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Martin Newman is the author of Econsultancy's Internationalisation of E-commerce Best Practice Guide published this week.
Here, he introduces the report, with tips and recommendations for those retailers wishing to sell online in other countries.
Can you tell us a bit more about this report and what inspired you to write it?
I am a ‘practicologist.’ For me that means I always adopt a practical approach to everything I do, but where possible this is also supported by some statistics, or the science behind it, and that’s where the ‘oligy’ comes into it.
I believe this report delivers some really practical tips and pointers with regard to everything a business needs to consider when adopting an internationalisation strategy for e-commerce. But I’ve also been able to find some really interesting and relevant statistics that should enable the business to make a more informed decision about internationalisation and what it might mean to their business.
My motivation for writing the report was to help companies pursue a more focused strategy and approach to internationalisation. In my experience, they tend to jump in head first without really planning it properly and end up failing to maximise the opportunity either because they’ve over- or under-invested.
They are often not focused on the things that really matter such as the customer proposition around product, price, fulfilment and the relevance of the site in terms of payment options and local language. The complexities around running an internationalised e-commerce channel are often not given due consideration.
How much scope do you think there is for companies to increase their sales by selling abroad?
There is pretty significant scope and opportunity to do so. But the scope will be determined by a number of factors.
-) The categories and sectors the business operates in, both in terms of the demand for their products and services but also in relation to the existing supply and level of competition. If their core products and services are not that widely available in local markets then clearly that will represent a bigger opportunity. Otherwise, they will have to create other points of difference such as pricing and added value services.
-) Pricing. Some businesses will find certain markets more competitive and price-sensitive than others and therefore may need to adopt a different pricing model
-) Barriers to entry. The easier it is for other competitors to enter the market, the less defensible the company’s position is likely to be. And of course the web offers a quicker route to market, so they are unlikely to be alone when it comes to targeting a new market
What are the main challenges companies face trying to sell online in other countries?
The main challenges stem from the level of localisation the company needs to adopt in order for the customer proposition to be relevant, and how they’re going to support this in an operational context. For example:
-) Are they going to fulfil from their domestic market or can they do it locally? If not, how compelling will the delivery proposition be? And how will they manage returns?
-) Are they going to develop local language sites and how can they manage that on an on-going basis in terms of translation?
-) How do they create and manage promotions and content and ensure the relevance to the local market?
-) VAT can become problematic particularly once you get over a certain threshold of sales.
And, of course, the technology in terms of the existing e-commerce platform may also present limitations in terms of being able to create local language variants of the website and other requirements to meet the needs of local market customers.
Are there any other classic pitfalls or mistakes, which can undo companies?
There are various potential classic pitfalls. The most common is when they don’t localise the customer proposition in terms of local language, local payment options and products that meet the needs of local market customers. This is the cause. And the effect is poor sales.
This leads to the company believing that the scope of opportunity isn’t sufficient and therefore either divesting their interests in that market or not pursuing it effectively.
From an operational perspective there are issues around how to manage customer service in different languages as well as the service levels around the whole customer service piece.
Companies will often translate the website to begin with but then don’t really think through how they’re going to manage content on an on-going basis.
Can you give us any specific examples of how the online shopping experience differs by country?
Online shopping experiences tend to relate directly to the stage of evolution of e-commerce in the local market. For example, in markets that are still in the early growth phase such as Australia, a lot of big retailers are not even selling online yet. And those that are have often gone for the lowest cost ‘dip our toes’ approach, which in itself limits the potential upside. This is similar to how e-commerce evolved in the UK.
Then you have challenges around specific aspects of the customer proposition. Take payment solutions. Germany, for example, has the lowest level of credit card penetration in Europe and as such, Germans prefer to pay using a method called ‘ELV’, which refers to bank transfer and direct debit. So if a retailer doesn’t offer this as a payment solution to German customers, then clearly the sales opportunity will be limited as a result.
Another example is in Scandinavia where one of the most common payment methods for product purchased online is cash on delivery.
Bearing in mind how nationalistic German and French people are, I’d also question how effective an English language site would be selling into these markets.
To what extent can technology solve the problems?
Having the right payment service provider can address local market payment requirements.
For retailers in evolving markets such as Australia, my advice would be to look to the UK and to our learning. There is no question that e-commerce will be a significant channel in all of these evolving markets and, as such, retailers should be ensuring they implement solutions that are both ‘fit for purpose’ and ‘future proofed’.
There is no excuse for a ‘dipping our toes’ approach any more. So in that context technology can solve a lot of problems at least when it comes to being able to deliver the type of online experience customers expect.
Which companies do you think are doing a good job of internationalising their e-commerce capabilities?
-) Clarks shoes
-) Apple (Although I think they could make the international options around language more obvious)
Is there anyone who is doing this badly?
Too many to mention but here are a few. All those retailers who don’t even allow international customers to buy from them. Or if they do, it’s not very obvious. Nor is it a very compelling proposition (e.g. Tesco Direct, Harvey Nichols, Abercrombie & Fitch)
Can you give three main recommendations for companies thinking about internationalisation of e-commerce?
1. Understand the scope of opportunity, and pick your target markets carefully
2. Don’t ‘dip your toes’. Either do it properly or don’t waste your time
3. Plan it properly. Think of all of the implications in terms of the day-to-day running as well as the strategic approach