eCommerce revenues are soaring around the globe. This year, the US, Western Europe, and China alone will generate over $800 billion in online retail sales. Growth rates, too, remain staggering in many countries: China’s massive online retail market will more than double between 2013 and 2018, as will Brazil’s. India’s much smaller market will grow by eight-fold during this timeframe.
However, a litany of businesses have failed as they attempted to tap into shoppers outside of their home markets, with many large US and European brands factoring prominently on the list of casualties. eCommerce is no exception: Numerous eCommerce businesses have taken the plunge into new markets, only to find their offerings didn’t resonate with local consumers or they were outsmarted by much savvier local rivals.
What separates successful global eCommerce businesses from their counterparts? Which tactics have proven particularly effective for brands aiming to extend their reach into new markets? What are some of the most common challenges businesses tend to encounter? Our newly published eCommerce globalization playbook helps brands through the thorny process of global expansion. Clients can read our playbook for insights on how to:
Discover and quantify international revenue opportunities. Our playbook includes reports outlining the global opportunity and identifying how eCommerce markets typically develop with time. Our online retail forecasts for the US and Canada, Western Europe, Asia Pacific, and Latin America provide a quantitative look at market sizes and eCommerce trends in these regions.
In 2002, the zeitgeist orchestrator David Bowie opined, “Music itself is going to become like running water or electricity.” A few years later, in 2005, the futurists Gerd Leonhard and Dave Kusek proposed “music as water” in their industry-shaking book, The Future of Music (A Manifesto for the Digital Music Revolution).
The metaphor was simple — music would flow on demand, like a utility, to people's home hi-fis and portable music players. Subscription access to "all" music was the approach that ultimately ended up with no more ownership of physical or even digital copies; CDs, mp3s, and the other ground-bound trinkets would no longer be necessary. Even in my own behavior, I see this change — where once I’d spend time ripping my CDs and loading up my 160GB iPod, now I simply curate music, like my Boxing playlist, in the cloud via Spotify.
Eleven years later, Bowie’s prediction is coming true and streaming is progressing at speed. In metropolitan Argentina 1 in 3 consumers are listening to streaming music - evenly split between mobile and computers (desktop, laptop, tablet). In France 15% of those we surveyed streamed on a computer but a whopping 27% used mobile. In fact this trend to streaming via mobile is likely to be one that will continue worldwide and today in metropolitan regions of Hong Kong and Mexico, as well as South Korea mobile has already considerably overtaken computers as the preferred listening method.
Online retailers are rapidly adding emerging markets to their list of new global opportunities to explore, as these markets are set to take a growing percentage of global eCommerce sales going forward. However, it’s important to remember that Europe still ranks as at the most popular region outside of North America for US online retailers expanding internationally. The market is set to grow at a healthy pace over the next five years: Clients can read my colleague Martin Gill’s recently published forecast of online retail sales in key markets across Europe.
Some takeaways from recent conversations with online retailers expanding into and within Europe:
FiftyOne, the company that provides globalization and international logistics services to US-based online retailers such as Gap, Pottery Barn, and Crate & Barrel, announced today that it is acquiring Canada Post’s Borderfree unit. Borderfree, one of the first organizations to play a role in driving cross-border eCommerce, carved out a niche for itself helping US online retailers target online shoppers in Canada.
A few observations:
The acquisition does not disrupt the landscape of solution providers. With this acquisition, FiftyOne boosts its Canadian offerings and takes a small competitor out of the market, but the acquisition does not counter any direct threat from another solution provider in the space. Other providers tend to focus on different market segments, for example, International Checkout counts hundreds of clients in the SMB space, while BorderJump focuses on Latin America and the Caribbean (For an outline of different vendors, clients can read our 2011 report on Using International Shipping To Reach Online Shoppers Around The Globe). Today FiftyOne does not face another rival with the same roster of large clients.
Brands rarely enter a market by selling direct on their websites. Most brands enabling eCommerce on their global websites today already sell in these markets through traditional retail channels — the online sales channel simply becomes a new way to reach consumers.
Country selection is not always dictated by market size. Brands expanding their online offerings in Europe, for example, often focus first on the UK, France, and Germany. After the big three, however, the ease and convenience of serving other markets often trumps market size.
Online sales strategies differ by market. Rare is the brand that has an identical offering in every international market. Most brands that offer eCommerce-enabled sites also provide informational sites in other markets, with little consistency in how the informational sites direct online shoppers to the brands’ retail partners.
As we look back on the year 2011, eCommerce organizations continued to expand their global reach. A growing number of US and European retailers started shipping internationally. Brands enabled eCommerce on their own websites in new markets and launched online stores on marketplaces in multiple countries. Other companies with an interest in global eCommerce used the year to gain insights into new markets, determining which ones to prioritize in the years ahead. Rumors swirled about Amazon preparing to enter India. Or Brazil.
For many companies, however, the globalization process is still just beginning. Aside from a handful of companies that operate eCommerce sites around the world, few companies have a truly global online footprint. The growing number of US- and European-based companies that ship internationally will see revenues increase from these markets, but will start to hit a language ceiling: Close to two-thirds of online consumers in both France and Germany, for example, agreed with the statement, “I only shop from websites in my native language.” In the UK, the percentage is close to three-quarters.
2012 will not be the year that eCommerce organizations blanket the globe with localized offerings – they will, however, continue stepping into international waters. Next year we expect to see :
Back in September, I wrote up a few of my findings from meetings with companies in the eCommerce space in Rio and São Paulo. We’re fielding an increasing number of questions about Brazil, and indeed, while eCommerce in Brazil today is still heavily dominated by local companies, the landscape is starting to include more international players:
Over the past year, we’ve worked together with the forecast team at Forrester to help eBusiness professionals understand the size of different online retail markets around the globe. Last year we published our first look at the online retail markets in some of the major markets in Asia-Pacific — this year, we’ve just published our first forecast for two of the largest online retail markets in Latin America, Brazil and Mexico. Some findings from the report include:
Brazil is — and will remain — the powerhouse in the region. With more than 40% of the online users in the region and a steadily growing economy, it’s not surprising that Brazil’s eCommerce market will outpace all others by a wide margin. Brazil’s projected 2011 sales of almost $10B put it behind other major online retail markets like France and South Korea but ahead of smaller ones such as the Netherlands and Italy.
Mexico’s online retail market is small today —but growing by a CAGR of almost 20%. With less than half of the online users of Brazil and limited online spending, Mexico’s online retail market remains a small fraction of the size of Brazil’s. Average online spending per buyer will not increase significantly over the next five years, but the sheer number of online buyers will.
One trend over the past year has been a growing interest in markets outside of North America and Europe. We're getting an increasing number of inquiries about markets in Asia-Pacific, Latin America and the Middle East - companies are anxious to map out their strategies for major eCommerce markets like Japan and China, as well as others such as Brazil and Russia. Retailers with an offline presence in affluent markets like the Gulf States are considering supplementing their traditional retail channels with an online one.
If you're looking to expand into any of these areas of the world, I wrote up some observations which were just published in Internet Retailer yesterday. Have a look if you're interested in emerging trends among online buyers in China, Japan, South Korea, Australia, Brazil and the UAE.
The past couple of months have seen a number of new initiatives and shifts on the global online retail front: Zara went live with a series of eCommerce sites (in five languages in Spain alone) while Gap started selling to an international online audience. At the same time, eBay conceded the market in China and looked to partner with market leader Alibaba. More companies have started coming to us asking about eCommerce in less traditional markets, with markets like Russia and Saudi Arabia being brought up with increasing frequency in our calls with clients.