently offer this service.

Person-to-Person (P2P) Transfers

There are many companies offering P2P services, in which funds are sent electronically to a third party, which in turn deposits the funds in the merchant's account. An example of a P2P service provider that conducts cross-border transaction is PayPal. PayPal lets anyone with an email address securely send and receive online payments using their credit card or bank account. PayPal will also conduct currency exchange, allowing the customer and merchant to operate in their preferred currency. Other P2P providers, such as Western Union's BidPay, accept a credit card payment from the payer and send a money order to the payee. Internationally, P2P transfers have come under some degree of scrutiny (see a United Nations Discussion Paper about Informal Money Transfer Systems ), so it is advisable to consult with a Commercial Service officer in the country you are targeting before deciding on a particular payment mechanism.

Taxation

An online merchant selling to international customers must pay careful attention to the tax implications of those sales. In general, once a company crosses a certain threshold of activity in a foreign country, the company becomes subject to income tax in that foreign country. In many cases, a company must have a "permanent establishment" in the foreign country before that country will subject the company to income tax on the company's business profits from that country. Thus, for example, an American online vendor of digitally- or physically- delivered products that does not have equipment or personnel in Japan generally would not be subject to Japanese income tax on its sales. However, there are important exceptions to this general rule. Some payments from customers in a foreign country may be subject to withholding tax by the foreign country (e.g., if the foreign country determines that the payments are "royalties" or other payments subject to withholding).

Electronically delivered goods should be treated like any other sale to a foreign customer. It generally is the responsibility of the customer/importer to declare their purchase and pay any taxes. Tax and tariff information on a country-by-country basis is available, or contact a Commercial Specialist in the targeted country for more information.

In addition, a foreign country may impose other types of taxes, such as value-added tax (VAT), on sales into its jurisdiction. For example, as of July 1, 2003, the EU member states began taxing sales of electronically supplied products and services by non-EU firms to non-business customers located in the EU. Non-EU providers of electronically supplied products and services are now required to register with a tax authority in a member state and collect and remit VAT based on the VAT rate of the member state where their customer is located. More information on online taxation can be found at the Department of Commerce, Office of Information Technology and Electronic website.

Market Development on the Web

As with brick and mortar enterprises, market development is an essential ingredient for all of the above models and must be an integral part of a firm's e-business presence on the Internet. Companies should consider and evaluate the advantages of advertising online as an extension and component of their corporate growth strategies and as part of their international marketing efforts. Advertising messages often appear on portals or other websites that draw viewers with content (news, information) and services (such as email, chat, forums, etc.). Companies may seek to advertise on search engines that attract high traffic volume (e.g., Yahoo!) or target a specialized demographic (e.g., ivillage ). Some portals sell favorable link positioning or advertising keyed to particular search terms in a user query (e.g., Overture). Companies may also consider using an advertising network that feeds ads to a network of sites, thereby enabling large marketing campaigns (e.g, Doubleclick). (Note that all the websites listed above have been internationalized or have local mirror sites.)

Direct E-mail

Direct E-mail may be a good way to promote web presence, depending on the market, product, or service. Direct e-mail is an inexpensive way to reach thousands of potential customers. However, several countries have legislation prohibiting or restricting unsolicited commercial email (see the Direct Marketing Association homepage at http://www.the-dma.org for more information on international spam legislation), and certainly any email must not constitute fraud. The Direct Marketing Association suggests that any email marketing should have:

1. an honest subject line;
2. no forged headers or technological deceptions;
3. the identity of the sender, which includes a "physical" address, and
4. an opt-out that works and is easy to find and easy to use (although note that some countries may specify an opt-in approach. Research spam legislation for the country you are targeting.)

Whether you're targeting domestic or international customers, companies should be aware before choosing direct e-mail as a way to promote web presence of the potential for backlash against unsolicited e-mails by consumers who feel overwhelmed by the number of such e-mails received.

Identifying Your E-Markets

Deciding which markets to target is one of the most important decisions a potential exporter can make. It is important to learn how to research foreign markets and tailor your products to regional tastes. U.S. Commercial Service trade specialists in your target market can help you identify market research needs you should consider for cross-border e-commerce. See also, research on the "Top Internet Markets FAQ ".

Step-by-Step Approach to Market Research

Learn how to best utilize the market research made available by the U.S. government on the internet.

Market Reseach Reports

Search the market research library, view a video market report, or find a wealth of country and industry-specific reports and trade statistics.

Types of E-Commerce Web Sites

Electronic commerce offers much promise to U.S. firms interested in using the Internet as another vehicle for exporting. However, the marketing executive should be familiar with the steps necessary to make the firm's web site e-export capable. Many U.S. companies have a web site that fulfills one or more marketing functions tailored to their business specialties. These sites feature one or more of the following characteristics (Note: all of the sites given as examples below have been internationalized or have localized mirror sites to facilitate cross-border e-commerce):

Transactional Site

People who shop online are most familiar with this type of website. A transactional site may be an electronic storefront for a brick-and-mortar retailer or a catalog business, (e.g., Lands’ End ), or a manufacturer showroom for those wishing to sell directly to the public (e.g., Dell Computer ). Transactional sites conduct full “end-to-end” transactions via the website, allowing customers to search for, order, and pay for products online as well as allowing them to contact the company for after-sales service. The most sophisticated sites create efficiencies by integrating the transaction process with back-office systems such as accounting, inventory, sales and others (e.g., Amazon ).

Information Delivery Site

This site generates sales by promoting corporate awareness rather than facilitating online transactions. Its function is similar to a brochure, providing information about the product or service and contact information on how to proceed with a purchase. Because this site is often static and doesn’t require the software systems necessary for online transactions, it is less expensive to design and maintain than the transactional site. An information delivery site is ideal for companies that market products and services that cannot be provided online or goods that cannot be sold online (e.g. Ford , Coudert , Caterpillar ).

A modified version of this site permits the buyer to shop online for the best price from competing vendors providing the identical product, e.g., authorized dealers of Honda America. Information on options available for a particular model allows the buyer to “visualize” the configuration and obtain an estimated price for the vehicle.

E-marketplaces

These sites are market-makers: they bring buyers and sellers together to facilitate transactions. Participation in a brokerage often provides an efficient way of finding a customer without the expense of building a proprietary transactional website. Types of brokerages include auctions (e.g. eBay ), virtual malls (www.virtualmall.com ) and matching services (www.buyusa.gov ).

1. Select A Domain Name

Selecting a domain name for your company's international website(s) is the first important decision you'll make and can potentially have significant marketing implications.

2. Register at Search Engines

Help potential customers find your website by registering with the major search engines in the countries you wish to target.

3. Choose a Web Host

Find a dependable web hosting service to house your localized website(s). Many hosting providers offer additional value-added services such as site maintenance, search registration, site development, etc.

4. Website Content – Localize and Internationalize

Target international customers by tailoring your website to local language and cultural tastes.

5. Execute Orders

Enable your customers a variety of payment options that meet local business practices and be aware of other considerations when doing international business such as taxes, shipping, customs duties, and after sales service.

What do you need to have an online store and what exactly is a shopping cart?

Shopping cart software is an operating system used to allow consumers to purchase goods and or services, track customers, and tie together all aspects of ecommerce into one cohesive whole.

While there are many types of software that you can use, customizable, turnkey solutions are proven to be a cost effective method to build, edit and maintain an online store. How do online shopping carts differ from those found in a grocery store? The image is one of an invisible shopping cart. You enter an online store, see a product that fulfills your demand and you place it into your virtual shopping basket. When you are through browsing, you click checkout and complete the transaction by providing payment information.

To start an online business it is best to find a niche product that consumers have difficulty finding in malls or department stores. Also take shipping into consideration. Pets.com found out the hard way: dog food is expensive to ship FedEx! Then you need an ecommerce enabled website. This can either be a new site developed from scratch, or an existing site to which you can add ecommerce shopping cart capabilities.

The next step, you need a means of accepting online payments. This usually entails obtaining a merchant account and accepting credit cards through an online payment gateway (some smaller sites stick with simpler methods of accepting payments such as PayPal).

Lastly, you need a marketing strategy for driving targeted traffic to your site and a means of enticing repeat customers. If you are new to ecommerce keep things simple- know your limitations.

Ecommerce can be a very rewarding venture, but you cannot make money overnight. It is important to do a lot of research, ask questions, work hard and make on business decisions on facts learned from researching ecommerce. Don't rely on "gut" feelings. We hope our online ecommerce tutorial has helped your business make a better decision in choosing an online shopping cart for your ecommerce store.

Are You E-Commerce Ready?

Companies that have decided on how to portray their business online must assess whether they have the most efficient information technology (IT) solutions to execute their online exporting programs. IT embodies a range of computer systems and software applications for managing a firm's web site, as well as personnel records, back end databases, etc. With more and more cyber attacks on government and corporate sites, companies should invest in security technologies to protect themselves and their customers from identify theft and denial of service.

An IT assessment should answer the following questions:

• What is the firm’s current IT usage? Is it at capacity? What are the plans for additional ITinvestment to upgrade existing systems?
• What business applications are best suited to move on line for B2B or B2C electronic?
• What does the cost/benefit analysis of all possible projects involving IT show?
• What are possible current and future security issues and what is the action plan for correcting problems?

There are, of course, many other factors to consider in doing international e-commerce, such as executing orders and payment issues that have a special e-commerce perspective, which are are addressed in other parts of this site.

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