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E-commerce is opening up the world to retailers
By 2020 world trade in goods will total around $35trn, more than double its value in 2010. Brands that continue to think within their own national borders will be missing out on growth.
International sales are picking up pace. The British Retail Consortium, for example, reported a 231 per cent increase in searches on British retailers’ websites from Germany in the final quarter of 2013. And in their Global Retail E-mpire report, Google and OC&C Strategy Consultants predict a fivefold increase in the value of cross-border trade in six leading e-commerce markets – France, Germany, the Netherlands, Scandinavia, UK and the US – by the end of the decade.
Brands that continue to think within their own national borders will be missing out on growth. There are high-profile examples of online retailers that are seizing the opportunities. Fashion retailer Asos now ships to customers in 237 countries from its UK base, with international sales accounting for 63 per cent of its turnover. Germany’s fashion brand Zalando has expanded one step at a time – first going into neighbouring Austria a year after its launch in 2008; then into France and the Netherlands in 2010 and Italy, Switzerland and the UK in 2011. It now covers 15 European markets.
“Over the next decade, online retail will become even more international…”
“Over the next decade, online retail will become even more international.” says Anita Balchandani, partner at OC&C. She says e-commerce means retailers do not have to replicate physical infrastructure abroad. “You can go a long way to be an international business without needing to establish in-country infrastructure. This reduces costs and accelerates the speed with which you can expand, and allows you more room for trial and error.” The Global Retail E-mpire report highlights H&M and IKEA as traditional, bricks-and mortar firms that have used online in this way to drive their expansion.
There are also plenty of big names that have been slow to realise the potential – and the ease with which e-commerce can attract significant business overseas. Upmarket UK department store Selfridges, for example, only launched an international delivery service to 12 countries in continental Europe at the end of summer 2013. That is despite 25 per cent of traffic to selfridges.com coming from outside the UK in 2012, with 50 per cent of those wanting to place orders that could not be fulfilled. Within a month of launching its new website, it had exceeded realistic sales forecasts by 1,000 per cent, with little marketing support.
Less well-known brands will have less confidence of finding such a ready audience. But Parvaneh Nilforoushan, AT Kearney consultant and co-author of the Global Retail E-Commerce Index, which ranks countries on their e-commerce potential, says there are just as many opportunities for small players as for larger ones. To find them, she says, requires strategy, branding and “offering something unique to the customer that is not available anywhere else”.
AT Kearney’s Index lists China as being the market with the most potential, with Brazil also in the top 10. But Nilforoushan warns retailers not to just follow the buzz. She suggests that it would be only natural for European retailers to think about fellow EU countries first, because fulfilment is perceived as easier. Although the Index groups markets into three categories that follow similar trends: established and growing (US, western Europe), digital DNA (Japan, South Korea) and next generation (China, Brazil), she says: “There is no one-size-fits all approach. It’s all about doing your homework, understanding what you offer in your home market and how that may or may not translate into international locations.”
“If consumers don’t get their product or they’re not satisfied by how long it takes to arrive then that’s a problem and they’re not likely to make repeat purchases”
Making it happen
Every business must decide which markets are attractive. But language and cultural differences will need to be mastered and will need to be reflected in product ranges, websites and marketing.
And although trading in the EU presents fewer problems in terms of regulation, rules around what you can sell or send, as well as how you can market your goods, can change frequently. There are also other practical difficulties. For one, consumers are still cautious about shopping overseas. PayPal’s Modern Spice Routes report found that fear of identity theft and fraud was the top reason why they do not make cross-border online transactions, cited by 70 per cent of respondents. Retailers have to offer them secure options for payment.
And Nilforoushan says fulfilment is vital. “If consumers don’t get their product or they’re not satisfied by how long it takes to arrive then that’s a problem and they’re not likely to make repeat purchases,” she says. In many cases retailers will need to improve their fulfillment capabilities, bearing in mind that they may also need help to clear customs. Although selling across borders adds complexity, the barriers will lessen as traffic grows. “This is one of the biggest opportunities for retailers to access new customer demand and growth,” says Balchandani. Provided you have a strong proposition, the work is worth it.
About Manuel Bonnin