Ahead of the eighth annual Internet Retailing Conference (IRC 2013) we’re running a series of previews of the event, focusing on the highlights of the one-day conference and featuring interviews with speakers. Today we speak to Rob Jennings, ecommerce director, Mamas and Papas , who will be taking part in a panel discussion on trading internationally.
Internet Retailing: Can you tell us about the Mamas & Papas experience of selling internationally?
Rob Jennings, ecommerce director, Mamas and Papas : We made a decision ten years ago now to significantly ramp up our investment in innovative new product development designed for a global customer. That new product development was really the tool that gave us the platform for international growth.
Our products are now sold in 50 countries. We sell online to America, Russia, China and pretty much most of Europe as well. We use different models, but most are controlled by us from headquarters. In most territories we manage the platform, we control content and also fulfil for each of those different platforms. Others are jointly managed and we’ll work with our franchise partners to provide the collateral that they need in order to trade regionally with our assortment.
IR: Can you tell us about something you/Mamas & Papas found difficult in that expansion and how you solved that, as well as one area where you found an unexpected benefit/opportunity?
RJ: Key to our brand proposition is our comprehensive product range. It is however a large and complex product range, with eight product categories that almost require operating as eight separate businesses. We have clothing, toys and gifts as well as bedding and interior collections, but then also larger and more complex items like pushchairs, bouncers, cradles, high chairs and furniture.
The biggest barriers we’ve found to replicating our UK proposition online are the logistics and reverse logistics. Adapting languages, managing multiple tax systems and payment types by region are definitely complex but sending a pushchair overseas, and dealing with returns and after sales, in a way in which we protect our margin, is very difficult.
Clothing is great, we sell it everywhere we sell online. It’s very low cost to ship, – if the customer returns it it’s low-cost to ship back. It’s perfect for us. The challenge is in larger items.
In America, for example, we’ve set up a website where in the same basket a customer can order a large bulky item such as a pushchair and a piece of clothing or a bedding set or something for the cot. In the background for that same basket, we’ll split the order and if it’s a large bulky item we’ve set up a distribution centre in the States, which will effectively ship that item to the buyer while the smaller items we house in the UK and we ship and fulfil that from here – because the cost of carriage is very low for us to ship smaller items from here.
What it means is that rather than us having to invest in significant sums of stock investment held up in the States for all those lines, we can just dip into a very broad assortment of the range we hold in the UK.
It’s been a good work around for us – it means we can completely open up the product range.
Another benefit we are working towards, is the contra season trading effect. At the end of each season we can be left with large quantities of clothing stock that we need to clear through.
We’re looking forward to opening up a proposition to the southern hemisphere countries, Australia, South Africa, for example. Then we can sell last season’s clothing as close to the full price as possible, so maximising the margin for that season.
IR: More generally, how do you think that international trade will have evolved in five years time?
RJ: I think there’s a great opportunity for multichannel retailers that have a strong proposition in their own country, such as strong UK or US multichannel retailers, to really make some heavy impact in the regions where the online competencies aren’t as developed or the online proposition isn’t as mature.
Australia is a great example – I saw some figures recently that suggested more goods are sold online in Australia from offshore than come from Australian businesses. Customers are obviously starting to get more savvy and shop online in that territory, but I think some of the major retailers there have been slow to react.
For those retailers that are based here, there’s a massive opportunity in those territories. I think what we’ll see more businesses do is trying to minimise the perceived barriers to a customer buying something crossborder. I suppose that comes down to things such as making sure duty is not paid by the customer, that the delivery proposition is as quick as possible and the cost as low as possible, so that there isn’t a downside to shipping from another country.
I suppose in the background the challenge to the retailer is the proposition of selling something large, like a pushchair, and shipping it across to Australia, which is going to cost a serious amount of money. If I want to offer a free of charge proposition I want to make sure I’m recovering that somewhere else, maybe by a protracted delivery lead time, whilst managing the customer’s expectations, or, indeed just make it up in the price of the product.
But therein lies another challenge in terms of managing visibility of prices for the same product in multiple regions, because as internet penetration increases across the globe, the ability to have regional prices based on cost to fulfil gets very difficult.
We are quite active with sniffing IP addresses and then showing what we have set as the price for that region. To be honest with you, many of our products are sold across the world. The challenge would be if most of the customers were to see what the UK price is, because the UK is a competitive market at the moment and the customer expects a significant discount. In order to gain commitment in the UK we must offer excellent customer service and excellent products, but crucially we must be competitively priced, However, based on varying tariffs, duties and carriage, prices must be different across the globe, yet the end customer doesn’t always appreciate that. There is an education piece to be done there.
This is where scale comes in, either by investing in local distribution centres, or by utilising the stock of regional franchisees or distributors to fulfill orders, hence minimising the movement of stock and the cost of carriage. Don’t get me wrong, we don’t want to optimistically invest in stockholdings in lots of different countries. I think it’s that principle of accepting a higher shipping cost at the outset and fulfilling from the UK until we’ve proved a business case of opportunity in that region before investing in logistics infrastructures.
IR: How do you think you and your customers will be shopping in that time period, whether at home or abroad? How will it have changed?
RJ: The pace of change is remarkable. For some time we’ve had a period where we as a business in the UK have more traffic coming to us on touchscreen devices on a weekly basis than people visiting our entire store estate – and that’s before we add in laptop and desktop traffic. The traffic we’re getting now through mobile devices continues to ramp up significantly as modern is incredibly tech savvy.
I still think that short of a few people who’ve optimised for it, not many people are providing an experience that’s right for tablet devices. There’s obviously a massive trend in responsive design but designing with the intent purpose of being controlled by touch is a new thing that businesses must respond to.
There’s a lot of talk about the death of the high street. It is very challenging but we’re in a position where we’ll never see online replace the high street. I think our product range is still experiential – customers want to go in-store, try out the pushchair of their choice and get that one to one consultation.
The channels working together is where we see value. We have incredible interplay of traffic across channels through the week. We have a surge of online traffic Monday through Friday, which then dips through the weekend, just as mobile traffic spikes up as a ‘near-store’ tool and store footfall spike up. This then completely flips back on Sunday night as people look at considered purchases such as furniture in-store, go home and buy it on the web on Sunday night.
The other real challenge that has to be addressed is logistics and carriage. Customers are wanting cheaper and free delivery more and more, so as retailer’s cost prices are increasing generally around the world, carriers are wanting increased prices, and the customer wants it all for free. It’s very difficult for a retailer to be squeezed in the middle of all that when, particularly in the vertical in which we trade, the expectation is to be free when you spend over £30 – that’s a very strong proposition but very difficult when already cutting back prices.
Every single retailer will be making a loss on carriage when offering that sort of proposition. We’ve focused on getting products to customers in a more cost-effective way that is flexible for the customer as well. We’ve rewritten our whole delivery system logic, the way in which it works. In summary we’re trying to offer as many premium delivery options as possible – all of which carry a higher charge – and market them strongly to increase the take up – next day, pre-noon, same-day delivery, etc but also the ability to mix one and two man orders in one basket and allow the customer to elect one named day. All these options are designed to make it as flexible as possible for a mum who needs to know she is going to get that item she delivered at exactly the time she needs it. But 80% will opt for the free delivery if we have free standard delivery. And that’s where our one hour click and collect service is now benefitting, offering a free and fast option to our customer, whilst costing us far less to fulfil than a home-delivered package.
Rob Jennings, ecommerce director, Mamas and Papas, will be among the panelists on the Internet Retailing In Store panel discussion at Internet Retailing Conference 2013 www.internetretailingconference.co.uk. The discussion, in The Business conference stream takes place at 2.35pm.