The Growing Urgency Behind Manufacturers’ Global Online Expansion Plans

Early in 2014, one of my colleagues penned an article for Multichannel Merchant about ways to expand a global online business. The tips in that article are as solid as ever, and practiced every day by the thousands of global merchants we are privileged to count as clients.

Even though expanding into global online markets is not a new strategy, it continues to be a hot button initiative – one that, in our experience, continues to gain momentum among small and large companies alike. To gain deeper insights into how companies are thinking about global ecommerce, late last year, Digital River commissioned Forrester Consulting to survey 130 executives and decision-makers at branded manufacturers in the U.S. and U.K.

The results of the survey were clear: manufacturers have an increasing appetite for international expansion through their ecommerce channels, and their expectations for speed-to-market and profitability are more aggressive than ever before. In fact, only 1% of respondents noted that international expansion was not at all a priority.

Don’t underestimate the costs to ecommerce entry

Two thirds of the leaders we interviewed told us that expanding into new international markets was a high priority, or even “critical,” within the next year. That kind of urgency is more than justified by the tremendous growth of ecommerce worldwide. Forrester Research estimated the 2014 global online retail market at over $1 trillion.

To be successful in new markets, however, merchants must back up their eagerness with careful investment. After all, entering a new digital market means much more than translating your website into a new language. It means ensuring the right ecommerce experience for the specific market you’re entering. Investing in deep local expertise is crucial to successfully navigating the technological, legal, regulatory and cultural complexities of a new international market. Failure to properly localize an ecommerce experience can result in lost sales and damage even the most well-intentioned brands.

Capitalize on what you know

Forrester predicts that the global online retail market will double by 2018, and the fastest growth will happen in China and elsewhere in Asia, and Latin and South America. That’s where most companies are rushing to establish ecommerce operations first. But before you charge into today’s emerging markets, think about expanding your online footprint in geographies where you already have a presence through traditional retail channels. By starting in one of these markets, the barriers to online entry are lower.

Your customers are already familiar with your brand, and you are familiar with the local environment. Sure, the Chinese ecommerce market is projected to grow to $1 trillion by the end of the decade, and your company will definitely want to sell there. But if customers are already buying your products in German brick-and-mortar stores, you can jump start your ecommerce expansion efforts by targeting Germany early on in the game.

Be realistic about going from zero to revenue

The branded manufacturers that were interviewed had very aggressive expectations about speed-to-market in international expansion. Just over 80% of the leaders interviewed expected to go from funding an online expansion initiative to generating revenue within a calendar year—and approximately 10 percent expected to be able to do it within three months.

But make sure your expectations of speed-to-market are aligned with reality. For merchants operating exclusively in their domestic market, the first unassisted foray into international ecommerce can be complex, surprising, and possibly more costly than anticipated. In our experience, merchants that launch into a new international market relying on their own resources frequently take a year or longer to go from zero to revenue.

Partner to jump start sales in new markets

Expanding into new international markets isn’t easy. To be successful, manage your risk and get to revenue faster, you’ll need expertise in a wide variety of areas. This includes ecommerce business infrastructure, customer service, fraud management and liability, legal and regulatory compliance, security and privacy, and tax collection and remittance. In our survey, regulatory requirements – particularly legal, tax, and compliance issues – ranked among some of the biggest challenges companies face when entering new markets. Because of the risks associated with getting these responsibilities right when you enter a new country, 95 percent of the leaders interviewed use third-party vendors for at least some of their international e-business functions. Working with capable third-party partners can diminish the risks and increase the rewards of entering new international markets. Our clients, for instance, can start making money in new international markets within 90 days.

Eric Christensen is group vice president of Commerce Business Infrastructure at Digital River.

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