Fruugo and Cross-Border Online Shoppers

Zia_Wigder By Zia Daniell Wigder

Over the past year, many online retailers have looked to tap
into global online shoppers by adding international shipping options. International shipping presents a relatively low-cost first step into
global markets - it also allows retailers to tap into the increasingly international
consideration set of consumers around the globe. This topic has been key within
our research this year: our international shipping report addresses this issue from the US
perspective and we’ll soon be posting a report on cross-border shopping within Europe.

This morning I had the opportunity to speak with Juha Usva,
the CEO of Finland-based Fruugo, a European site that
aims to facilitate cross-border shopping within Europe.
Launched in public beta in May, Fruugo’s current offering is part international
checkout solution, part international shopping mall. Fruugo allows European users
to order from online shops in other countries – today some 70 online retailers
are up on the site in three different markets. Revenues are based on a percentage of sales.

 Below is a quick summary of our conversation - Fruugo is aiming to tap into cross-border demand through the
following:

 Rolling out in targeted, small markets first. Fruugo currently
operates in Finland, Sweden and the Netherlands.  In addition to having particular in-house
knowledge of these markets, the company is gaining expertise prior to rolling
out services in some of the larger European markets. Sweden’s use of its own national
currency as opposed to the Euro also provides a good opportunity for the
company to hone its ability to handle multiple currencies.

 Focusing on specific categories. Rather than trying to target every
category, Fruugo has focused its efforts on a handful of categories: Mother
& Baby, Outdoor, Health & Beauty and Home & Decoration.

 Helping to streamline cross-border issues for online retailers. In
addition to handling international payments and local currency display, Fruugo
manages other cross-border issues for retailers. For example, despite the
duty-free nature of cross-border shipments within Europe,
some products still require payment of value-added tax (VAT). Fruugo helps
retailers calculate these costs upfront.

 Facilitating language translation. Fruugo makes it easy for online
retailers to provide translated content for consumers in other markets – the
amount of translated content is determined by the retailer. Fruugo also offers
machine translation technology from Language Weaver to help consumers
understand retailers’ offerings in other languages.

 Mastering local online retail regulations. Fruugo is helping
companies navigate the complex landscape of local regulations. In Finland, for
example, returns must be free: online retailers cannot charge shipping or
restocking fees. In Germany
and Austria,
similar situations exist. By contrast, in Fruugo’s other two markets aside from Finland – Sweden and Netherlands – such restrictions
don’t apply. 


Comments

re: Fruugo and Cross-Border Online Shoppers

I think the notion of cross border selling is an admirable one. It will allow many merchants in this difficult economic period to sell to many more markets than previously possibly.Beyond the simple technical issues, this proposition, in my opinion, is the equivalent to alchemy. It's virtually impossible to reconcile base cultural differences in buying behavior, technical variations in currency, payment and shipment and turn them into the proverbial gold. Say for example a Medium Sized UK company has a shipment contract with Royal Mail, fruugo has a contract with DHL for shipments in this region - how do you make the proposition interesting to the merchant without compromising their business. Making all retail companies accessible to all consumers is the equivalent to turning the rich diversity of a city market you might visit whilst abroad, into a common shade of beige. So the question extends to - you may be able to achieve this - but truly why would you? It will be incredibly expensive as we all know Fruugo has spent many million euros. And with a percentage cut on the sale, how is this meant to make money? The only merchants you might buy through this platform would be niche merchants where you may wish for the reassurance of buying through a larger umbrella organisation. But the items such a retailer would offer would be low cost and low margins. Larger organisations such as Tesco would surely retail through their own online store (their own online store is currently going through a redesign; part of which includes internationalisation no doubt).As said, the problem presented by this ambition is beyond the simple legal and commercial technicalities presented here. To believe that cultural division between Spanish commerce and English commerce can be broken down, simply because we now have the technical ability to do so is naive.Before we even get down to detailed personalisation, the translation engine used on the site (with some investigation) is google translator, at least it produces similar results. It's a literal translation that is helpful, but does not solve the issues of language barriers and to promote this as a key "added value" proposition is disingenuous. Every site can do this, a little tech know-how and you're ready to roll.In my mind the internet is an extended communication channel, nothing more. If an everyday person in France is unable to easily enter a transaction with an everyday merchant in Poland in person, there is no reason to believe this can be accomplished online.These problems (and there are many more) would pose serious issues to the most accomplished minds in the ecommerce arena, and in the more mature markets such as the UK, US, Japan, France or Germany. Looking at the public information on who comprises this "international" Finnish team (and looking at those who have recently left), I fail to see how this will be achieved. Essentially the number of years of experience in ecommerce in this team is minimal & international years beneath board level is almost zero.With this in mind, what will Fruugo bring to the table that Amazon did not accomplish some years ago? With the introduction of Maestro payment across the continent the issues of cross border retail transactions become negligible.As said, I think the notion is an admirable one and I look forward to being proved wrong.

re: Fruugo and Cross-Border Online Shoppers

Didn't know Forrester was so one sided...I normally expect reports written by international research companies to be objective & supply feedback from both sides with detailed analysis.The US market is irrelevant to the European market and is a completely different subject all together.I am interested to see Fruugo prosper but so far, I am not confident at all.This report seems to be written by the CEO of Fruugo or someone within the organization.I have to ask the question - Is Fruugo subscribing with Forrester in any way?

re: Fruugo and Cross-Border Online Shoppers

Hi Dean,Thanks for your comment. This was not meant to be a promotion for Fruugo but rather a summary of our conversation: perhaps I should've been clearer that this was not an analysis of their business but a quick look at how one company is attempting to drive cross-border shopping.Fruugo’s struggles along the way have been widely documented by others – the goal here is simply to outline the cross-border issues that companies like Fruugo are attempting to overcome.As always, I appreciate your thoughts.Zia

re: Fruugo and Cross-Border Online Shoppers

Hi John,Thanks for your insightful feedback on the blog post. I completely agree that there are large differences in the way people shop across Europe, and that remains equally true in online shopping – even when you look at something like which online tools and features are valued most by online shoppers, it can vary quite a bit from one country to another.That being said, what’s interesting is that cross-border orders are not insignificant within Europe. English-savvy Dutch and Swedish consumers (whose domestic online retail markets are relatively small) are quite frequent cross-border online shoppers. Many UK online shoppers order from US sites.Indeed, language does play a significant role, and very few companies shipping cross-border have tackled this issue. Look at how many online retailers shipping internationally offer any local-language content for international users – it’s very, very few. Urban Outfitters is an exception with their UK site – they provide French- and German-language FAQs on international shipping. Machine translation is not an answer, either, but it’s a better option than no assistance – and Language Weaver’s technology, like all SMT, improves as it “learns” the specific type of content it’s being asked to translate.I agree, the Fruugo folks have enormous challenges, and their issues have been widely documented. However, I do think there is a role for companies that aim to streamline cross-border shipments and tackle the many hurdles that exist (in the US, the international payment/freight forwarding solutions like E4X and International Checkout are adding online retailers at a rapid pace). Does Fruugo have the right model within Europe? Impossible to know just yet. They are, however, tackling some of the core issues in cross-border shopping that others have not.Zia

re: Fruugo and Cross-Border Online Shoppers

In a past life, I would evaluate the business models of information vending companies. One of the more memorable companies was TVGuide. From the outside, it looked deceptively simple to replicate.Fruugo, like Hulu.com or Wine Logistics, is attacking the e-commerce opportunity from the perspective of expediting commerce using the nuances of law as a differentiator. Hulu.com provides a compelling user experience that respects the patchwork quilt of syndication deals of TV programmers, while Wine Logistics helps wine merchants navigate the complex tax structure that varies from state to state.These businesses, if they reach critical mass, have the potential to become tremendous cash-generation engines.

re: Fruugo and Cross-Border Online Shoppers

Hi Zia,I think your article about "Fruugo and Cross-Border Online Shoppers" and "Global trends at Shop.org" is very interesting.I always feel that in the Global Market it is very important to reduce the international shipping cost as well as import duties (which can double the cost of the product).For this purpose I have started a new networking site - www.ship2friends.com wherein I am trying to connect the travelers and buyers from all over the world.“Incase you buy a product from another country - Say NO to shipping costs, Say NO to Import Duties!”&“Earn while you Travel to another country or make friends!”Do look at the site let me know your views on this concept.Thank you,Sahil Sehgal