The common pitfalls, key considerations and decision points that business leaders face as they expand beyond the border.
Introduction
With 96% of the worlds population living outside of the United States, and global commerce projected to reach $1 trillion by 2016 (i), its no surprise that many domestic companies are more than dreaming of global eCommerce expansion. Many international markets such as Asia Pacific are projected to be larger than the U.S., and along with Europe and Latin America are projected to grow at a faster rate. As such, global expansion is either already underway for many organizations or one of their top priorities for 2013 and beyond. As enticing as globalized eCommerce sounds, its not exactly a build it, and they will come proposition. While its true that opening an eCommerce store is not as physically resource-intensive as opening an international brick-and-mortar store, expanding beyond geographic borders is still a significant undertaking. It is important that you fully understand the scope of your initiative, and take the all the steps necessary to avoid any major setbacks or showstoppers. In the following paper, youll learn some of the common pitfalls, key considerations and decision points that youll face as you look to expand your eCommerce business beyond the border. They have local brand awareness Many brands have tried to establish themselves in new countries via eCommerce, assuming that the sales will simply start rolling in the minute they open up distribution. In some cases this has worked. More often than not, however, these companies are left wondering where all the customers are. So instead of using eCommerce as the pioneering entry into globalization, it may be easier and more effective to launch where you already have some sort of brand presence, whether thats through retail, wholesale or distributor relationships. They have local distribution In the past, distribution and logistics were major barriers for e-retailers looking to expand internationally. And while there are many different options to help overcome these barriers, one thing is clear; companies that leverage local distribution to fulfill direct-to-consumer orders have a significant head start.
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Payment Methods eCommerce customers in the U.S. typically use predictable/stable payment methods like credit cards, debit cards. In fact, 80% of their online purchases are processed via debit and credit cards. The only dominant alternate is PayPal. However, thats not the case in other countries (ii) : In India, only 2% of the population holds a credit card. FlipKart, which enables Cash on Delivery (COD), is the dominant payment method. In Germany, 66% of eCommerce transactions are handled via alternate payment methods, such as Elektronisches Lastschrift Verfahren (ELV), a direct debit option that handles 28% of all transactions. In China, 60% pay with Alipay, a service that holds payment until the consumer has indicated they are happy with the product(s). In Russia, 75% of online shoppers prefer using COD. In the Netherlands, 81% of Dutch online shoppers use iDeal real time bank transfers. 54% prefer it as their primary payment mechanism.
Reliability is a Concern Shipping concerns are one of the dominant reasons for international cart abandonment. Delivery is inconsistent at best. In fact, many locations wont deliver anything that cant fit into a traditional mail slot. Failed and missing deliveries are commonplace in many countries, resulting in lost consumer confidence. Alternative Delivery Options Based on this lagging consumer confidence, alternate delivery methods are becoming more prevalent around the world. In France, Kiala is a popular service that lets customers ship products to common retail locations. In the U.K., customers have their items shipped to code-protected boxes in train stations. But in order to offer these payment options, youll first have work with these individual providers, and your technology team will need to account for the integration and testing efforts.
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Its quite common for companies to plan a product assortment only to encounter channel conflict issues with existing brick and mortar retailers, not to mention any exclusivity agreements with distributors in certain markets.
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Get Organized
Get Organized Deciding how to organize for international eCommerce is the final challenge well discuss, and there are many different models in practice today. There really is no right or wrong answer, but based on the size of your business, you may choose to start more centrally and migrate to a hybrid model. And if sales grow rapidly, you can always move to a locally managed model. The most common models are: Centrally Managed: Some companies choose to centralize management of their global sites from the US to maintain tight control over brand and to leverage experienced eCommerce resources. The challenge comes in understanding local market differences to optimize business performance. Locally Managed: Other companies build eCommerce teams at the local level and give them complete ownership over their eCommerce experiences. The challenges with this model lie in maintaining global brand consistency, coordination and communication across global locations. Hybrid Model: Some companies hire local marketing, merchandising and customer service teams while leveraging a centralized team for common services such as technology, creative production, and database management. Here they can benefit from the core customer facing local resources while benefitting from the efficiency of the more technical and operational aspects of the business. After all, you need to make sure that when a German customer calls your European toll free phone number that a German speaking customer service agent is ready to take the call.
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Conclusion
International eCommerce expansion can be a long, and at times, difficult journey - even for those who have experienced the process first-hand. More often than not, questions are met with vagaries, answers have ambiguities and conflicting advice creates confusion. No matter what the business, however, there are common challenges and considerations that can be marked as key touchpoints along the way. Following the plan outlined above should help any newcomer enter the world of global expansion with confidence. Clearly, there will be challenges along the way. While there may be frontrunners, we are all entering this new world of International eCommerce together, so there are no unbreakable rules yet. The exception now, perhaps, is to never take anything for granted. Never assume. Always ask questions. Double and triple check that you havent missed anything. Ask colleagues, seek out third-party advice from those who have achieved success. Do everything you can to ensure youre as prepared and equipped as possible before building your site. And then build it right. Because while globalized eCommerce is not exactly a build it, and they will come proposition, if you do take the time to build it right, theres a very good chance the customers will come.
Sources
i Morgan Stanley; Devitt, Scott (Jan. 6 2013). Morgan Stanley Report: Amazon Surges to Record High on Global E-Commerce Growth [Report]. Retrieved from http://www.bloomberg.com/news/2013-01-07/amazon-surges-to-record-high-on-global-ecommerce-growth.html ii Worldplay; (May 9, 2012) Alternative Payments to rise exponentially by 2015; Retrieved from http://www.worldpay.com/media/ index.php?page=archive&sub=worldpay-altpayments&c=
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About Optaros
Optaros is a global digital commerce service partner focused on helping companies conceive, build and operate eCommerce solutions that accelerate revenue and decelerate costs. With the technical capabilities of a systems integrations company, the UX and creative design of an interactive agency, and the insights of an expert commerce consultancy, Optaros delivers outstanding programs for more than 200 clients in the retail, consumer goods, media, healthcare and financial services industries. For more information, visit www.optaros.com, call (617) 227-1855 or email ContactUs@optaros.com.
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