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Taken from our Internationalisation of E-commerce Best Practice Guide, this extract provides a framework to enable you to quickly review the opportunities and challenges presented by a specific market and help you make an initial judgement of what markets to enter.
Here are the 11 Cs of e-commerce internationalisation...
There could be many potential countries and markets that at the outset appear to be attractive propositions. In the case of larger, well-established global brands, there will most likely be existing data available from the offline channel to qualify the potential of a market.
Smaller brands and those who have yet to internationalise through any channel may analyse existing web traffic patterns in order to make some informed assumptions around the opportunity from international markets.
But there are also important considerations around PEST analysis (Political, Environmental, Social and Technological factors) that you should review before making a decision on what countries hold the best prospects for you.
Customers are the lifeblood of every business, whether you are selling B2C, B2B or B2B2C. You will need to analyse the market in order to understand what customer segmentation looks like and how relevant and closely aligned is your product or service offer with local market customers.
You will also need to understand their behaviour and their level of engagement, adoption and interaction with the web. Clearly markets with good levels of broadband penetration are likely to indicate that consumers will have a higher propensity to buy online.
But some markets that already have good levels of broadband penetration have additional challenges, such as consumers' reluctance to use their credit cards online (e.g. Croatia and other emerging Eastern European markets) or where the infrastructure around fulfilment is limited, such as is the case in Australia.
Of course if you already have distribution in certain local markets through wholesale customers or franchisees, you will need to navigate your way around your contracts and relationships with these players before deciding upon which markets to enter.
From an end-customer perspective, it is also advisable to look at market segmentation and consider traditional marketing criteria when determining the relative attractiveness of a market.
- Demographic: gender, age, income level, social class and educational achievement.
- Psychographic: lifestyle factors - activities, interests and opinions.
- Behavioural: patterns of consumption, loyalty to product category and brand.
You are going to have to communicate with customers in new markets through a number of channels and therefore you will need to consider how you are going to effectively engage customers through both marketing messages and all other forms of communication, including customer service and content.
If you aim to create local language content in order to drive an increase in customer engagement, you are going to need local marketing and customer service resources to help you with the development of relevant content.
Therefore, the supply of these services will also become important criteria when deciding upon market entry.
Cultural variances of local markets can impact upon a number of considerations. European markets are hardly comparable with one another. A good example is design. In Sweden, functionality, simplicity and speed are the most important features of an online shop. This is in contrast with France, where the focus is on design.
In Japan, shopping represents a social activity, an opportunity to meet friends and mingle. Due to this social function and reluctance to use credit cards, online shopping has not really taken off in Japan.
From a content perspective, model shots and lifestyle images that work well in the West do not go down well in the Middle East.
Of course, each country will observe its own public holidays and festivals. You need to think through basic operational issues and requirements such as the fulfilment of customer orders and handling customer service at these important times of year.
5. Customer service/Customer proposition
Customers in local markets will always prefer to speak to someone in your customer service team in their local language.
But you also need to consider practical operational challenges such as the hours that your customer service team is available. You may end up taking a fair number of orders and after-sales enquiries from customers who are in a different time zone, and they still require the same levels of customer service as you would provide for your domestic market customers.
The 'last mile' is the most important leg on the customer journey. If the purchase results in a poor experience when it comes to receiving their order, customers will remember that. A number of international markets have fairly poor delivery options, which will hinder the online opportunity.
You will definitely want to have a close look at the competitive landscape and your potential competitors, as you may end up getting competition from well-known, established competitors as well as from local market competitors with whom you may be unfamiliar.
You will want to understand what their marketing mix, market share and positioning is in order to understand what you need to do to have a competitive advantage.
7. Currency and payment options
Local market customers will require you to offer a variety of payment solutions and will normally prefer to pay in their local market currency. For example, Germans have a low adoption of credit cards and prefer to pay through ELV and direct debit. A significant percentage of Scandinavians prefer to pay by cash on delivery.
This obviously adds a degree of complexity to systems as you will require your payment service provider (PSP) to facilitate transactions in new currencies and payment methods, some of which they may not already cater for.
While conversion rates always need to be put into context, some knowledge of KPIs in the local market, specifically within your own category will help to qualify the scope of opportunity you can expect to achieve.
These will be driven by a number of factors, including the local market consumers‟ propensity to buy online, their propensity to buy a specific product or product category online, the delivery and fulfilment proposition and so on.
9. Channels (and category)
E-commerce may not be the only channel you need to consider. For example, in India, due to the cost and unreliable nature of fixed line communication, mobile has a higher penetration.
Therefore, if you were entering this market, not only would you need to develop a mobile compatible site, you might also need to consider other opportunities presented by mobile such as mobile applications, barcodes, QR codes, RFID and SMS.
If you have an existing store portfolio in the local market, you will also need to consider your cross-channel approach and what sort of customer experience you will provide across the different touch-points. For example, will you enable customers to return goods to a store?
From a category perspective, not all categories are created equal. Some categories are more competitive in certain markets.
As previously discussed under 'culture', content is always a major consideration in e-commerce but even more so when put into the context of internationalisation.
Content that works in your domestic market is unlikely to transcend borders to meet the needs of local market customers. Therefore, you will need to have an international content strategy as well as people with linguistic skills to enable you to produce relevant content to position the brand and align the proposition to the needs of the local market.
You will also require a content management system (CMS) that enables you to implement appropriate levels of access and control over the content you create.
There are a number of strategic models you can adopt to help you in the decision making process. These include the business portfolio matrix, the Ansoff growth matrix, the 4-risk matrix and Michael Porter‟s five forces competitive analysis model.
The first 10 Cs will play a significant role in helping you determine what cost implications are associated with entering into different market. But by this point you should also have a feel for the potential ROI.