The rise of e-commerce has made the world a smaller place in the online sphere.
Making a purchase can now be done at the click of a button, but after that the real challenge begins: delivering a product to a customer’s door, even if it is a door in another country.
According to a survey conducted by the Economist Intelligence Unit, almost three out of four (72%) small and medium sized enterprises (SMEs) expect to earn up to half of their revenues from overseas markets by 2019.
Online shopping will become a US$2 trillion industry worldwide, in terms of sales, by the end of next year, eMarketer forecasts. There are great opportunities for businesses to make inroads in foreign markets.
“The barriers to building a global business are crumbling as costs decrease while possibilities increase,” said Dr Karen Reddington, president, FedEx Express Asia Pacific. “This is due to digital technologies providing a global platform to reach consumers, enterprise-class technology being available to rent and the increasing sophistication of the global supply chain.”
Timing is everything
Recognizing when the time is right to go global can be achieved in several ways. Analysing online traffic is one of quickest way to identify growing overseas markets. Those e-commerce businesses who sell their goods through a multi brand online retailer can subscribe to web analytics from the platform which will tell them who is buying their product. This is also the case for so-called ‘e-tailers’ who sell from their own site.
But depending on your product line, anecdotal evidence can be just as important. Take online luxury goods marketplace Reebonz, which has recently earmarked the Middle East as a new consumer base. The company sells bags, accessories, jewellery and shoes, and it uses a combination of web analytics and people on the ground to identify its key markets and pinpoint exactly what customers want.
“We are focusing a lot more on the global market at the moment, now that we’ve established ourselves in the Asia market,” said Cassie Mah, head of operations at Reebonz. The company, which has been working closely with express carrier FedEx, was founded in Singapore in 2009 with just 18 staff, but now has a team of 300 across eight countries in Asia-Pacific, its core market.
The luxury sales market is a key area for online growth. Management consulting firm McKinsey & Company reports that internet purchases currently represent just 4% of worldwide luxury sales, leaving plenty of room for expansion. However, it also found that 40% of luxury item purchases are in some way influenced by the digital arena through online research or social media.
“Different markets do have different preferences for different brands, so we have to have a very good understanding of what is trending, as well as what key brands are most feasible within each market,” said Cassie Mah. “In each market, we have localised teams to make sure we are getting that intelligence. We talk to customers. We have a merchandising team who travel and who focus on research, but it is also based on our current customer purchasing patterns.”
National to international
In Asia’s biggest market, China, shopping online for products from overseas is so widespread it has its own name: “haitao”. The number of Chinese shoppers who have made overseas online purchases is 87%, according to internet performance experts Dyn. And according to market researchers Nielsen, female shoppers comprise 57% of these buyers.
With so much cross-border potential in the Asia-Pacific region, businesses with ambitions to expand need to be ready to meet worldwide demand. However, the transition from a domestic setting to a global one is a difficult balancing act, because every international market is different.
When making the move to go global, SMEs should dip their toes in the water first. This might mean starting out their online sales operation on a multi brand platform. This was the case for Korean clothing company Doublju, which launched their global sales operation in 2008 on eBay. This platform provides businesses with analytics on data such as click-through rate, sell-through rate and page impressions.
Doublju has continued to follow this global model: customers who click on an item on the company’s website are taken to the product’s page on Amazon to complete the transaction. The big shift for
Doublju, however, was in logistics; the company is now supported by FedEx where beforehand it transported its products to customers through the postal service, but found that strategy hampered global growth.
When your domestic logistics arrangement begins to struggle as a result of orders from further afield in overseas territories, it is an indication that your business may need to go global to keep customers happy. That can mean a shift in logistics strategy.
“Our dream was to become a successful global online retailer, but we needed help with logistics to achieve it,” said Doublju co-founder Jong-Tark Jang. “Now, thanks to a more efficient delivery cycle, lots more people around the world are looking great in the Doublju brand.”
Return to sender
A good logistics partner can advise or take control of practical issues such as customs, tax, goods restrictions and international returns.
In the US alone last year, US$284 billion worth of merchandise was returned by shoppers, according to the National Retail Federation. At the beginning of this year, one in five consumers told a survey by mobile shopping app Retale that they would be returning at least one of their Christmas presents. Crucially, 70% of shoppers said they prefer to return gifts in-store, compared to just 9% who would rather do it online.
Web analysis experts comScore found that two out of three consumers view a retailer’s returns policy before making a purchase, while 82% said they would complete a transaction if it came with free return shipping.
In its Total Retail 2015 report, professional services network PriceWaterhouseCoopers (PwC) surveyed 19,000 consumers in 19 countries; 67% of those surveyed said they preferred online purchase returns to be available in-store. All this indicates that customers are not willing to settle for a less-than-exemplary returns service, and almost all of them expect it to be free of charge. Reebonz, for instance, offers free returns.
As more consumers are prepared to venture overseas to make online purchases, SMEs must be equipped to deal with the logistics of transporting their products across borders. Increasingly, this means working with a global logistics provider who will handle issues such as customs and returns.
Knowing when to go global is about identifying new markets through web analysis and building a customer base in those markets carefully. Extending your reach also means asking yourself whether your existing logistics set-up is comprehensive enough to take on the world. Given the importance of logistics to the customer experience, it might be time to partner with a global express provider.