Going Global: Roadblocks To Revenues

Many e-business owners are attempting to ride the limitless wave of the Internet overseas, a prospect that can be rife with dangerous twists and turns. Before a business can get up and running in another country, there are a number of issues that must be considered:

Internet users in some countries are more responsive to a national Web site than an international one. For that reason, a U.S. business that goes global must localize the site to the culture it intends to serve.

U.S. businesses that must rely on suppliers in other countries to fulfill orders may be in for a rude awakening if some of those foreign companies turn out to be unable to deliver the goods. Such was the case with ChemConnect, an online marketplace that welcomed a number of buyers and sellers from Asian countries, particularly China and India. In the end, ChemConnect’s customers had problems collecting payments and getting the goods they ordered. The marketplace ended up having to dismiss more than 400 companies from its group.

Having enjoyed freedom from taxation in the U.S. during the current moratorium on Internet taxes, some companies are surprised to find out that the rules are different abroad. If a U.S. business sells goods overseas, it must collect the value-added tax (VAT). In Europe, those taxes can be as high as 20 percent.

The best-kept secret concerning international e-commerce may be the hidden costs. Once duties, taxes, tariffs, shipping fees and the cost of tracking shipments are totaled, the figure can sometimes exceed the value of the goods being sold.

E-businesses are finding it difficult to price their goods in local currencies. Also, most U.S. e-commerce depends upon credit cards for payment, but many foreign populations do not use credit cards. Forrester Research, Inc. estimates that 88 percent of European merchants offer debit card or invoice payment plans for online transactions. Only about 14 percent of U.S. companies offer these payment types, since invoicing requires a delay in getting paid and debit cards have to be swiped in order to transfer funds from the customer’s account.

Why Not Stay Home?

With these and a number of other roadblocks and restrictions, why not just stay domestic and avoid the hassles? Simply put, the sheer numbers involved in going global are enough to make an e-business owner’s head swim.

In fact, International Data Corporation (IDC) forecasts that by the end of the year, 60 percent of the world’s Internet users will be non-U.S. residents. IDC also predicts that e-commerce sales in Europe will soar from last year’s $5.6 billion (US$) to $430 billion by 2003.

In Asia, online sales are expected to surpass $72 billion by then, compared with last year’s $2.7 billion.