Carbon Copy

Apr 01, 2002 10:30 PM  By

The need to grow a company in the international marketplace is a challenge that U.S. firms increasingly realize they must face. Since, after all, they invented e-commerce, U.S. retailers would seem to have a head start on how to create and support the processes needed for fulfilling orders abroad.

But replicating initial U.S. successes in other regions of the world has proved to be more of a challenge than just making a batch of photocopies. Issues such as remote inventory management, customs duties, and overseas call center support add complexity to an already elaborate domestic process. Also, the potential of foreign markets can seem daunting: Some forecasts predict 180 million Internet purchasers outside the U.S. by 2003.

A number of firms are already beginning to develop call center and fulfillment operations with truly global reach. Ranging from the sizable efforts of UPS to those of regionally focused independents such as Hong Kong-based V-Logic or I.T.S. Fabry, headquartered in Maubeuge, France, international fulfillment service providers are creating processes and infrastructure to help U.S. direct sellers enter new territory.

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David Fabry established an I.T.S. Fabry office in Chicago to be closer to the companies that are best poised to take advantage of the new, borderless economy. But it hasn’t been without its struggles.

“There is a quite a bit of inertia between a first contact and an agreement,” Fabry says. “We need to talk to finance about VAT, then operations, marketing, and of course, customer service. It is a long process, where a lot of people have questions because it is an unknown.”

One of the reasons that domestic companies have been slow to exploit their first-mover expertise internationally is the simple fact that there has been no immediate need. The brisk growth rates of the Internet sales channel, and the resources required to keep that engine going, simply haven’t left much time to explore overseas markets.

Still, the current, slower growth rate of domestic sales and booming international Internet penetration rates compel a look at foreign countries. With many companies planning for the direct channel to account for as much as 15% of total sales within the next three years, industry leaders such as Greenwich, CT-based NewRoads executive chairman Antony Lee can see it pretty clearly. “Brands are by definition global. If brands are going into the multichannel space, and brands are global, ipso facto, we are going to be involved, eventually, in direct operations, globally. It’s a no-brainer. It’s just a question of when.”

And how. Although inquiries are on the increase, there still is only a smattering of U.S.-based retailers pushing their fulfillment operations into the international arena. For every Lands’ End that has established an overseas fulfillment center, there are several brands that are only contemplating such a move.

Dave Rush, a principal of Kurt Salmon Associates (KSA) working from its London offices, can understand why it has been a slow start. “Business-to-consumer is not nearly as developed here in Europe. You just don’t see pan-European delivery service similar to that of the U.S. As a result, there are a lot of country-based direct marketing agencies.” Rush notes that U.S. companies can take on these challenges or risk missing the boat, and eventually end up facing foreign competition at home.

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In an effort to create a bridge for U.S. companies to Europe, Dallas-based fulfillment services provider PFSweb recently established its own operation in Belgium. Mark Layton, managing director for PFSweb Europe in Maastricht, The Netherlands, says that the company’s strategy has been to replicate the key processes at its successful U.S. hub, and then to customize them, per client, for European operations. “That’s a big confidence charge in the arm for clients, when they see an operation working really well in the U.S., and then get the chance to see that here in Europe.”

Companies considering a jump into the international arena can become paralyzed when faced with the complexities. Layton says that merchants shouldn’t concentrate on the differences: “Most of what is done in the U.S. can be done here in Europe, and you’ll probably find that 90% is pretty much the same. But you’ve really got to pay attention to the 10% that’s different.”

Nuance and nuisance

That 10% difference includes the nuances, and nuisances, that make international, well, international. From a fulfillment standpoint, it may mean that five SKUs of an item — perhaps the different plugs that an electrical appliance needs or varying size offerings of a garment — will be needed at a regional hub to replace what one SKU does for the U.S. market. KSA’s Rush notes that what sells in Italy might not sell in France or Germany, or it might sell in Spain, but not in England. “Frequently you hear about companies having to micro-market in the U.S. for markets such as San Francisco. In the U.S., that’s the exception; in Europe, that’s the rule.”

Even when things seem to be getting simpler internationally, you need to look again. For instance, although the euro may provide an easier means of financial navigation through Europe, VAT rates can differ by up to 9 points. The margin on a product featuring an “all-in,” pan-European price could take up to a 9-point hit to margin between two specific European countries.

Another change facing new U.S. marketers in Europe is the fact that every Web site selling online now must either have fiscal representation or must incorporate in Europe. “Companies are faced with more hurdles; we are providing fiscal filing work as part of our package,” says David Fabry.

Break the mold

It is precisely because of this complexity that Peter Levesque, V-Logic’s CEO, sees the value of establishing regional fulfillment hubs. “The ability to pick, kit, and pack an order from within the region, in support of how a particular item is being marketed at the moment, is key to keeping order processing costs down,” Levesque says.

Lee of NewRoads couldn’t agree more. “In the retail supply chain, [retailers] are as sophisticated as perhaps they ever need to be relative to global operations. There are global retailers that have successfully managed their retail supply chain, but who have not managed their direct supply chains, simply because they never have had the opportunity to go direct in any country other than America.”

Ultimately, it’s all about getting the product to customers — no matter where they live — quickly, efficiently, and at a profit. A careful review of your existing supply chain, U.S. fulfillment operations, and international fulfillment vendors should yield savings that help fuel growth in the international marketplace.

But a company has to make the decision to go there first. KSA’s Rush counsels that firms that decide to accept the international challenge need to “come in small and flexible, but growing and persistent.”

Roger Sklar is vice president of international business development at V-Logic Ltd. Based in Hong Kong, V-Logic provides Asia/Pacific fulfillment services for U.S. and European retailers. Sklar can be reached by phone at (770) 753-6388 or by e-mail at


Imitation is the best form of flattery, they say, and nowhere is this better exemplified in the business world than by the legion of overseas call centers that carefully mimic U.S. processes and techniques. Before companies even have the chance to ask the question “If we go international, how are we going to provide good customer service?” they can see the answer in the booming growth of the international call center industry. Dell, General Electric, and Citibank lead the roster of highly visible U.S. firms that have successfully outsourced a portion of their U.S. call volume overseas (see “A Passage to India,” page 30).

Exposure to U.S. customers and order processes paves the way for foreign facilities to serve as the call centers for U.S. brands internationally. Mark Schmidt, a vice president at Richfield, OH-based TeleDevelopment, has worked with a number of foreign call center operations to bring in U.S. best practices. Schmidt credits the company’s success in moving an inbound call center from a cost to a profit center to a careful blending of cultures — in effect, “changing the mindset of the customer service agent.”

What has led many U.S. companies to offshore centers is savings of up to 30% compared with domestic outsourced solutions, and costs that are 40% to 50% less than those of operating an in-house call center in the U.S. Today, India boasts over 100,000 call center seats, and the Philippines has more than 10,000.

Derek Holley, president of eTelecare in Monrovia, CA, says that while expenses are a key driver, so is customer service. “You need a large population of English speakers, with a strong education system and a culture that fits with customer service; you need a good telecom infrastructure and a government that has been stable in its view toward foreign investment. We have all that with our centers in the Philippines.”

eTelecare also supports a number of other languages. Its work with American Express includes Australia and Japan and includes operating with telecommunications lines that would make a cargo logistician wince: “Bandwidth between the U.S. and Asia is cheaper than within Asia, so we’re handling some calls from Japan and Australia that go from Asia to the U.S. and then back to us in Asia,” Holley says.

So just as fulfillment managers begin to seek out ways to replicate their domestic programs internationally, the call on what front-end customer contact options are available has already been answered.