PFS: Perrine Masset Senior Manager Agency at LiveArea
How big is the opportunity for internationalisation for UK retailers?
Cross-border and international ecommerce offer a massive opportunity for UK retailers. Some 32% of global ecommerce revenue is predicted to be from international sales by 2020. This will amount to $216bn (£167bn) giving enough opportunity for everyone to get a piece of the cake. There are also opportunities for retailers to target different markets in a way that fits with their brand, vertical, customer base and investment be that mature markets in Europe or large geographies such as Canada and Latin America which have a large proportion of local consumers purchasing from international sites.
What business models could UK brands follow to expand internationally?
There are three approaches that retailers can follow with varying levels of investment and risk. The simplest, and the business model with the least amount of risk and investment, is to offer cross-border shipping. This, however, does not offer the optimum customer experience. Marketplaces offer further opportunity to create brand awareness and to test new markets but can add complexity and be trickier to manage. Retailers should look carefully at each country and site and the different options based on their vertical. The greatest investment and risk is to operate an independent, fully localised site offering local assortment, payment methods and delivery options. This offers the best customer experience but also needs a certain level of brand awareness locally.
Being flexible with a test and learn approach can offer a first foot into the door for a UK brand going into mature markets such as Germany or the US. A site designed with a ‘minimal viable product’ approach can be low risk, allowing a retailer to understand how customers react to their product and prices and allows them to be ready for when they launch a fully localised site.What are the main points to assess when going international?
When expanding internationally external and internal factors need to be considered. Market evaluation is critical; a large ecommerce market may not translate to a large number of international purchases. US shoppers spent almost $400bn (£309bn) online in 2016 but the majority of it was with US retailers. Canadians, though, are predicted to spend $40bn (£31bn) online by 2018 with a large proportion spent internationally. Even in the EU, not all countries offer a similar market level. Internet penetration in the Netherlands is at 96% compared to Italy’s 62%.
Different trading regulations mark the complexity of market entry as do rules regarding different verticals with some, such as spirits, being more complex. For example, Germany, Norway, Singapore and Hong Kong offer lower barriers to entry than Afghanistan, Greece or Luxembourg according to a study by the World Bank.
The type of product might even be one which consumers do not buy online with shoppers preferring to buy from established brick and mortar retailers so analysis of both on and offline competitors needs to be conducted. And that’s before getting into consumer behaviour online, their preferences in the chosen market for delivery and payment methods. Shoppers in China, for example, pay cash on delivery versus European’s credit and debit cards and Germany’s bank transfer payments. Retailers need to look at the differences and keep them in mind.
Internally, retailers need to gauge their existing brand footprint in a country, the level of awareness and required marketing investment. One global retailer launched into the US but found that a larger marketing budget was needed since its product category was heavily discounted with consumers looking for vouchers and discount codes before purchasing and competitors outbidding them on key words.
Staffing levels and internal talent too are factors and whether the right skills and local resource can be put into place.
Does a global approach bring advantages to internationalisation?
A global approach brings economies of scale and the ability to build a reference application that’s solid for all countries across the globe. Each country is then able to turn on aspects, such as the local delivery and payments options, they need. One platform allows for a lot of flexibility and agility along with strong master code and innovation governance.
Are there common pitfalls?
There are three main pitfalls to internationalisation: wrong evaluation; underestimating the team; costing. If the initial market evaluation is incorrect in any way, such as underestimating and misunderstanding the local competition or consumer buying habits, the business case will be built on the wrong KPIs.
Some retailers have underestimated the team that needs to be in place, running too much with a UK team instead of local staff, understanding and resources. Some companies view internationalisation as a small project whereas it should be considered as a new entity within the business.
The third pitfall is underestimating the costs involved. The budget needs to be looked at as more than platform and implementation costs and include long-term marketing investment and a customer-acquisition model. Retailers need to make sure that they have the long-term investment in place before entering a market.
You will fail at some point so embrace the test and learn approach and this in turn brings the agility that’s needed to fix things very quickly.
This Company Spotlight was produced by InternetRetailing and paid for by PFS. Funding articles in this way allows us to explore topics and present relevant services and information that we believe our readers will find of interest.
PFS IN BRIEFDate launched:
Established in the US in 1994. Launched in Europe in 1999 and the UK in 2014.Global reach:
PFS has a global reach working from 15 locations in the US, Europe and India.Turnover:
$334.6m (£259m) in FY2016.Customers:
Over 170 world-class brands including P&G, Diageo, Lego, L’Oréal and Pandora.Employees:
For further information contact PFS at email@example.com
Check out our Website
or telephone 020 3475 4000.Partners:
PFS is a solution-agnostic provider working globally with the leading enterprise platforms including Salesforce Commerce Cloud, Salesforce Marketing Cloud, SAP, Magento, IBM and Oracle ATG. In the UK market, the company also partners with Qubit, Amplience, Monetate, Tealium, Adyen, InRiver, Bazaarvoice, Rackspace and Mirakl.