The potential of the US and Canada for jewellery retailers and brands
There are glittering prizes in reach for UK jewellery brands and retailers that tap into the growing demand from younger shoppers worldwide to purchase luxury jewellery online.
The opportunities are coming into clear focus as consumers, particularly those belonging to Gen Z (those born after 1995), become increasingly receptive to purchasing high-value items online, wherever they might live.
Gen Z are confident ‘digital natives’ who engage with visually-focused social platforms like Pinterest and Instagram. Increasingly they have spending power as they move further along their career path and the cohort is predicted to represent more than 40% of the overall luxury goods market by 2025.
The rate of growth for global jewellery sales is outpacing any other part of the luxury goods industry. In 2018, the global luxury jewellery market amounted to an estimated $20 billion. Online jewellery sales are rising and forecasts made last year suggest the global online jewellery market will grow at a CAGR of 15.7% up to 2022.
The global online market is comprised of many local markets that differ in currency, tax and duty regulations and shoppers’ preferences in how they shop online. Retailers that understand the unique characteristics of each market and the differences between them and who offer online shoppers a localised experience adjusted to their market, will be the ones to reap the benefits.
The USA and Canada are two of the key markets for many UK online retailers selling internationally. And when it comes to fashion and luxury jewellery, they offer a great opportunity to grow revenues. US consumers dominate the luxury jewellery market and have an appetite for fashion jewellery. Sales forecasts for jewellery within the US in 2018 totalled a little over $68 billion, a 7% year-over-year growth. The Canadian jewellery, watches and accessories market had total revenues of $5,323.5m in 2017.
Though they are geographically close, these are two different markets and not just in terms of size and currency. Therefore, in order to grow online sales, merchants need to tailor their online offering to the unique characteristics of each of these markets.
USA overview
More than three quarters of all online users in the US are open to the idea of shopping internationally and 42% have already done so, according to the United States 2017 Cross-Border Trading Report.
American online shoppers are used to purchasing in US dollars. Our data shows that 99% of American cross-border online shoppers buying from UK merchants prefer to pay in USD when given the option. However, accepting payments and presenting prices in USD is not enough – prices should also be presented in a rounded manner, in accordance with local market conventions.
In the US, there is a threshold of $800 on the value of products bought online cross-border before duties kick in. This high threshold creates a great opportunity for retailers selling to the US as it removes one of the major barriers preventing shoppers from buying from cross-border websites and helps to make international retailers more competitive.
Credit cards and PayPal are still the favoured payment methods for cross-border online purchases from the USA. However, with mobile retail commerce revenues in the US rising from $156.28 to $207.15 billion USD in 2018 and with almost 40% of cross-border purchases in 2018 made on mobile devices according to our stats, it’s important that emerging mobile friendly payment methods like Apple Pay are included as additional payment options at checkout.
Understanding local shipping and returns preferences is also crucial for conversion rates. In the US, most local retailers offer a choice of economy, express and free shipping options, so UK retailers offering a greater choice and competitive prices will give US shoppers an added incentive to buy.
US consumers are diligent about checking return options before purchasing. GlobalWebIndex data shows US consumers returned $351 billion of all online and offline purchases in 2017, with accessories/jewellery/watches ranked as the third most likely category for returns and this is even more likely from the younger Gen Z shopper.
An easy returns process is part of the buying decision for over 60% of US shoppers buying cross-border. International retailers therefore should present a transparent, seamless and low cost returns process including a local return address.
Canadian Overview
Four fifths of Canadians have made an online purchase from an international retailer, according to UPS research. Millennial and Gen Z Canadians in particular are embracing cross-border online shopping with enthusiasm, with 61% of 18-34 year-olds making a purchase from a foreign website according to the 2018 Canadian E-commerce Monitor. In fact, cross-border e-commerce sales in Canada made up more than a quarter (26.8%) of retail ecommerce overall.
The preferred device for cross-border online shopping is still the PC but m-commerce is growing rapidly with 28% of cross-border online purchases made in 2018 via mobile – a 50% YoY increase. Our data shows that there is a near-unanimous preference for purchasing in Canadian Dollars; 99.7% of Canadian shoppers opt to purchase in their local currency when given the option. Credit cards are still the favoured payment method for cross-border online shopping, but e-payment methods like PayPal and Apple Pay are gaining in popularity and accounted for nearly a quarter of payments in 2018 according to Global-e’s stats.
In contrast with the USA, the Canadian threshold for duties and taxes is very low, with all goods over 20 CAD subject to local duties. Due to this low threshold, most cross-border online shoppers will purchase over this amount. Therefore, international merchants looking to increase their sales in Canada, should provide shoppers with a guaranteed calculation of all duties and taxes owed and enable prepayment at checkout. Global-e’s data show that 92% of Canadian shoppers will opt to prepay taxes given the choice. When it comes to high-value items like jewellery, incorporating duties and taxes into the up-front product price whilst informing shoppers that no additional costs will be added, can increase conversion rates significantly.
Free shipping is another driver for online sales; according to research from Ayima, 75% of Canadian shoppers say it’s a key factor when choosing which website to buy from. Much like consumers in the US, Canadians scrutinise the return policy, with 40% of Canadians admitting that a retailer’s return policy caused them to abandon a purchase. UK jewellery brands and retailers should therefore ensure that their returns process is simple to navigate and entice the customer by offering free shipping and returns wherever possible.
To conclude, the North American market offers great potential for UK jewellery retailers and brands to grow their international sales and customer base. However, to fully capitalise on the revenue potential, sellers need to ensure that they are offering a seamless localised online experience, tailored to the local shoppers’ preferences and the specific characteristics of each of these markets. UK jewellery brands and retailers that master this will benefit from increases in both conversion rates and customer satisfaction.
By Nir Debbi, Co-founder, CRO at Global-e
