The world is flattening and borders are blurring, opening up a wealth of new opportunity for UK retailers.
The world is flattening and borders are blurring, opening up a wealth of new opportunity for UK retailers. 40% of shoppers in the European Union now use the internet to buy goods and services, and within the next five years cross-border trade is expected to account for 20% of all ecommerce.
Selling into more geographies is a great way of avoiding domestic market saturation and diversifying risk. However, the prospect of entering a brand new market can be daunting.
To make a success of it, each retailer needs to tailor an approach that fits them and identify the most suitable markets. The 13 largest online markets in the EU are already estimated to be worth €20bn and growing at just under 20% per year. Despite its economic woes, Greece has been attracting 21% more packages from the UK this year, while Finland (20% more), Netherlands (20%), France (19%), Denmark (10%), Switzerland (9.5%), Italy (7%) and Spain (6.9%) are also among the top EU growth markets for UK parcel shipments, according to Royal Mail.
The opportunity may be bigger in China or India than the more established EU countries like Germany or Spain, but you need to balance the potential benefits with the added challenges that come with entering markets that are radically different to the UK.
Ecommerce in Turkey is growing so fast that it has been dubbed ‘the new China’. In 2011, ecommerce transactions increased by 57% compared to a year earlier, reaching €9.4bn. In the first month of 2012 alone, over 30 new Turkish ecommerce companies launched, including Markafoni – the second most visited private buying network in the world – that has attracted investors such as eBay, Amazon and Trendyol.
To best judge which countries to start selling into, retailers need to consider who in the target geography is going to buy from their store rather than a domestic store. What is the target demographic for your business? How does this demographic behave in your target market? Does it shop online and, if so, how and which brands will you be competing against?
Apparel retailers, for example, are finding success in emerging markets such as Australia because they can sell seasonal stock all year round, giving them the chance to extend the lifespan of product lines and dispose of stock easily. Australia in particular was the leading growth market for UK distance-sellers, with November 2011 figures suggesting a 31% growth in package volumes heading Down Under compared to the same period the previous year.
But retailers need to do their homework, just the same as if they were opening a flagship store in a new territory. Ask why you should sell there. Why will consumers buy your product? How much traffic can you expect? How will you transfer stock? Does your business model fit with this region or will you need to think about adapting?
As a retailer, you must consider the recognition of your name in that geography. Smaller retailers will have little to no recognition in foreign markets, so they’ll have to consider ways to build trust such as on-site security, conspicuous customer service contact information and a clear product return policy.
Marketplaces such as eBay and Amazon are a great way to start trading overseas, especially when resources are limited, as they offer huge sales potential for little investment. Beware, though, that each country-specific marketplace has subtle differences and a one-size-fits-all approach won’t work.
Beyond those considerations, the biggest challenge often isn’t the online task of actually setting up and selling, but the logistics of getting the product to the customer. The customer experience has to be paramount, including the tricky business of reverse logistics and managing returns. Some retailers may already have physical assets in an EU geography that they can use for distribution and those practical considerations might make expanding into Europe the sensible option.
On top of this, it’s crucial to get the lingo right. Retailers need to build trust with new customers, so poor language translation or irrelevant advertising may damage this relationship. The mantra always needs to be ‘think global, act local’. Think localised site, local currency, local legislation, and local payment methods. Remember that local tax varies from country to country, so get advice on how taxes will affect you in your target geography.
If you get cross-border ecommerce wrong, you can lose money and damage your brand. However, if you do your research thoroughly, seek expert consultancy and pick your targets carefully, your business can flourish overseas.
- Seamus Whittingham, managing director EMEA, ChannelAdvisor