Michael DeSimone, CEO of E4X Inc., discusses how to stay competitive in international e-commerce

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Steve Diaz: We're talking with Michael DeSimone, CEO of E4X, which is a provider for e-commerce solutions. I'm going to let Mike explain it.

Michael DeSimone: It's not an easy one, is it? What we do is provide local currency pricing solutions for e-commerce merchants who are selling internationally.

Steve: You just released the Foreign Sales Index. Can you explain a little bit about the index and its purpose?

DeSimone: Sure. One of the most clearly important aspects of what's happening in e-commerce is what's happening with international commerce -- specifically United States e-commerce. We commissioned a survey about three months ago -- we had an independent company, which would take a review of Internet Retailer magazine's Top 400 Websites from the perspective of what it was like for an international shopper to access those sites and to make a purchase from outside the United States.

We put together evaluation criteria of how easy the site was to use and how friendly it was to the international visitor, looking at things like return policy, localized language, localized currency -- things of that nature. I think there were about 10 key factors we used to come up with an objective means of measuring the international friendliness of the site. We also put some subjective criteria in it, as well, like how easy it was to call customer service and how they deal with that kind of thing. I think the survey was only able to complete 377 websites because, just for various reasons, they couldn't even get started on certain ones.

Steve: These are the websites that are selling the most internationally also?

DeSimone: Well, I can't say they're selling the most. I'm not really sure, but what we do know is that, from the international buyer's perspective, they are the most friendly to the international shopper. That's the key really: How easy is it for someone who is not based in the United States to buy a product from these online merchants -- and how easy is the site to deal with for somebody who's not based in the United States?

Steve: What was the biggest finding in this study, and how does it relate to your business?

DeSimone: That's a good question. What I found most interesting were some of the names that scored highest -- how they really stood out. I don't know if we want to talk about those names yet. Some of the website names that scored highest surprised us in terms of who they were, and the fact that we weren't even aware that they were selling internationally -- but they had gone to great lengths to make it easy for the international shopper.

When you look at international e-commerce from our standpoint, it's really starting to get traction from the United States to be able to sell internationally. Having a website means you're global, whether you know it or not, and obviously, whether you care or not. It still means you're global, and what we're seeing in a lot of conversations we're having with merchants is that a lot of them are kind of maxing out their growth curve inside the U.S. domestic market. They're really looking for ways that they can expand and reaccelerate their growth, and a lot of them have looked internationally. Some of them have chosen to work with companies in order for them to have sort of a plug-and-play solution to going international. Other websites have gone ahead and done it themselves, and when you look at the scores of the Foreign Sales Index survey, I think one of the things that you can pretty clearly say is that the ones who scored highest are the ones who do it themselves.

By doing it themselves, I mean, they localized their website. They may have engaged us for currency localization as a piece of it, but they've handled all the presentation to the international customer and they're dealing with the shipping, logistics and tax issues that come along with going international. They may have even translated their site into a foreign language itself. So, they've done it all themselves instead of having a place where their international shopper is sent over to another site to complete the transaction.

I think that might be one of the more interesting things that came out of the survey. Another one I didn't know was that Build-a-Bear did things internationally. Some of the retailers were a surprise, like Nike.com -- it was probably one of the biggest ones that surprised me the most, and I don't really know why. What's surprising is that Nike.com has made it extraordinarily easy for the international buyer to go on their site and buy a product. That means they handle the language, the currency, the shipping -- it's all easy. Returns are easy as well, and all those types of things that were important to the qualifications for the Foreign Shopping Index. They scored very high.

Steve: Your currency solution was free to the retail websites, is that correct?

DeSimone: Yes, exactly. From our perspective, we need to know who's out there doing international commerce so we can go ahead and offer our services to them. Although a lot of them may be selling internationally, most of them aren't doing any type of local currency pricing for giving the consumer the ability to pay with foreign currency. What we do is integrate with those merchants and take all of the risk and complication out of the issues of dealing with multiple currencies. If websites want to display a price in British Pounds, they know that they are showing a price -- the merchant does -- that they're showing a price that would be translated into a specific equivalent of U.S. dollars. There's no variability. If they need to get $100 for an item, they're going to get $100 for their item.

On the shopper side, they see the price in their own local currency -- in British Pounds in this case. It might be 82 pounds, and they know at the point they're making the decision to buy that they're going to get charged 82 pounds. It's important, we think, in terms of the amount of conversion between shoppers and buyers. If someone comes in internationally and they look at a price in dollars, they have to estimate -- and they know whatever they estimate is going to be different than what shows up in their credit card statement 30 days later. With our service in place, they know exactly what they're going to be charged.

We find that, in general, conversion rates double when a merchant uses local currency pricing for international shoppers, because they are able to price compare and they are able to make the decision -- and not be exposed to the uncertainty as to how much they're going to get charged. At the same time, the merchant isn't faced with the situation where they get phone calls saying, "I estimated this to be 80 pounds and I got charged 86 pounds. Why did you charge me that much?" It's really out of the retailers' hands because the credit card company does the currency conversion.

We fit into that niche of international U.S. merchants selling internationally, and really trying to make it easy for them to do so by taking out the currency exchange piece of it.

Steve: Do you call it real-time conversion?

DeSimone: Yes, absolutely, real-time guaranteed. I think that's probably one of the most important things. It's not an indicative price; it's a guaranteed price. If someone looks at a product and says, "I want to buy that bag for 10 pounds," and they click to buy, they know that they're only going to be charged 10 pounds. If you've traveled internationally and you used your credit card, you probably know that when you get your credit card statement there is a difference in what you've been charged and what you're expected to pay. One day I spent 10 pounds at a store and got charged that amount -- the next day I got charged a different amount. You don't really know until you actually get your statement back how much you actually are going to be charged in dollars. Taking that variability out of the equation -- with e-commerce specifically -- really drives up the conversion rate for international shoppers.

That's a really good example of how we've seen international conversion rates dramatically grow, especially when they automatically update the currency based on what country the person is coming in from -- and showing that price in that currency.

Another interesting thing our service does is give retailers the ability to price things for international markets, as well. They can price their things accurately, according to the current market. It doesn't have to be a direct conversion. We can set prices according to what the market will bear.

The most basic way online retailers can go international is to take their U.S. dollar catalog and convert it to a foreign currency equivalent that may change from day to day. Other companies that we've worked with -- looking at their competition in that market -- decided they have to charge a specific price, like 50 pounds. "I can't charge more than 50 pounds for this item," you may say. Well, what we are able to do is to guarantee exactly how many U.S. dollars they're going to receive -- so there's no variability on that side of the equation. Instead of letting the foreign price vary, they fix to the foreign price and let the amount of U.S. dollars they get vary according to period -- but they do know how much they're going to get when each transaction is done. Does that make sense?

Steve: Can you give an example?

DeSimone: Let's say someone was selling bottled water online. Here in the United States, you know you can order a case of water online for $10. But a French company comes in, and if they converted their currency prices into dollars, on some days, their price might be $11 and on other days it might be $9. So, their price is kind of varying around. Instead, what they decide is they always want to sell their water for $9 -- so we let them fix that price so they could compete on a price level and still know exactly how much they're going to get paid in French Francs. I'm overcomplicating this, but basically what we're discussing is fixing the U.S. dollar price and allowing the foreign amount to vary. We also offer merchants the chance to fix the foreign amount and allowing the U.S. dollar amount to vary. That's probably an easier way to explain it, instead of diving into such levels of detail.

The most important thing about our solutions is that we give the merchant the ability to control the price that is being paid by their consumer. If you think about what happens in most cases -- if you are a U.S. dollar e-commerce merchant, and you're selling internationally but you are only pricing in U.S. dollars -- you don't really set the final price your customers pays. The credit card company does. With us, you end up setting that final price yourself, and I think having that control of your pricing really helps you to be more competitive, as opposed to sort of being left to the whims of the currency markets and what the banks decide to do on a particular day.

One of the things online merchants ask is if there is a charge, and we don't charge typically for merchant installation. Our success is tied to the merchant's success, and almost every single one of our customers, from the point they start to 12 months later, almost double their international sales.

Steve: In how long?

DeSimone: In 12 months, or about a year -- almost every single merchant. We did the analysis, and I don't think any of them had less than double. Some of them had a lot more. But if you look at month one and month 12, the curve goes nicely up in terms of growing international sales. We think that it is because of increased conversion rates for people who prefer to pay in local currency.

Steve: Does it have anything to do also with the ease in shopping, or the guarantee?

DeSimone: I think yes -- when you come back to the Foreign Sales Index itself, we think it has a lot to do with currency pricing, the shipping options that are available and being able to quote fully landed costs. A lot of times you'll see a final price, but there may be some tariff that is due or other taxes -- and what will end up happening is when they ship the item, it will get stopped at customs and the recipient will get a note saying, "Come on in and pay your duty on this item before you can pick it up," and things like that.

Eliminating that variability for the consumer is a huge positive for online merchants, when they are able to do those types of things. When we did the Foreign Sales Index, those were some of the things that we evaluated. Return policy was also a really big thing for the international shopper. Not so much making it really easy for them to ship back internationally, but really understanding what they're going to be subject to if they decide they don't want the item.

Steve: Which countries are buying more U.S. goods then?

DeSimone: I would say, macro-economically from an e-commerce perspective, probably the number one area is the United Kingdom, followed very closely -- if you take Europe as a different whole -- by Europe. But, if you break it all into pieces, I would say the U.K., Germany and France. Outside of Europe, it would be Japan, Canada and Australia. I would say those are the main countries.

Steve: You count Canada as international?

DeSimone: Yes -- it's a different currency from our standpoint. Canada's borders have to be crossed, and there are duties that have to be collected.

Another interesting thing the Foreign Sales Survey found was that only 65 percent of the retailers we looked at who do sell internationally, only about 40 percent go beyond Canada. With this knowledge of which countries are buying, it is a huge opportunity.

Steve: Do you have a website? Is there a website retailers and e-commerce merchants can look up?

DeSimone: Sure, it's www.E4X.com.

Steve: Thank you so much, Michael.

DeSimone: Thank you.

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