optaros going global whitepaper

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GOING GLOBAL: PLANNING

FOR INTERNATIONALECOMMERCE EXPANSION

The common pitfalls, key considerations and decisionpoints that business leaders face as they expandbeyond the border.

Optaros Perspectives Whitepaper Series © 2013 Optaros Inc.



www.optaros.com | [email protected] © 2013 Optaros Inc. All Rights Reserved. 2

Going Global:Planning for International eCommerce Expansion

The common pitfalls, key considerations and decision points that business leaders face as they expand beyond the border.

By Christopher Langway, VP, eCommerce Business Strategist at Optaros

IntroductionWith 96% of the world’s population living outside of the United States, and global commerceprojected to reach $1 trillion by 2016 ( i), it’s no surprise that many domestic companies are morethan dreaming of global eCommerce expansion. Many international markets such as Asia Pacicare projected to be larger than the U.S., and along with Europe and Latin America are projected togrow at a faster rate. As such, global expansion is either already underway for many organizationsor one of their top priorities for 2013 and beyond.

As enticing as globalized eCommerce sounds, it’s not exactly a “build it, and they will come”proposition. While it’s true that opening an eCommerce store is not as physically resource-intensiveas opening an international brick-and-mortar store, expanding beyond geographic borders is still a

signicant undertaking. It is important that you fully understand the scope of your initiative, andtake the all the steps necessary to avoid any major setbacks or showstoppers. In the followingpaper, you’ll learn some of the common pitfalls, key considerations and decision points that you’llface as you look to expand your eCommerce business beyond the border.

Identify Where You Stand Today

While the lure of global riches can be enticing, the road to success is not quite as smooth youmight think. Sure your competitor may have gured it out, but that doesn’t necessarily mean thatyour company is equally equipped for such a move. The best way to gauge if your company is readyfor expansion is to take a look at the infrastructure of companies in your market that have recentlycompleted a successful global transition. Do you have what they have? Can you do what theydo? If you’re ever going to be successful, you’ll need to have the proper infrastructure in place fromthe start. And while there are no hard and fast rules to doing so, those who achieve the greatestsuccess share some of the following characteristics:

They’re Already Strong at HomeA good rst step is to evaluate the current state of your domestic eCommerce business. After all,you can’t expect to win an international battle with fundamental weaknesses back home. In fact,these weaknesses are almost guaranteed to be amplied as you add the complexities of languagesand currencies.For example, if you already have a complicated product set-up process, imagine what it will turninto as you add more segmented assortments and tailor translations and pricing to an internationalmarket. Even if you have the nancial and operational resources to wage the battle on bothfronts, you should rst ne-tune your domestic marketing, merchandising, customer service andtechnology operations to build a strong foundation for growth and expansion.

They have local brand awarenessMany brands have tried to establish themselves in new countries via eCommerce, assuming thatthe sales will simply start rolling in the minute they open up distribution. In some cases this hasworked. More often than not, however, these companies are left wondering where all the customersare. So instead of using eCommerce as the pioneering entry into globalization, it may be easierand more effective to launch where you already have some sort of brand presence, whether that’sthrough retail, wholesale or distributor relationships.

They have local distributionIn the past, distribution and logistics were major barriers for e-retailers looking to expandinternationally. And while there are many different options to help overcome these barriers, onething is clear; companies that leverage local distribution to fulll direct-to-consumer orders have asignicant head start.




Establish Your Product Assortment Strategy Product offering is at the core of eCommerce. So as you expand globally, there are several keydecisions you need to make. Do you simply take your US assortment and offer it abroad? Doyou narrow your assortment down to offerings less available in other markets to create choice forthat customer? Do you create unique products to meet the needs and taste of your new markets?

Some companies answer these questions by leveraging direct-to-consumer eCommerce to eliminateperceived fashion and taste barrier fears and expand their existing brick-and-mortar assortments.By positioning U.S. products as “online exclusives” on international websites, brands and

wholesalers can prove their product’s demand and viability to distributors and bolster the argumentto expand a buy.

Regardless of the product, there is one key piece of assortment planning that should neverbe overlooked: communication and coordination with channel partners. It’s quite common forcompanies to plan a product assortment only to encounter channel conict issues with existingbrick-and-mortar retailers, not to mention any exclusivity agreements with distributors in certainmarkets. Poor channel communication and coordination is a very common, yet preventable, pitfallthat should always be considered prior to going global.

Determine Your Country, Region and Locale StructureOnce you’ve identied your expansion locations and assortments, you’ll need to determine how to

best serve these countries. Will it be through a single country-specic website or a multi-countryregional site? This decision cannot be taken lightly, as it will likely impact technical architecture,organization setup, merchandising and operations. So how do you decide between a regional orcountry-specic site? The key factors to consider are assortment, price, content and promotion.

Regional Site: A regional site is single site capable of shipping to multiple countries. These workbest when countries share a common assortment, currency, pricing and promotions. A languagetoggle will allow you to speak to customers in their native tongues.

Country-Specic Site: If any of the above items (assortment, price, etc.) vary, your best bet is toeither build separate sites, or incorporate some logic to dynamically enable variable content. Ifyou decide to go with separate sites, see if you can share common commerce components (carts,proles, etc) across locales. For example, if a customer adds to cart in the U.K. and then visitsthe Spain site, would they still see that same product in their cart? If so, what currency would bedisplayed? Would the customer expect to be able to log in with the same user ID and Password?

As you can see, it can get complicated if you don’t think through all the little details.

Nail Down the LanguageSo you’ve selected your product assortment and identied your target countries and regionstructure. Now it’s time to decide which languages to support. Ideally, you’ll want to support allthe native languages in all the countries you serve. But that’s not always nancially or operationallyfeasible. After all, there are close to 100 languages spoken in Europe alone. ealistically, you’d needto support at least 10-20 of them just to cover one international area the size of the United States.

In countries with one dominant language, it’s always best to try and offer the local language. Insome cases, however, that’s pre-determined as a mandate rather than an option by local customsor regulations. For example, Italian authorities are stringent that all site labeling be done in Italian.

If you are launching in a multi-lingual country, you may be able to do so without providing the localdominant language. For example, 90% of Dutch adults speak English. So you may be able to launcha successful eCommerce site in the Netherlands without incurring additional translation costs.

Translations: Say what you mean to sayOnce you settle on languages, it’s time to implement translations. This step should not beapproached lightly - it could very likely be one of the most taxing operational and marketingexpenses for international efforts.

Manual TranslationsThe manual process involves building multiple language slots into your CMS, and then manuallytranslating and uploading your copy. This may be best for lower-volume sites launching a nitenumber of languages and for those that distribute site operations to local teams around the globe.For more centralized models, this method can become more difcult to scale as a business expands.

Automated TranslationsAutomated translations can proxy your website and serve the appropriate language in near realtime. Of course, this comes with an added cost. MotionPoint and Translations.com are two leadingproviders. In the end, you have to consider your resources and run the business case to see whichoption works best.

Establish a Currency, Pricing and Payment Strategy While customers may uctuate on language preference, they will always expect to shop forproducts in their local currency. So if you want to compete with the locals, you’ll need to meet thisfundamental expectation. And while you might think that it’s easy to accept local currency by region,like most things in globalization, it’s not as simple as it seems.

Currency ConversionA simple approach to global pricing is to simply maintain an existing US Dollar price list and convertthe price to local currency online. This approach works best for brands and companies without in-market channel conict issues to worry about. Otherwise, if your converted price ends up less thanthe local retailers’, you’ll surely be hearing from both your sales force and your customers.

Market-Based PricingSome companies choose market-based pricing to optimize sales based on “what the market willbear.” For example, a necklace selling for $90 USD would go for roughly €69 in a straight-upcurrency conversion scenario. However, based on market conditions and consumer expectations,that same necklace might be listed for €80 MSRP in France and €75 price in Germany.

This scenario is fairly common in the brick-and-mortar world. But when you take this approachonline, it’s much more transparent to customers, retailers and distributors. And it could causesome tension. So if you do m ove forward with market based pricing, you should have multiple pricelists, and anticipate any potential customer experience challenges. For example, would you allow acustomer living in France to order from the German site because it had a lower Euro price? If not,then you’ll need to restrict shipping within a locale.




Payment Methods eCommerce customers in the U.S. typically use predictable/stable payment methods like creditcards, debit cards. In fact, 80% of their online purchases are processed via debit and credit cards.The only dominant alternate is PayPal. However, that’s not the case in other countries ( ii) :

• In India, only 2% of the population holds a credit card. FlipKart, which enables Cash on Delivery(COD), is the dominant payment method.

• In Germany, 66% of eCommerce transactions are handled via alternate payment methods,such as Elektronisches Lastschrift Verfahren (ELV), a direct debit option that handles 28% of alltransactions.

• In China, 60% pay with Alipay, a service that holds payment until the consumer has indicated theyare happy with the product(s).

• In Russia, 75% of online shoppers prefer using COD.

• In the Netherlands, 81% of Dutch online shoppers use iDeal real time bank transfers. 54% preferit as their primary payment mechanism.

Learn About International DeliveryDelivery is another fairly predictable element of the U.S. market. Chances are, UPS, FedEx, or theUSPS will deliver your product anywhere at any time. And if the customer isn’t home, they mighteven leave it outside the front door. But again, things aren’t always the same case abroad.

Reliability is a ConcernShipping concerns are one of the dominant reasons for international cart abandonment. Deliveryis inconsistent at best. In fact, many locations won’t deliver anything that can’t t into a traditionalmail slot. Failed and missing deliveries are commonplace in many countries, resulting in lostconsumer condence.

Alternative Delivery OptionsBased on this lagging consumer condence, alternate delivery methods are becoming moreprevalent around the world. In France, Kiala is a popular service that lets customers ship productsto common retail locations. In the U.K., customers have their items shipped to code-protectedboxes in train stations. But in order to offer these payment options, you’ll rst have work withthese individual providers, and your technology team will need to account for the integration andtesting efforts.

Make Nice with the LocalsAs companies expand beyond their borders, they quickly learn that a “one size ts all” strategy willonly take them so far in markets where tastes, motivations and market conditions vary greatly fromwhat we see in the US. That’s why it’s so important to cater your brand and product messagingto your new market. You want your new customers to feel like you’re there to serve them, not justtake their money.

ProductsIt’s important to remember that the products you highlight in the US may not be the ones thatsell best in a different country. Even within Europe, what sells in Germany can be dramaticallydifferent from what drives business in France. It’s all about product positioning - presenting theright products to the right audience with the right messaging. Even if your product assortmentdoesn’t vary much by country, choosing the right products to highlight in each country can make allthe difference in the world.

Photography As companies expand globally, they often try to leverage/reuse their existing creative assets.However, this may prove problematic later when the imagery fails to resonate positively with thenew market you’re trying to enter. For example, your photography of blonde and blue-eyed beautieson SoCal beaches may not play so well in some international markets. In fact, there are somecountries that won’t even allow you to show a bikini model online.

Brand ContentWhile surely impressive here at home, your domestic event sponsorships, and the local athletesthat endorse your products might be completely irrelevant to a customer in South America. Theideal approach is to customize and optimize content to drive deeper brand relevancy and higherconversion rates. Depending on the number of locations, this may require signicant m anpower andbudget. So you’ll have to think carefully about your plan.

Make sure you are aligned on your “global” brand positioning and what it stands for. If you arepositioned as an “iconic American brand”, then your “All-American” imagery may very well beappropriate no matter where you sell. But if not, just focus on what truly matters for customers.Start by presenting the right products to the right customer base and then consider how muchbrand content you want (or need) to include, and whether or not it needs to be localized.




Breakdown Distribution BarriersDistribution can often be one of the most signicant challenges for US companies expandingabroad. As a result, companies with local distribution already in place to serve brick and mortarretail are at a signicant advantage. However, even they face some key issues that need to beaddressed.

Direct to Consumer OptimizationIt’s likely that your Distribution Center (DC) is optimized to ship larger volume orders to retailersand distributors. As a result, you’ll probably need to work through some modications and process

changes to account for individual direct to consumer orders. This may include smaller, morefrequent pick waves, consumer friendly packing slips and one-off returns.

Inventory ManagementIf you’re introducing new product not traditionally carried in that DC, you’ll need to make sure youhave room for pick faces. Depending on your sku count, that can become a real issue. If you’re ina fashion or seasonal brand, you’ll have to ensure that the DC will commit to carrying product wellinto the selling season. For a wholesaler used to clearing out seasonal product early in the season,that too can become an issue.

There are still some options out there for companies without local distribution. One is to work with alocal 3PL provider who can handle inventory and warehouse management for you. Many companiesare looking to fully leverage their US operations and work with companies that consolidate ordersin the US, handle customs and duties and ship the product to overseas customers. Some of thesecompanies can also help with currency conversion and fraud detection to get you to market morequickly. FiftyOne is one of the leading providers in this space.

Get Help with the LegaleseThe complexity around compliance with international regulations and legal policies can beoverwhelming for U.S. merchants entering global markets. Unfortunately, it’s unreasonable (andnearly impossible) to try and become an expert on the laws and regulations in each and everycountry you enter. So you’ll probably need to have experienced legal counsel or rely on yourkey partners to help guide you through the constantly evolving landscape that is internationaleCommerce law.

TaxesIn Europe, retailers must send a VAT invoice to all consumers itemizing product cost vs. VAT. Thiscan get complex because depending on the product type and your sales volume in a par ticularcountry, you may have to register in that country and pay their VAT rate vs. the country from whichyou ship.

PrivacyPrivacy is also becoming more complex in international markets. In the EU, make sure your opt-inbox is unchecked and closely follow directives on cookies. Most sites are now required to identifywhich cookies are used on the site and soon, may require an explicit opt-in.

LanguageAs it is in Italy, there may be language mandates that require the site (and any notices) be in thelocal language.

Marketing

Make sure you’re following the rules in all your marketing materials. Some countries have morerestrictive regulations around pricing policies, advertising and sales guidelines.

OperationsSome countries mandate that you must automatically refund outbound and inbound shipping onreturned product if returned within a certain time period.

“It’s quite common for companies to plan a product assortment only to encounter channelconict issues with existing brick and mortar retailers, not to mention any exclusivityagreements with distributors in certain markets.”




Get OrganizedGet OrganizedDeciding how to organize for international eCommerce is the nal challenge we’ll discuss, and thereare many different models in practice today. There really is no right or wrong answer, but based onthe size of your business, you may choose to start more centrally and migrate to a hybrid model.And if sales grow rapidly, you can always move to a locally managed model.

The most common models are:

Centrally Managed: Some companies choose to centralize management of their global sites fromthe US to maintain tight control over brand and to leverage experienced eCommerce resources.The challenge comes in understanding local market differences to optimize business performance.

Locally Managed: Other companies build eCommerce teams at the local level and give themcomplete ownership over their eCommerce experiences. The challenges with this model lie inmaintaining global brand consistency, coordination and communication across global locations.

Hybrid Model: Some companies hire local m arketing, merchandising and customer service teamswhile leveraging a centralized team for common services such as technology, creative production,and database management. Here they can benet from the core customer facing local resourceswhile benetting from the efciency of the more technical and operational aspects of the business.After all, you need to make sure that when a German customer calls your European toll free phonenumber that a German speaking customer service agent is ready to take the call.

ConclusionInternational eCommerce expansion can be a long, and at times, difcult journey - even for thosewho have experienced the process rst-hand. More often than not, questions are met with vagaries,answers have ambiguities and conicting advice creates confusion. No matter what the business,however, there are common challenges and considerations that can be marked as key touchpointsalong the way.

Following the plan outlined above should help any newcomer enter the world of global expansionwith condence. Clearly, there will be challenges along the way. While there may be frontrunners,we are all entering this new world of International eCommerce together, so there are no unbreakablerules yet. The exception now, perhaps, is to never take anything for granted. Never assume. Alwaysask questions. Double and triple check that you haven’t missed anything. Ask colleagues, seek outthird-party advice from those who have achieved success. Do everything you can to ensure you’re asprepared and equipped as possible before building your site. And then build it right. Because whileglobalized eCommerce is not exactly a “build it, and they will come” proposition, if you do take thetime to build it right, there’s a very good chance the customers will come.

Sources

i Morgan Stanley; Devitt, Scott (Jan. 6 2013). Morgan Stanley Report: Amazon Surges to Record High on Global E-CommerceGrowth [Report]. Retrieved from http://www.bloomberg.com/news/2013-01-07/amazon-surges-to-record-high-on-global-e-commerce-growth.html

ii Worldplay; (May 9, 2012) Alternative Payments to rise exponentially by 2015; Retrieved from http://www.worldpay.com/media/index.php?page=archive&sub=worldpay-altpayments&c=

Good Luck

Buona Fortuna

Bonne Chance

Buena Suerte

Noroc

Удачи

Καλή τύχη

İyi şanslar


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About the Author: Chris Langway

VP, eCommerce Business Strategist at Optaros

Chris Langway brings to Optaros 15+ years of experience in global eCommerce andtraditional retail.

Most recently, he was Vice President, eCommerce at Wolverine Worldwide, a globalmarketer of branded footwear. In this role, Langway led the global eCommerce businessand operations for the company’s Performance and Lifestyle Group overseeing the SperryTop-Sider, Stride Rite, Saucony, Keds, Robeez and Grasshopper brands across US andEurope. Prior to Wolverine, Langway served as Vice President, Director of Marketing for theBoston-based integrated advertising agency Digitas. While at Digitas, he managed clientengagements for American Express, The New York Times and General Motor’s Pontiacdivision and was responsible for user experience, CRM and digital marketing. Langwaybegan his career in retail buying with Filene’s Department Stores.


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About Optaros

Optaros is a global digital commerce service par tner focused on helping companiesconceive, build and operate eCommerce solutions that accelerate revenue and deceleratecosts. With the technical capabilities of a systems integrations company, the UX andcreative design of an interactive agency, and the insights of an expert commerceconsultancy, Optaros delivers outstanding programs for more than 20 0 clients in theretail, consumer goods, media, healthcare and nancial ser vices industries.

For more information, visit www.optaros.com, call (617) 227-1855 oremail [email protected] .

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