One of the more common questions we hear is, “Why does the problem of geo-fragmentation exist in the first place?” Why do these large companies, with unlimited engineering support, create the globally fragmented mess of storefronts, links and affiliate programs we’re all too familiar with?
While we can’t pretend to understand all of the nuances around international tax, legal, accounting, and distribution, we do have a few ideas that have as much to do with user experience, as they do convenience and cost-effectiveness.
On the frontend, eliminating geographic barriers such as differing currencies and languages, helps increase conversion rates and boost customer retention (people want to shop in their local currency from pages using their native language). For ecommerce brands selling physical goods, this also means setting up local or regional distribution centers to ensure faster shipping and delivery.
On the backend, several additional factors come into play.
First, is the sheer volume of backend support required to process orders and distribute products on a global scale. Additionally, there is the issue of cross-border taxation and accounting. Those unfamiliar with the current hot topic need not look farther than Apple CEO Tim Cook’s congressional hearing in which he defends the common tax practice, used by both his company and ecommerce vendors around the world, of creating different legal entities in different countries. Finally, the legality of supplying goods, especially digital goods, to an international audience fosters a host of distribution rights and licensing-related complications.
Regional storefronts are optimized for efficient selling to a specific audience. Yes, they tend to create a lot of messy, broken links for us to clean up. But without them, there would be no such thing as Amazon Prime two-day shipping, localized stores in developing countries, and we at GeoRiot would be back to our old day jobs!