Everything You Need to Know about Selling in Spain

As the fifth largest country by population in the European Union, Spain is one of the key European business markets but e-commerce in Spain is lagging behind the rest of Europe. The opportunities for cross-border merchants looking to sell in Spain are a result of the fact that it is catching up with its neighbours – while only 54% of Spaniards have bought online, 40 percent of the country’s e-commerce turnover is cross-border sales. Let’s take a closer look at the e-commerce in Spain and how you can benefit from it.

SellinginSpain

In the Everything You Need to Know series, we take a look at a specific e-commerce market to help you decide whether you should expand online sales across borders. As a provider of comprehensive payment processing services, we at DalPay specialise in cross-border commerce and have first-hand experience facilitating business in over one hundred markets worldwide.

Unless otherwise noted, figures in this article are sourced from:

The European Union has made considerable strides in the last two decades to create a single, unified European economy, but the countries of Europe will always have their own differences in culture, language and payment habits. SEPA, the Single Euro Payments Area, makes cross-border e-commerce within Europe much more accessible to businesses on or off the continent, but no matter how easy it is, there will always be regional differences in how people shop and Spain is no exception.

Although Spanish e-commerce is relatively underdeveloped for a Western European nation, don’t let that turn you away. Businesses expanding into Spain will find plenty of opportunities for growth. The Spanish economy is growing faster than some of Europe’s strongest economies, such as Germany and the Netherlands, consumer spending is growing rapidly, and marketing costs are often far below those of other European countries.

Quick Figures

  • Total population: 46.9 million
  • Internet penetration: 72.7% (34 million)
  • Mobile penetration: 87%
  • Online shoppers: 16.5 million
  • E-commerce sales: EUR 14.7 billion
  • E-commerce annual growth rate: 12.4%

Thanks to initiatives by the European Union, it’s easier than ever for European merchants to do business in Spain, but no matter where you’re located, it’s an attractive market for any e-commerce business. Spain’s economic recovery in recent years has been impressive, with a GDP growth rate of 1.6 and a consumer confidence index of 90.6 as of January 2015.

What You Need to Know

Top e-commerce categories

Due to its population size, Spain is actually the largest e-commerce market in Southern Europe, with an online turnover of more than EUR 14 billion. With a relatively low penetration rate and average consumer spend of EUR 848 per year, this large market also has a huge capacity for growth. 63% of online shoppers already buy from foreign merchants and close to 30% of those transactions are mobile.

Most online shoppers in Spain spend their money on apparel and footwear with a value of EUR 1.2 billion in 2013, and food and drink with a value of 1.1 billion. Other leading categories include media products, consumer electronics, and beauty and personal care. Holiday shopping contributes to one quarter of total e-commerce sales and, like in Italy, the UK, the US and Canada, the biggest online shopping day is Cyber Monday.

Preferred payment methods

Credit and debit cards remain the most popular online payment methods, accounting for 45% of all transactions, with Visa leading in popularity. Other preferred payment methods in Spain include e-wallets (18%), cash-on-delivery (12%), and prepaid cards (7%).

Spain is also leading Europe in mobile device usage, outperforming runners-up France and Germany with 38% of consumers surveyed claiming that they browse e-commerce sites on their mobile devices with the intention of making a purchase. However, only 53% of e-commerce businesses in Spain are offering support for mobile payments, so there’s a big opportunity for cross-border merchants to meet an unfulfilled demand in the Spanish market.

As with most countries, digital content is one of the largest e-commerce market segments and in conjunction with the growth of m-commerce, that fact is pushing more consumers toward direct carrier billing. Direct carrier billing allows the consumer to make a purchase using their mobile device and have the cost added to their phone bill at the end of the month and gives content providers an opportunity to reach a wider audience with fewer security concerns.

Language as a key driver

Spanish is the second-most spoken language in the world, after Mandarin, so localising your webstore content and marketing to appeal to Spanish people also opens up an avenue to expand to markets in Latin America. LATAM is a very populous market with an impressive year-over-year growth rate of 200% in the past 10 years, to a total turnover of over EUR 60 billion as of 2014, making it the fourth strongest e-commerce region in the world.

Spanish localisation also provides increased access to Spanish-speaking populations in the USA, France and Portugal, where 21% of cross-border transactions are conducted via Spanish-language webstores.

Logistics

Though still only a fraction of the whole, cross-border e-commerce is the fastest growing segment. With 54% e-commerce penetration, Spain is still lagging behind the rest of Western Europe and this is most evident in the country’s logistics industry. While several companies are attempting to improve delivery services through a combination of pick-up locations and home delivery, the bright side for merchants is that consumer expectations in this area are low.

Longer delivery times are not often seen as a prohibitive factor by Spanish consumers and they are equally flexible when it comes to reverse logistics, with a widespread acceptance of being required to travel to return locations. Therefore, the costs saved by not having to invest in competitive delivery methods is a main attraction for cross-border merchants.

Cybercrime report

One area that Spain has not lagged behind in is online fraud prevention. In 2012 Spain was the only SEPA country where the majority of fraud took place at the point-of-sale, and the total fraud rate is 0.02, a third of that of France and the UK, with only 7% of internet users saying they have experienced online fraud. As the e-commerce market growth, Spain’s strong focus on authentication and verification will allow the market to flourish.

Legality

International merchants planning to expand their e-commerce operations into Spain will have to familiarise themselves with local legislation as well as, if they are based outside of Europe, the legislation of the European Union. For example, rubber erasers that are similar in appearance to food products and which can be easily ingested are on the Spanish no-import list.

Additionally, under the European WEEE regulation, for physical products it is mandatory to register the number of items being put to market, as well as the items taken back from the market (as in the case of returns), or risk thousands of Euro’s in fines. Products imported from outside of the EU are subject to duties, while inter-EU deliveries are subject to the EU Directive on the VAT-system.

Spanish E-Commerce in Brief

Pros:

  • The strongest economy in Southern Europe
  • More than a third of e-commerce turnover is cross-border
  • High mobile penetration and m-commerce acceptance
  • Low online marketing costs
  • Very low fraud rates

Cons:

  • Relatively low e-commerce penetration
  • Online sales driven by language as opposed to geography
  • Underdeveloped logistics industry

Spain has a lot going for it. It’s one of the most populous markets in Europe, speaking the second-most common language in the world, has low fraud and a hunger for cross-border e-commerce. Even though the country has struggled with economic turmoil for most of this young millennium, it is now one of the fastest-growing economies in the EU and consumers are rapidly shedding their financial concerns and embracing impulse spending.

Spanish consumers are also turning to their mobile devices for their online shopping and, as m-commerce becomes increasingly synonymous with online retail, merchants selling across borders gravitate toward mobile-ready markets. If you’re looking to expand your business across borders, Spain is realistically one of the most attractive markets in Europe and the world.

Expanding into a new international market is a risky venture but a very rewarding one if done right. For the latest information about how you can build and maintain a strong e-commerce enterprise and keep it compatible with legislation and buying habits at home and abroad, subscribe to the DalPay Blog and follow us on Facebook and Twitter for the latest industry news.

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Everything You Need to Know about Selling in China

When it comes to digital retail, no market quite compares to China. In the midst of a growing economy and a strong retail sector, China’s e-commerce sector is the largest in the world, with Forrester predicting it reaching a total value of 1 trillion USD by 2019. Despite the size and rapid growth of the market, success is by no means a given. In this article, we’ll take a closer look at why the market is growing the way it is and what you need to do to ensure your business is a success when expanding into China.

SellinginChinaIn the Everything You Need to Know series, we take a look at a specific e-commerce market to help you decide whether you should expand online sales across borders. As a provider of comprehensive payment processing services, we at DalPay specialise in cross-border commerce and have first-hand experience facilitating business in over one hundred markets worldwide.

Online marketplaces vary significantly around the world in a wide number of ways, such as their level of economic development, shopping habits, preferred payment methods, access to technologies, legality, logistics, etc. Because of this, there are a great many factors to consider when choosing which international markets to expand to. This series is designed to provide you with all the information you need to choose which countries are a good fit for your business and to begin selling across borders.

Unless otherwise noted, figures in this article are sourced from:

China is the world’s most populous country, so it should be no surprise that, in today’s digital economy, the Chinese e-commerce market is very mature. The population, particularly in urban areas, largely embraces online retail, which is supported by highly developed and low-cost payments and delivery infrastructure. Business-to-consumer online sales are growing by 25% per year and already 80% of online shoppers in China participate in m-commerce. If you’re thinking about expanding your business to this booming marketplace, there are a few things you need to know before taking the plunge.

Quick Figures

  • Total population: 1.4 billion
  • Internet penetration: 45% (618 million)
  • Mobile penetration: 92.3%
  • Online shoppers: 190 million
  • E-commerce sales: USD 297 billion
  • M-commerce sales: USD 27.4 billion
  • E-commerce annual growth rate: 116.5%

Even though it’s already the largest e-commerce market in the world, there’s still considerable room for growth. Tier-3 cities and smaller have a significantly lower penetration rate than the largest cities, but also have a much more rapid rate of growth. Currently, e-commerce represents less than 10% of the total retail market, but as penetration grows, more of those 1.4 billion potential customers will be going online.

The most popular product categories for online sales in China are consumer electronics, apparel and sporting goods. Chinese consumers mostly make cross-border purchases from merchants in the US, Hong Kong, Japan, the UK and Australia. Future growth will be increasingly driven by mobile and logistical develops, which we will go into detail about below.

What You Need to Know

Preferred payment methods

The online payment market in China is highly concentrated, with the top seven players representing 98% of all transactions. While credit/debit cards are the most popular payment method, the leading e-wallet provider, Alipay, is a close second, processing one out of every four online transactions in China thanks to the market dominance of their parent company, the retail giant Alibaba.

Chinese shoppers are accustomed to having a variety of payment options available to them, including cheque or cash-on-delivery (which together account for 10% of the market), payment cards, bank transfers and e-wallets. China’s domestic card provider UnionPay is used by 54% of all cardholders.

M-commerce

One of the clearest trends in China is the growth of mobile payments, even for a market that already has a relatively mature m-payment infrastructure. The year-on-year growth rate of m-commerce is 168.6%. 83.4% of Chinese internet users connect via their mobile devices, more than the amount that connect via computers, and mobile payment services are used by 38.9% of internet users.

China’s top e-commerce players are investing in and developing their mobile sales at a rate that surpasses their U.S. counterparts, with 67% of businesses having already developed m-payment strategies. As mobile penetration spreads into smaller cities and rural areas, more online shoppers are skipping the computer and going right to their phones. Offering a mobile-ready web store and accepting m-payments is key to tapping into the bulk of the Chinese e-commerce market.

Logistics

In the same breath, it’s necessary to consider that the growth of more remote online shoppers means that logistics will become an increasingly vital challenge to face. The good news is that the local logistics infrastructure is well-developed, with most retailers able to deliver to Tier 1-3 cities within two days and the rest of the country within four.

Despite that fact, logistics remains an area where online retailers can set themselves apart from the competition. The growth of e-commerce over a wider geographic area in China is outpacing the growth of domestic express delivery. Depending on the type of products you sell, it’s key to form a strategic partnership with a competitive and appropriate domestic delivery company, whether that means a large firm that can provide basic services or smaller, more specialised networks that can handle fragile, oddly shaped or difficult to deliver products.

Barriers to entry

The main challenge when it comes to expanding your e-commerce business into the Chinese market is the sheer size dominance of domestic retailers, Alibaba in particular. However, the growth of new online shoppers and m-payments in a wider geographic area leaves plenty of room for alternatives and niche retailers to gain a foothold in the market.

One of the reasons the largest companies are so successful is because of concerns about online fraud. The Chinese e-commerce market is not heavily regulated and it’s not uncommon for products purchased online to have been fakes. According to Strategic IP Information, up to 10% of all products sold online in China are suspect. For this reason, most consumers avoid unknown merchants, and nearly 80% of shoppers leave a review after making a purchase online. Since Chinese consumers are highly influenced by the comments of past customers, these reviews can be leveraged by merchants to gain trust. The more online reviews a product reviews, the higher the sales.

Chinese E-Commerce in Brief

Pros:

  • Largest e-commerce market in the world
  • 190 million potential customers
  • Widespread e- and m-commerce penetration

Cons:

  • Not heavily regulated
  • Growing population of rural consumers leads to logistical concerns
  • Market dominated by local providers

The Chinese e-commerce market is already the largest in the world and expected to triple in size within the next five years. Much of the growth will be accounted for by m-commerce and younger shoppers in less urban parts of the country. These are highly tech-savvy consumers who respond to being given a lot of choice and a niche appeal, but they will also abandon you if you can’t prove the trustworthiness of your business and get your products to their door in good shape and in a reasonable amount of time.

Expanding into a new international market is a risky venture but a very rewarding one if done right. For the latest information about how you can build and maintain a strong e-commerce enterprise and keep it compatible with legislation and buying habits at home and abroad, subscribe to the DalPay Blog and follow us on Facebook and Twitter for the latest industry news.

Enter your email address to follow this blog and receive notifications of new posts by email.