Retailer's Guide to International Expansion

The International Potential

The world is flattening and borders are blurring: e-commerce has revolutionized the world of retail, opening new channels and opportunities for retailers of all sizes. The prospect of internationalization is intimidating, especially the overwhelming thought of the time and monetary investment needed to expand. However, international expansion can be as straightforward as testing your products in new regions or delving further into expansion by developing a localized website. The opportunity for international success is there… it is for each retailer to tailor an approach that suits them.


Why are retailers expanding?

The global e-commerce opportunity is mind blowing. Cross-border trade is expected to account for 20% of e-commerce by 2017. Any retailer worth its salt is already expanding or planning to. Many retailers find that expanding internationally can be a low, calculable risk that offers a consistent and high return on investment, provided they choose the right partners. Beyond the aforementioned global growth, there are numerous reasons these retailers are driven to broaden their horizons and expand internationally.

Seasonal Stock:

Many retailers are expanding their reach in order to sell off seasonal stock. For example, our apparel and sportswear retailers have begun selling their summer stock to the Australian market once the season ends in Europe and the US. This lengthens the season and avoids the issue of excess inventory and selling off products at a dramatically reduced price.

Growth has levelled off:

Some retailers have found that their growth has become stagnant in one region and do not see the potential for further local growth. This can be due to aspects such as market saturation. However, rather than accepting this as the status quo, savvy retailers are looking to markets where there is a demand for their products and potential to drive growth.

Strong Domestic Competition:

If you are in an industry fraught with competition, it is easy to become embroiled in price-wars, squeezing your margins to the breaking point. Broadening your horizons to new regions is a way of getting a step ahead. Now is the time to embrace crossborder trade and establish yourself internationally before your competition has the chance to do the same.

Diversify the risk:

Everyone is familiar with the old adage that you shouldn’t put all your eggs in one basket. This pertains not only to relying too heavily on one online channel, but also relying too heavily on one country. Selling internationally can diversify the risk to your business in a number of ways:

  • The more marketplace geographies you sell into, the more potential buyers are seeing your products.
  • The more countries you sell into, the less vulnerable you are to any one country’s economic situation.
  • Often, items that don’t sell well in one country fly off the shelves in another. Some of our sellers increase the breadth of their products to cater to their foreign buyers.

Ease of expansion:

Marketplaces like eBay and Amazon and leading platforms like ChannelAdvisor are focusing on internationalization, and this has simplified the process of selling your products in multiple regions. ChannelAdvisor offers pooled inventory via its inventory juggler, which allows you to list the same inventory on multiple marketplaces at once, without any overselling scenarios. Amazon has simplified international selling by introducing Amazon EU, a single posting feed, and unifying the procedures for entering and selling items. In addition, Fulfilment by Amazon (FBA) can expedite shipping and protect your all-important Seller Ratings.

How can you identify if internationalization is for you?

It’s a rare case that sellers don’t have an opportunity to expand abroad. A good signal for expansion opportunity is if you’re selling items consistently to a specific country. This means that your price and shipping are attractive to that country’s buyers. Attractive enough, in fact, that the buyer is willing to purchase even though the ad isn’t in their native language. You then have to ask yourself, how many other buyers from this country am I not reaching?

On the other hand, if your items are not selling to foreign markets, that doesn’t mean they couldn’t. Perhaps one of your competitors or a local seller is luring customers away from you because they are already listing directly to the foreign market. InterCultural Elements, the intercultural consulting and e-commerce-specific translation services, has found if a retailer’s items sell well in a domestic market, they will generally sell well in foreign markets, after being properly translated and localized.

The benefit of the e-commerce revolution is that you can test the international waters without much investment. Examining your products on eBay and Amazon in different regions to judge that market’s reaction is a great way of gauging success. Having said this, even testing the waters has to be done properly to effectively measure your accomplishment and to ensure this does not impact your performance.

Where is the international e-commerce opportunity?

The international e-commerce opportunity really depends on some key factors, including: where your business is based, your business model and your products. To best judge which items to expand to which markets in what order, it is better to receive a consultation; but generally, for US retailers, Australia and Amazon Canada tend to be good starting markets. Selling directly into Europe opens up whole new large-scale opportunities, but it’s often recommendable to use fulfilment when doing so to avoid shipping and tax issues. If you’re based in the UK, then UK, France and Germany tend to be good large markets; second-tier expansions are then Australia, USA, Italy and Spain.

How to approach expansion:

Take your business’ expansion seriously, and get it right the first time. InterCultural Elements provides these tips for expansion:

  • Don’t assume everyone speaks English. Although most online buyers speak sufficient English to understand English ads, most buyers would prefer items in their native tongue, and under the rules of the country they live in. This desire increases with more expensive or more technical items.
  • Selling items successfully abroad is not unlike selling them domestically; it’s all about building trust. Machine translations (or even human translations that aren’t e-commerce specific) erode that trust, as do ads that have not been localized for the country you’re selling into.
  • Be aware of the different payment methods that are preferred in each country. A seller listing in Germany without offering wire transfers puts a barrier in their own way, and Amazon Italy requires you have an Italian bank account. There are payment gateways that can help with this.
  • Each country-specific eBay and Amazon site has subtle but important differences in the different geographies. Here are some examples of what to pay attention to:
  • Price of listings with and without a shop; sellers can save lots of money by knowing whether to buy a shop and where the rates are the best for their type of product.
  • Categories, browse notes, item specifics, etc. can differ greatly per geography; since search is increasingly based on these, it’s vital that the translator be able to navigate the marketplaces to choose these correctly.

Starting out:

When starting out, marketplaces such as eBay and Amazon are a good starting point. These options alrready have an established audience of millions, as well as a recognized process and low barriers to entry. Testing your products on these sites will be a good indicator of how your products will perform in that marketplace, all while establishing an international customer base.

Going Further:

Creating a localized website for your company would be the next step for more established companies. This will allow you to kick-start paid search campaigns and display your products on comparison shopping engines to drive traffic back to your website.

5 Questions to Answer Before you Expand:

✓ How will I deal with deliveries and returns?

✓ What are the tax requirements for the country I am expanding to?

✓ Are there cultural requirements I need to be aware of?

✓ How will I translate my products and deal with customer service?

✓ What are the legal restrictions in the region I would like to expand to?

What does success look like?

LeSports:

UK-based online sportswear and equipment retailer and joint ChannelAdvisor and ICE customer, LeSports expanded to multiple regions and has experienced 40% year-over-year growth. LeSports is now operating within the US, UK, Australia, Germany and France with international sales now accounting for nearly 50% of the company’s sales. The US has been the biggest growth market for the sports retailer, with 37% YOY growth. Read the full story here.

Global Technology Resource:

InterCultural Elements and ChannelAdvisor customer Global Technology Resource (GTR) started listing directly into eBay Germany in July 2007 and by year’s end, GTR already had a 400% return on its ICE investment (ROI). Building on this success, they decided to expand further by selling into eBay US, France, Italy and Spain. Within 12 months Global Technology Resource had sold into 62 countries, including all EU countries, Mexico, Japan and Thailand. Some 55% of turnover was coming from outside the UK and 8% of the company’s items sold on eBay Spain were purchased by US customers.

Summary

There is no doubt that there is a lot of potential with international expansion, but it is not a case of one size fits all. You need to identify an approach that suits your business offering and expand at a pace you are comfortable with. If you would like more information on how we can help you sell more online, give us a call and we’ll be happy to lend you our expertise and lean on our industry contacts to make sure that you start off this venture on the right foot.