Internet Retailing returns to internationalisation for its research report series a year after it first surveyed retailers’ views as to the challenges and opportunities they faced by going overseas. Liz Morrell reveals the results.
In 2013, retailers saw the opportunity for expansion and were putting it high on their priority lists. Come 2014 and it seems retailers largely feel the same. The majority of those surveyed (59%) have already been trading internationally for some time. A further 11% had made the move in the last twelve months whilst 15% were looking to launch overseas within the next six to twelve months. But there are still some concentrating fully on business back home too with 15% of our 2014 respondents saying that they weren’t planning on expanding abroad at all compared to 16% last year.
Most are seeing the value of expanding with 57% doing so because of demand outside of the UK for their products or brand whilst nearly a third (29%) had identified the return on investment that international expansion offered.
Europe is still a key target for international expansion
Understanding what route to take with expansion is key and our survey showed that the expense and risk of own stores or concessions puts off retailers. Over three quarters of respondents (76%) said stores were the least effective route and over two thirds (67%) said that store concessions were. Instead our respondents preferred less risk averse channels with 50% saying that direct sales through wholesale was an effective route, 84% citing marketplaces and a massive 93% citing local websites as being one of the most effective routes for international expansion.
Deciding where to expand is also a tough choice to make. Nearly three quarters (73%) said that they chose their expansion targets based on where their brand will perform best or will be the best fit but nearly a quarter of respondents (23%) admitted that they chose the easy targets rather than the markets where there are more challenges to overcome.
Priorities for expansion range widely. Unsurprisingly perhaps Europe remained top of the list for retailers looking to expand in 2015 with 60% of retailers looking to the EU member states for expansion. This was followed by the US and Canada where more than two thirds (37%) of respondents said the region was a target for next year. More than a quarter (28%) also chose Australia or New Zealand as expansion targets.
The results also showed the popularity of the BRIC region too with Brazil, Russia, India and China a priority for many. 17% are targeting Brazil, 30% Russia, 13% India and 28% China despite the greater complications of such markets.
Those complications still concern retailers – from the payment and delivery challenges of Germany to the myriad of challenges they face in Russia and China too.
Once again our survey showed the challenges of brand recognition and developing a local customer base with 27% saying it was the hardest challenge they faced and 28% citing language, culture and local market and customer knowledge as key.
LOCALISATION IS KEY
81% of respondents said that localisation was important. 39% said it was vital and they localised to each market whilst a further 42% said it was important but they faced challenges in doing so.
“Localising is really key. You have to get into the mind-set of a buyer in that locality. If you don’t invest time in that upfront you will end up doing a lot of rework down the line,” said Vinny O’Brien, Channel Manager at Micks Garage, and one of the retailers we interviewed extensively in the report.
Deciding on the degree of localisation remains a challenge but can come down to simple solutions in the short term our retailers pointed out. Clothing brand Weird Fish, for example, has a strong ex-pat customer base so when it’s analysing its expansion opportunities by looking at overseas sales it does so taking into account whether the customer in a market is a genuine local or an ex-pat and therefore whether it needs to translate the site or not.
Customer service is also vital internationally and we looked at how retailers were handling this. Nearly three quarters (72%) were handling it from the UK and more than 4 in 10 (42%) from the UK with a UK team but it’s obvious that full benefits come from having native speakers involved in the process who not only understand the technicalities of the language but the nuances of it in-situ too.
Upcoming Research Briefings
Internet Retailing’s Editors reveal the findings of their latest research on Wednesday 22 October, 08.30 – 12.00 at Glaziers Hall in London. Come along as they reveal the results in separate briefings on:
Seasonal Peaks Research Briefing
Customer Experience Research Briefing
For further details and to register, visit internetretailing
But our international survey wasn’t just about asking questions but sharing learnings too. The report, which will be published in September and presented at a live event in London the same month, also includes numerous case studies from retailers that have already expanded abroad, or who are in the early stages of doing so, giving vital tips, best practise and advice for doing so from a range of retail names – both large and small and covering a wide sector of retail – from sports to organic products, homewares to fashion. Some of these are retailers that have worked with our four report sponsors Neteven, Peer 1, Redbox Digital and WNDirect, whilst others are retailers that were kind enough to take part in our survey and volunteer to be interviewed in more depth as part of the research – a big thank you if you were one of them or if you took part in the survey itself because we couldn’t do it without you!
Understanding how they have tackled expansion is further supplemented by us asking retailers the best lessons they have learnt – either from their own point of view or what they have gained from the experience of larger retailers. The report collates their lessons learnt into five top tips for expanding abroad. These include:
❚ Lesson one - understand the local market and localise where possible;
❚ Lesson two - only go where there is demand;
❚ Lesson three emulate success stories;
❚ Lesson four - get in there quick but don’t rush it;
❚ Lesson five - don’t assume instant success.
Of course replicating what others have done right is a great way to ensure success and we also asked our respondents to let us know who they most admired for their international expansion and why. Although the answers were a little obvious – ASOS and Amazon to name but two – that makes them no less worthy and our report looks at the latest such players have to teach smaller retailers for whom international strategies are perhaps less developed.
As ever our research reports are jam-packed with advice, best practise and lessons to learn so be sure you download your copy of the International Research Report in September.
In the meantime we are also now working on the next research report Seasonal Commerce which you are likely to already have received the survey link to. Please do take the time to fill in the survey and if you would like to be interviewed in more depth or have suggestions or comment to make for the piece then email the research editor on [email protected]