With more people opting to do their shopping online, coupled with a decrease in transnational shipping rates, it’s more feasible than ever to sell to a global audience. 4.54 billion people now have access to the internet, according to a Statista survey in January 2020, so the addressable market is larger than ever. International selling allows you to broaden your reach and expand your business, as well as spreading the risk.
But for every yin there is yang—there are key points to consider when adopting a cross-border ecommerce strategy (especially for those running on Shopify). Planning with these actionable tips will help you avoid the common pitfalls of international e-commerce. But before diving into that, you have to make sure it’s worth selling internationally.
Is it worth selling internationally
Just as your addressable market will grow when you sell internationally, so will the factors you need to consider:
- Have you calculated the cost of shipping to countries you operate in?
- Have you decided whether you’ll offer free shipping? Or will you bake shipping costs into the price?
- Have you considered the feasibility of getting your product to the customer? In other words…
- How long will it take?
- How many suppliers are there?
- What’s the risk of the product being stolen or damaged in transit?
A good question to consider: will the profits from selling cross-border be worth your company’s effort to enter these new markets?
Once you know which international markets you want to tap into, try calculating the cost of running international operations. Will your projected additional monthly revenue from expanding cross-border outweigh your projected additional monthly cost?
If so, it’s time to prepare your Shopify site for more international traffic.
Use a multi-currency strategy
Selling in multiple currencies lets your customers pay for their orders using their currency. If your business is in one of the following situations, multi-currency is a home run feature:
- You have one or more stores that have international traffic and product page views, so you want to boost your conversions among international shoppers.
- You’d like to offer regional stores e.g. you want to sell in the U.S. and Canada (geographically close and share holiday shopping seasons, but they use different currencies). You could sell primarily in the U.S. (offering multiple currencies) while offering a “regional experience” to Canadian shoppers.
- You’re running on Shopify Plus or have multiple stores with strong international traffic. One of your international stores uses multi-currency to sell to customers who live in countries you haven’t yet marketed to.
In addition to these use cases, adopting a multi-currency strategy has a number of benefits:
Optimize for conversions
It’s no secret that offering prices in shoppers’ own currencies increases their confidence in your brand.
Multi-currency ensures that customers see your pricing for every product as a simple, rounded number (e.g. 10.00 Euros rather than 5.26 Euros).
Minimize abandoned carts and refunds
According to Worldpay, merchants see a 13% increase in cart abandonment when customers are shown prices in a foreign currency. This is partly due to fears of conversion fees, plus additional charges that may occur if you choose to pay in a foreign currency.
By displaying a shoppers’ native currency as a payment option at checkout, you’re building customer trust and increasing your chances for a purchase instead of an abandoned cart.
International customers will appreciate both your straightforward approach to pricing and the lack of effort required on their end to see your pricing in their native format.
How to offer multi-currency
With dozens of highly-rated apps in the Shopify market, it’s actually easy nowadays to offer multi-currency on your store(s).
Automated software on the Shopify app store can easily help you:
- Convert currencies for your customers at checkout
- Automatically round up prices to match your pricing standards
- Make refunds in foreign currencies without using a third-party app
But first things first: do you know which currencies you’ll offer on your storefront? Will it even benefit you to offer multi-currency? What will your multi-currency strategy look like? And how do you even get started?
Know where your customers come from
Before you download any apps, consider where your customers come from.
While this definitely includes knowing which marketing channels are driving the most traffic to your product pages, which campaigns are working, etc., it also means you need to know which international markets have the most interest in your products.
If you primarily market to American customers but a growing number of orders are coming from Australia, it’s time to shift your approach and make sure your shopping and checkout experience is excellent for Australian shoppers, too.
Here are a few multi-currency tools that will help create a seamless experience for international customers:
Bold multi-currency: Bold multi-currency is a free currency converter app on the Shopify app store. The app lets shoppers change currencies quickly and easily via a built-in currency switcher, which works with any Shopify theme.
- Supports all currencies, with every currency included free
- Merchants can set a specific rate for any currency
- Supports multiple rounding rules for more accurate pricing, plus allows different rounding rules for different currencies
- Makes pricing consistent for shoppers by rounding at the product level and carried through into the cart
Best Multi Currency Converter: This Shopify app is a mobile-oriented converter tool aimed at stores that primarily sell internationally. The app offers an auto-currency switcher that can run 100% in the background, plus…
- Auto-selects currency based on a shoppers’ location
- Automatically removes price decimals
- Supports every currency and also works with every Shopify theme
Auto Currency Switcher: This app detects the country of the user based on their IP and converts the price to their local currency automatically, plus…
- Displays country flag in the currency selection box
- Customers can choose where to place the currency selection box
- User readable price figures (with decimal points removed)
Shopify converts refunds automatically, but for a better shopping and checkout experience for your customers, we recommend one of these three apps to enhance your store experience and maximize your potential for an order—not an abandoned cart.
Use supply and demand to your advantage
A final key consideration for optimizing your pricing strategy is your competition (or lack thereof).
If you’ve found an untapped market that does not offer access to your product, then demand will probably outstrip supply. If you find yourself in this situation, try charging different prices in different markets.
Another method is to increase the price gradually and observe the change in demand. If it doesn’t drop your sales revenue, affect your average order value, or increase your cart abandonment rates, continue exploring different price points until you find the “sweet spot” where the highest number of people are likely to purchase.
But if you’re entering a competitive market in another country, it’s likely your competition will influence your pricing strategy. In this case, it’s crucial to fully understand your competitors and their strategy, supplier and shipping conditions, and profit margins.
Once you know what your competition is doing, you can:
- Opt for a more profitable market elsewhere, or
- Take an aggressive approach and attempt to gain market share
Of course, this also depends on your own strategy—whether you’re pricing on the high end or low end, or somewhere in the middle.
Accurately track the ecommerce metrics that matter
When you’re looking to enter a competitive international market, your average customer acquisition cost (CAC) could vary quite a bit. It could also have a massive impact on your profitability, which directly affects your pricing strategy.
A key performance indicator (KPI) in ecommerce, CAC is the calculation of the total cost of acquiring a new customer. CAC is crucial for Shopify merchants because if your customer acquisition cost is greater than your revenue for long enough, your store will be out of business (in more than just one country!)
CAC generally includes factors like marketing costs, salaries, etc., divided by the number of customers acquired:
Promotional costs ÷ number of new customers = CAC
For instance, if company A spent $200 on marketing in year 1 and they acquired 200 customers in the same year, their CAC is $1.00.
Let’s take another example – an ecommerce company running on Shopify, called Fin, which sells protein powders. Fin spent $50,000 on advertising last month, and its marketing team says 5,000 new orders were placed. This means their CAC is $10.
However, Fin’s average order value (AOV) is $20.00, with a markup of 100% This means that Fin makes $10 per sale and $2.00 per each customer, which helps pay for the company’s overhead costs and other expenses.
This is a fairly simple way to calculate CAC. But how will Fin measure CAC once one of their customers makes more than one purchase, or she becomes a loyal customer?
This metric would be Fin’s customer lifetime value (LTV or CLV), where the purpose is to form a better (and more accurate) idea of what your customer’s CAC really means to your store.
Shopify merchants need to calculate their LTV accurately and track it consistently. Why? Because both customer turnover (churn rate) and profit depend on your customers’ desire to continue engaging with your brand and coming back to your store for more purchases. Here’s one way you can calculate lifetime value, though the results will be incomplete (see the section below):
LTV and CAC are closely tied together as the metrics that should receive most of your attention. By itself, LTV is the best indicator of future churn (the live-and-die metric for Shopify stores), your best projector of profit, and perhaps the biggest help in making marketing and sales decisions, such as:
- Should you continue selling in this country or this region?
- Should you increase/decrease our prices for this particular buyer group?
- Should you offer discounts, rewards, or other incentives for this buyer group?
Ensure your Shopify tracking is accurate
Unfortunately, many merchants are stabbing in the dark when it comes to calculating LTV.
And even a data powerhouse like Google Analytics can’t properly calculate LTV on its own, so many merchants resort to their own Google Sheets calculations (or online LTV calculators).
Luckily, there are automated solutions for calculating LTV and CAC accurately, designed specifically for those who sell on Shopify.
By fixing your tracking, you’ll get accurate data about your marketing attribution (to see which paid campaigns are working and which aren’t), shopper behavior, and ecommerce events like adds-to-cart, removes-from-cart, cart abandonments, product page views and clicks, your customers’ entire checkout flow, and more.
Offering cross-border sales has a number of unique benefits, such as:
- Multi-store growth
- Tapping into new audiences
- Higher potential success for products that may perform better in other markets
But to be successful and profitable, your pricing strategy must be informed by the right currency considerations, the correct shipping strategy, and accurate calculations for the metrics that matter.