Although expanding into global online markets is not a new strategy, it continues to be a hot button initiative – one that continues to gain momentum among small and large companies alike. To deepen our understanding of how companies view global expansion, Digital River commissioned Forrester Consulting to survey 130 executives and decision-makers at branded manufacturers in the U.S. and U.K.
The results of the survey were clear: manufacturers have an increasing appetite for international expansion through their ecommerce channels, and their expectations for speed-to-market and profitability are more aggressive than ever before. In fact, only one percent of respondents noted that international expansion was not at all a priority. At Digital River, we’ve helped thousands of merchants enter new online markets successfully, and we have some practical advice to help companies fast track their ecommerce operations around the globe.
1. Don’t underestimate the costs to ecommerce entry
Two thirds of the leaders we interviewed told us that expanding into new international markets was a high priority, or even “critical,” within the next year. That kind of urgency is more than justified by the tremendous growth of ecommerce worldwide. Forrester Research estimated the 2014 global online retail market at over $1 trillion.
To be successful in new markets, merchants should back their expansion plans with careful investment. After all, entering a new digital market means much more than translating your website into a new language. It means ensuring the right ecommerce experience for the specific market you’re entering. Investing in deep local expertise is crucial to successfully navigating the technological, legal, regulatory and cultural complexities of a new international market. Failure to properly localize an ecommerce experience can result in lost sales and damage even the most well-intentioned brands.
2. Capitalize on what you know
Forrester predicts that the global online retail market will double by 2018, and the fastest growth will happen in China and elsewhere in Asia, and Latin and South America. That’s where most companies are rushing to establish ecommerce operations first. But before you charge into today’s emerging markets, think about expanding your online footprint in geographies where you already have a presence through traditional retail channels. By starting in one of these markets, the barriers to online entry are lower. Your customers are already familiar with your brand, and you are familiar with the local environment. Sure, the Chinese ecommerce market is projected to grow to $1 trillion by the end of the decade, and your company will definitely want to sell there. But if customers are already buying your products in German brick-and-mortar stores, you can jumpstart your ecommerce expansion efforts by targeting Germany early on in the game.
3. Be realistic about going from zero to revenue
The branded manufacturers that were interviewed had very aggressive expectations about speed-to-market when expanding internationally. Just over 80 percent of the leaders interviewed expected to go from funding an online expansion initiative to generating revenue within a calendar year—and approximately 10 percent expected to be able to do it within three months.
But make sure your expectations of speed-to-market are aligned with reality. For merchants operating exclusively in their domestic market, the first unassisted foray into international ecommerce can be complex, surprising, and possibly more costly than anticipated. In our experience, merchants that launch into a new international market relying on their own resources frequently take a year or longer to go from zero to revenue.
4. Partner to jumpstart sales in new markets
Expanding into new international markets isn’t easy. To be successful, manage your risk and get to revenue faster, you’ll need expertise in a wide variety of areas. This includes ecommerce business infrastructure, customer service, fraud management and liability, legal and regulatory compliance, security and privacy, and tax collection and remittance. In our survey, regulatory requirements – particularly legal, tax, and compliance issues – ranked among some of the biggest challenges companies face when entering new markets. Because of the risks associated with getting these responsibilities right when you enter a new country, 95 percent of the leaders interviewed use third-party vendors for at least some of their international e-business functions. Working with capable third-party partners can diminish the risks and increase the rewards of entering new international markets. Our clients, for instance, can start making money in new international markets within 90 days.
Do you have any global ecommerce tips to share? Please leave me a comment below.
This article originally appeared in Multichannel Merchant.