With 2020 right around the corner, we’ve been fielding questions from eCommerce clients about future growth opportunities – both domestically (US) and internationally. In this case, we’ll focus on the latter and start out by weighing the Top 7 considerations when going global with your eCommerce business.
- Get Clear About “The Why”
When contemplating a global expansion of your eCommerce business, the reasons why aren’t always as cut and dry as one might think. The obvious answer is to take advantage of the size and relative eCommerce sales growth rates of international markets such as those found in Asia or Latin America.
The benefits of expanding your eCommerce business internationally can be significant, including market share and revenue growth (96% of world’s consumers live outside the US), asset diversification, and tapping into global talent and innovation. And yet, less than 2% of the over 30 million US companies sell their products or services internationally – it’s tough sledding out there, boys and girls.
Interesting Fact: In the U.S., and in spite of the stat shared above, nearly half (47 percent) of shoppers purchased from merchants outside the U.S.
- Understand Market Demand
The lack of inherent market demand for your products or services, or ability to create that demand when and where it hasn’t previously existed through savvy marketing, is oftentimes cited as the number one reason that businesses fail.
“Global expansion is a great way to grow your business,” said Peter Lukomskyj, senior vice present for products at Elastic Path.
“That said, don’t assume that just because you’re successful in your home market you’ll be successful abroad,” he told the E-Commerce Times. “Do you have something unique or different enough that there is going to be a lot of demand? Test new markets to determine whether they are ready for your products, if your price-point resonates, and if you can meet buyers’ expectations for overall customer experiences.”
Though it can be time-consuming, doing your homework before expanding globally will pay off in the end. “If you get it right, you could be that innovative company which sparks a new trend,” noted Lukomskyj. “If you get it wrong, global expansion plans can erode margins quickly.”
Bottom line: if you can’t make a compelling case for demand, don’t bother reading on.
- Loco for Localization
It might drive you crazy at the outset, but getting localization right when expanding your eCommerce initiative into global markets is critically important.
According to our very own international eCommerce expert, Nik Adamovich, “prospective customers in non-US countries are more likely to trust your company and its products if they are presented properly in the native language and with a respect for local culture – how you market, sell, fulfill, and service locally makes the difference in getting clicks, conversions, and long-term customers”.
“Understanding the local environment and its norms is a major issue,” said Lukomskyj. “Shoppers from other countries can quickly be turned off if their local customs aren’t respected. Black Friday would be a foreign concept in France, just as much as Singles Day would be a foreign concept to North Americans.”
You’ll want to localize your marketing, sales, fulfillment and distribution efforts as much as possible, so that potential customers feel comfortable buying from you. “We advise our clients that they need to localize their online offer for every international market they enter if they want to compete against local retailers and etailers”.
- We’re Not in Kansas Anymore – Global Logistics
Domestic fulfillment and logistics can sometimes be tricky, but it pales in comparison to what you’ll face when expanding your eCommerce shop internationally.
The first decision a company must make is whether to sell from their current country and then ship cross-border to the customer, or set up operations in target countries with a fully localized experience taking local payments, in local currencies, under local tax requirements.
Physically moving a product from seller to buyer in context of an international environment is a challenge unto itself, but understanding and managing the costs and its impact of your profitability can be even more daunting.
According to a 2017 International Post Corporation (IPC) survey of 29,000 International customers in 30 countries, 62 percent of international buyers still expect to receive free shipping when shipping internationally despite the higher costs and unpredictable cross-border issues. Meeting high expectations and staying profitable is difficult, given the additional challenges of international shipments.
Are you going to go it alone or leverage overseas shipping partners to navigate the myriad of shipping options, returns, restrictions, and requirements? Given the right partner, the upfront investment will pay dividends down the road (no pun intended) if you are able to more efficiently and effectively (let’s not forget the customer experience in all this) expand your eCommerce business internationally.
- Tricky Taxes, Fees, and Currency Conversions
One of the most common mistakes businesses make when going global is failing to investigate taxes and fees in the markets they’re entering.
“The highest-consequence mistakes are those with the largest financial impact,” said Lukomskyj. “Do not misunderstand local tax regulations or overlook how to repatriate sales revenue to your company’s primary legal entity. Some countries require a local partner to own a percentage of the legal entity selling goods in that country.”
Mismanaged movements in currency conversion rates can also spell disaster to your bottom line if you or your partners aren’t staying on top of eCommerce environmental conditions. 53 percent of all consumer international ecommerce purchases go through just three marketplaces: Amazon, eBay and Alibaba. Marketplaces can help solve currency conversion issues and provide international exposure to a large number of customers to create potentially tremendous new business opportunities.
- Picking Partners, Platforms, and Payment Methods
We touched on the importance of picking the right partners as related to international logistics, and the same holds true for the ways in which you plan to market and sell in global markets – localized direct-to-consumer (DTC) and/or major marketplace platforms/ retail partners?
As previously noted, Amazon, Alibaba, and eBay dominate globally, but there are a multitude of potential eCommerce marketplace platforms in each region and country that you might want to consider when marketing and selling internationally. Additional examples include Rakuten, Flipkart, Snapdeal, Konga (Africa), Mercado Libre (Latin America), Wal-Mart (global), and Zalando (Europe).
Determining payment methods to offer is driven by technical availability (gateways), comfort with devices (paying via mobile), as well as national preferences. For example, most of Europe embraces the more traditional digital wall (PayPal) or bank card (Visa, MasterCard) options whereas the Netherlands leans heavily towards bank transfers (iDeal). As we enter 2020, even cryptocurrency options (Bitcoin) must be considered.
- Determine the Market(s) That Make Most Sense as Starting Point
Making this determination brings us full circle to the question of demand. Which market represents the best opportunity for your company (brand) and its products? Remember, this isn’t a decision arrived at by gut feel alone, but rather by research and data.
As you continue down the checklist of considerations, your initial decision should be reinforced or reversed by your growing understanding of obstacles and opportunities related to market size and growth rate, localization, logistics, taxes and fees, pricing, payment methods, partners and platforms.
Considerations contemplated, are you ready to take that first step on the road to international eCommerce expansion and success? If so, contact us now and we’ll show you how we’ve grown other eCommerce companies across the globe.