global insights and guidance to selling internationaly with paypal

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INSIGHTS INTO SELL INTERNATIONALLY Dec 2015


2

Agenda –

1. Insights from global research done by PayPal in partnership with Ipsos. Research was conducted in 29 markets with approximately 23,000 consumers to examine how people shop online and across borders.

2. Framework for cross-border selling

3. Insights from PayPal data on Canada originated cross-border selling.


Incidence of online cross-border shopping Shopping across-borders is most prevalent in Ireland, Austria and Israel

3

78

33

64

14

69 61

49 43

63

35

15

51

67

38

21

65

45 51

33

55

30

59 56 62

88 73

30 35

65

20

60

33

79

28 35

47 50

32

58

78

46

29

54

71

32

45 45

60

40

64

37 36 36

11

23

60 59

32

2 7 3 7 3 3 5 6 5 8 7 4 4 8 9 3 10 4 7 5 6 5 8 2 1 4 9 6 4

US CA UK IRE DE FR IT ES NL CH AT SE PL RU IL TR UA BR MX AR NI SA EY IN JP SK SIN AU CN

North America Western Europe Middle East Latin America Asia Pacific Africa Eastern Europe

% Shop domestically only % Shop domestic and x-border % Shop x-border only

Self-stated domestic and cross border purchasing in past 12 months

Q27. Thinking about shopping online, from which of the following country or geographies’ websites have you purchased in the past 12 months? Please include your home country if applicable.Base: Online shoppers (size shown in appendix)

-8

-7

-6

n/a

-9

-11

-12

-6

-7

-5

+2

-8

-3

+4

-3

-2

-5

-1

+5

n/a

n/a

n/a

n/a

n/a

n/a

n/a

n/a

-11

+9

Ppt. change in x-border incidence from 2014 (where data available):


The majority of cross border purchases are still made on a computer

But in some less developed markets, a large proportion of cross-border purchases are made on a mobile device

4

64%

77% 67%

77% 80% 86%

78% 77% 81% 81% 82% 79% 79% 78% 79%

66% 54%

74% 69%

79%

50%

67% 59%

53%

75% 70% 71% 74%

53%

19%

12%

15%

12% 11%

8% 12% 12%

9% 10% 10% 10% 11% 13%

15%

19%

29%

14% 17%

11%

36%

18% 28%

30%

12% 19% 16% 13%

27%

13% 9% 15%

10% 7% 5% 8% 8% 8% 9% 7% 9% 7% 8% 5%

10% 12% 8% 10% 4% 11% 12% 12%

11% 11% 6% 11% 11%

14%

4% 2% 3% 2% 3% 2% 2% 3% 2% 1% 1% 2% 3% 2% 1% 6% 5% 4% 5% 6% 3% 3% 2% 6% 2% 5% 3% 2% 6%

US CA UK IRE DE FR IT ES NL CH AT SE PL RU IL TR UA BR MX AR NI SA EY IN JP SK SIN AU CN

North America Western Europe Middle East Latin America Asia Pacific Africa Eastern Europe

Q33. Thinking only about the purchases you make on websites in other countries, what proportion of your purchases in the last 12 months do you think were made using each device? Base = Cross border shoppers (size shown in appendix)

Other device Tablet Smartphone Desktop/laptop/ notebook

Average proportion of x-border purchases in past 12 month made on each device


China and the US are the most popular cross-border destinations For Western European shoppers however, shopping within Europe is still more popular

5

25

19

14

11

5

USA

China

UK / GB

Germany

Japan

Top online destinations among all online shoppers surveyed*

Top online shopping destinations for consumers Within each region* (% of online shoppers living in each region shopping cross-border from the country mentioned)

USA 30% CN 21% UK 16%

USA 29% CN 15% UK 7%

USA 38% CN 26%

JP 9%

DE 23% UK 21%

USA 19%

USA 26% CN 14% UK 9%

USA 30% CN 30% UK 12%

North America (n = 1057)

Central/South America (n = 1490)

Western Europe (n = 5823)

Africa (n = 1411)

Middle East (n = 1695)

Asia Pacific (n = 3651)

*Results are among all consumers surveyed, not weighted for population size

Q27. Thinking about shopping online, from which of the following country or geographies’ websites have you purchased in the past 12 months? Please include your home country if applicable.Base: Total online shoppers n= 16,302

Region definition (countries surveyed): Western Europe: UK, IRE, DE, FR, IT, ES, NL, SE, AT, CH, Central and Eastern Europe: PL, RU; North America: USA, CA; Latin America: MX, BR, AR; Middle East: TR, IL, UAE; Asia Pacific IN, CN, AU, JP, SK, SG Africa: NG, SA, EG

CN 31% USA 15%

UK 9%

Eastern Europe (n = 1176)


In most regions, clothing and apparel is the most popular category for cross-border purchases

6

Top x-border categories among all online shoppers surveyed*

Top x-border categories for respondents Living in each region* (% of x-border shoppers shopping x-border in each category)

Entertainment/education online=47%

Clothing = 44% Consumer electronics =

41%

Clothing=42% Entertainment/education

(physical) = 30% Entertainment/education

(digital)=26%


(digital) =45% Consumer Electronics=40%


(physical)=33% Travel & transportation

=33%

Clothing =53% Cosmetics/beauty = 34%

Travel & Transportation =32%

Clothing =51% Travel & Transportation= 35%

ConsumerElectronics=34%

North America (n = 456)

Central/South America (n = 803)

Western Europe (n =3124)

Africa (n = 734)

Middle East (n = 956)

Asia Pacific (n = 1469)


Clothing=54% Consumer Electronics=

39% Toys & Hobbies=34%

Eastern Europe (n = 555)

49

32

31

31

29

26

Clothing, Footwear & Accessories

Consumer Electronics

Entertainment/education (digital/downloadable/onlin

e)

Travel & Transportation

Entertainment/education (physical items)

Toys & Hobbies

Q28. In the past 12 months what kinds of products have you purchased from websites in other countries? Base: Cross-Border shoppers n = 8097

Region definition (countries surveyed): Western Europe: UK, IRE, DE, FR, IT, ES, NL, SE, AT, CH, Central and Eastern Europe: PL, RU; North America: USA, CA; Latin America: MX, BR, AR; Middle East: TR, IL, UAE; Asia Pacific IN, CN, AU, JP, SK, SG Africa: NG, SA, EG


Shipping costs, and reassurance about safety of purchasing are key drivers to cross-border shopping

7

50

47

41

38

37

37

36

35

35

34

Free shipping

Safe way to pay

Can find items which are hard-to-find locally

Free return shipping

Costs shown/payment possible in your local currency

Customer support in my language

Lower overall cost to buy items from another country

Proof of product authenticity

Faster delivery

Website available in my language or translation available

Q39. Which, if any, of the following would make you more likely to buy from a website from another country? Base: Online shoppers n = 16,302

47

41

39

39

38

37

37

37

36

36

Delivery shipping costs

Concern that I may not receive the item

Having to pay customs duties/fees and /or taxes

May not receive sufficient help if I encounter problems

Delivery time not fast enough

Concern that the item I receive would not be as described

Difficult process for returning products

Concerns about counterfeit goods

Concern about identity theft / fraud

It is not clear how much duties/customs fees/taxes I will have to pay

Q36. Which, if any, of the following reasons prevent you purchasing from websites in another country (more often)? Base: Online shoppers = 16,302


Top 10 potential drivers for x-border shopping among all online shoppers surveyed*

Top 10 barriers for x-border shopping among all online shoppers surveyed*


The five species of cross-border online shopper Research reveals that the cross-border shopping population around the world can be divided into five distinct types.

8 Source: PayPal’s Report: Modern Spice Routes - The Cultural Impact and Economic Opportunity of Cross-Border Shopping, 2013


Challenges for businesses to sell abroad

9

Despite the growing market opportunity, many retailers aren’t actively pursuing international opportunities because they’re unsure about:

Concern on increased fraud and chargebacks

Complexity in calculating and paying taxes to buyer countries

Challenging international logistics (complexity of handling returns)

High international shipping costs

Localized websites

Localized Payments

Hard to get marketing dollars

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The cross-border value chain

Operations Fulfillment

Access to consumer base

Category/ product recommend-ation

Offers/ coupons

Language, time zone, source relevance

Marketing (SEO, SEM)

Local website hosting

Website in local language/ form factor

Shopping cart integration

FX support

Tax compliance

Order management

Sourcing

Localized ops and CS support

Accounting integration

International shipping and tracking

Returns

Warehousing

Customs clearance

Seller and buyer protection

Local currency listing

Distribution Demand generation Selling Payment Merchant

How is my payment

processed?

How do I get my

purchase? Where do I find products? How do I pay

for them? Consumer

Description

We are a trusted part of people’s financial lives and a partner to merchants in 203 markets around the world.

Our customers can accept payments in currencies, 100 withdraw funds to their bank accounts in currencies, 57

and hold balances in their PayPal accounts in currencies. 26

Almost PayPal team members provide

support to our customers in over languages. 8,000

20

PayPal’s Global scale

$300B 79% 94M Of shoppers in key markets, 79% used PayPal for a cross-border transaction between

June 2012 and June 2013.

In 2014, 94 million people shopped with PayPal across

borders in key markets.

In key markets, cross-border trade is expected to pass

$300B in 2018.

PayPal’s international

footprint


Canada

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By 2018, bringing cross-border sales to an estimated CAD 12.8 billion

Rank Industry

1 fashion

2 auto-parts

3 website-services

4 software

5 travel

6 sports-equip

7 arts-n-craft

8 memorabilia

9 cellphones

10 computer-hardware

Based on PayPal data, below are top exporting industries from Canada -

Source: PayPal data: 2014


Canada’s Top online export countries… (based on PayPal data)

14

1 USA

2 UK

3 Australia

4 Germany

5 France

6 China

7 Netherlands

8 Hong Kong

9 Brazil

10 Japan

1

2

3

4 5

6

7

8

9

10

Austria, Norway and Israel are opportunities



Top Canadian Cities exporting and their top export industries (based on PayPal Data)

15

1

2

3

4

5 6

8

City Industry 1 Toronto Fashion 2 Vancouver Fashion 3 Montreal Fashion 4 Calgary Photography 5 Mississauga Auto-Parts 6 Ottawa Software 7 Victoria Fashion 8 Edmonton Fashion 9 London Travel 10 Oakville Fashion

Rank Industry 1 fashion 2 auto-parts 3 website-services 4 software 5 travel 6 sports-equip 7 arts-n-craft 8 memorabilia 9 cellphones

10 computer-hardware



Case Study: Canadian companies that went global

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Penzu, www.penzu.com Alexander Mimran Australia, Germany, Hong Kong, New Zealand

Whistle & Flute Clothing, www.whistleandfluteclothing.com Miranda and Ryan McCullagh Southeast Asia and Canada

http://www.penzu.com

http://www.whistleandfluteclothing.com


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How They Shop • 70% of consumers shopped online; • 30% have shopped from intl sites. Consumers most often purchase from: 1. China (13%) 2. UK/Great Britain (9%) 3. Canada (9%) Categories: 1. Clothing/apparel, footwear and

accessories (34%) 2. Toys and hobbies (18%) 3. Travel and transportation (18%) Barriers and Drivers • shipping costs, and • delivery times.

How They Shop • 76% of consumers shopped online; • 42% have shopped from intl sites. Consumers most often purchase from: 1. United States (24%) 2. China (16%) 3. Germany (9%) Categories: 1. Clothing/apparel, footwear and

accessories (33%) 2. Cosmetics/beauty products (19%) 3. Jewelry/watches (18%) 4. Entertainment/education (physical

items) (18%) Barriers and Drivers • shipping costs

How They Shop • 70% of consumers shopped online; • 76% have shopped from intl sites. Consumers most often purchase from: 1. United States (50%) 2. UK/GB (36%) 3. China (32%) Categories: 1. Clothing/apparel, footwear and

accessories (42%) 2. Entertainment/education (physical

items) (27%) 3. Toys and hobbies (24%) Barriers and Drivers • shipping costs

https://www.paypal-passport.com/


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How They Shop • 26% of online consumers have shopped

from intl sites. Consumers most often purchase from: 1. United States (14%) 2. Hong Kong (9%) 3. UK/Great Britain (6%) 4. Japan (6%) Categories: 1. Clothing/apparel, footwear and

accessories (45%) 2. Cosmetics/beauty products (38%) 3. Consumer electronics (31%) Barriers and Drivers • shipping costs

• Word of mouth - Ensure Your Supply Can Meet the Demand

• Shipping Costs

• Focus on a Product Line that is Already in Demand

• Go Mobile

• Invest in Translations

• Simplify Payment

• Singles Day (November 11th) https://www.paypal-passport.com/

Questions


Appendix Research Methodology

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On behalf of PayPal, Ipsos interviewed a representative quota sample** of c.800 (23,354 in total) adults (aged 18 or over) who own and/or use an internet enabled device* in each of 29 countries (UK, Ireland, France, Germany, Austria, Switzerland, Italy, Spain, Netherlands, Sweden, Poland, Turkey, Russia, Israel, UAE, USA, Canada, Brazil, Mexico, Argentina, India, China, Japan, South Korea, Singapore, Australia, South Africa, Nigeria, Egypt). Interviews were conducted online between 17th September and 28th October 2015. Data was weighted to known incidence of online shoppers in all countries, and to demographic profile of internet users in 4 countries (SK, SG, EG & UAE). *Desktop computer/Laptop/ notebook computer/Tablet/Smartphone/Some other type of mobile phone/Electronic organizer/PDA with wireless voice and data features/Games console with Internet connectivity (e.g. Wii). **Age, gender and region representative of online population (Age and gender representative in Switzerland). Quotas were not set for Nigeria, as online profile not available in this country. Ipsos is a member of the MRS, and research was carried out according to MRS code of conduct.


Research Methodology This study was conducted across 29 markets and approx. 23,000 consumers globally.

21

Screening

Transaction & Spend: Past 12 Months & Next 12 Months

Cross-Border transactions &

spend

Cross-Border Payment

Online survey

Global Fieldwork conducted Sept-Oct 2015

20 minute questionnaire

Respondents recruited from online panels

Own and/or use an Internet-enabled device* Nationally

representative of online population Aged 18+

Fieldwork Sample, per market

Questionnaire

This research was carried out to the international quality standard for market research, ISO 20252:2012

Data weighted to adjust for known population incidence

29 markets Sample of c.800 per market.

Drivers, barriers and attitudes to cross-border shopping

*Desktop computer/Laptop/ notebook computer/Tablet /Smartphone/Some other type of mobile phone/Electronic organizer / PDA with wireless voice and data features/Games console with Internet connectivity (e.g. Wii) /Smart TV

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