In last year’s global eCommerce predictions report, we wrote that in 2015, cross-border eCommerce would become "more seamless and less apparent to shoppers". We’ve started to embark on this path: Today consumers around the world have access to growing selection of products as more retailers make their offerings available to shoppers in other countries. My colleague Michelle Beeson recently documented that cross-border sales in Europe alone will reach€40 billion by 2018.
Retailers that haven’t yet started to ship cross-border—and those that have only dipped their toes in the water—now have a variety of different solution providers that can help them take their brands into new markets. Analyst Lily Varon and I just published a report that looks at the trends and leading vendors in this space with a focus on solutions targeted at US-based merchants. It’s now common to see retailers working with different partners including:
International parcel carriers. A number of retailers elect to manage their international shipping options directly with an international carrier such as UPS or FedEx. In some cases, a cross-border option is an extension of the existing relationship between the merchant and the carrier; in others, merchants will seek out a new partner specifically to help with cross-border shipments.
Today Amazon launched full force in Mexico with items ranging from baby products to electronics to sporting goods—for the past two years, the company has sold only eBooks on its localized site in the country. Why Mexico now?
Mexico’s eCommerce market has risen on global brands’ priority lists. When it comes to eCommerce, Mexico is the India of Latin America: a small, early-stage market that has been overshadowed by rapid eCommerce growth in a much larger neighbor (Brazil in the case of Latin America, China in Asia). However, Mexico’s time has come. As Brazil’s economy has slowed to a halt, Mexico’s continues to grow—at the same time, the cost and complexity of operating in the Brazilian market has become apparent, leading many US and European brands to turn their attention north to the region’s second largest economy. In 2014 alone, Orange, Zara, Home Depot, Lowe’s and Williams-Sonoma all rolled out eCommerce offerings in Mexico.
Driven by a variety of different categories, the online retail market is growing rapidly. We often talk about eCommerce markets evolving in four phases (see graphic below). Mexico has very much followed this trajectory. Early-stage online purchases were largely in the travel sector—then as consumers started to make physical product purchases online, they gravitated to categories such as consumer electronics and computer hardware. Going forward, these categories will continue to grow but they will be augmented by later-stage categories like apparel, beauty and grocery. We expect Mexico’s total online retail market to grow by a CAGR of 19% between 2014-2019, reaching almost $7 billion by 2019.
Today we published the business case report for our eCommerce globalization playbook (client access req’d). In it, we discuss how to think about international expansion and how to win over executives with your plans for global domination. However, as a savvy digital business leader, you must first think through:
Is an international offering right for your brand? Business leaders are often lured into thinking that a global footprint is better than a domestic-only one, and that selling overseas is the only path to long-term riches. This is a flawed assumption. Many successful omnichannel retailers have little or no international presence; even web-only players like Zappos serve a US audience exclusively. Other retailers had a hard time penetrating new global markets and ultimately pulled the plug on their offerings. Don’t assume that having a sizeable global footprint is inherently better than having a singular focus on your own market or dedicating resources to just a few international initiatives.
Over the past few weeks, I spent several days in both China and Brazil speaking with eCommerce executives about the opportunities and challenges in their respective markets. Despite the vastly different market sizes – China’s retail eCommerce market reached $440B in 2014 while Brazil’s came in at $18B – these two countries are similar in that they both dwarf other markets in their regions in terms of online sales.
There are many different ways to look at eCommerce in China vs. Brazil; below are just a few areas in which these markets differ and where they show similarities:
Mobile evolution is at different stages. In China, Alibaba's Q1 2015 results showed mobile to be 51% of GMV across its marketplaces, up from 27% a year ago. In Brazil, by contrast, eCommerce players of all types tend to see lower figures in terms of both GMV and total transactions via mobile. B2W, for example, one of the top players in online retail in Brazil, reported that 16% of orders placed in Q1 2015 were via mobile. As the percentage of mobile revenues grows in both markets, so will expectations of companies’ mobile experiences.
At Alibaba, overall sales are shifting heavily toward mobile
Omnichannel is now a must-have. At both events, omnichannel retail was front and center. Adyen underscored the opportunities inherent in integrating online and offline payments. At the Borderfree event, Stephen Sadove, the former chairman and CEO of Saks, kicked off the event with 10 disruptive trends. He declared that #1 and #10 were most important: #1 was the shift to omnichannel. Sadove cited the substantial gross margin implications of being able to move inventory between channels; he also emphasized it’s “not a sustainable point of view ” to believe that getting one view of the customer is just too expensive.
The demands of retail leaders have shifted. Other issues that came up regularly with attendees at both events were the changing needs of retail and the challenge of hiring qualified talent (“talent requirements” was the #10 big trend on Sadove’s list above). Today’s business leaders must be able to deal with a laundry list of new topics — e.g. mobile payments, cross-border eCommerce — many of which wouldn’t have registered on their agenda just a decade ago.
A growing number of digital business leaders are being tasked with global expansion. Their technology partners play a critical role: eBusiness professionals rely on partners not only to help build new digital offerings, but also to provide strategic advice on how to effectively penetrate new markets. Some of the key questions solution providers can anticipate from clients and prospects include:
How quickly can I get up and running? A common scenario looks like this: After years of discussing the need to go global, senior leaders within an organization finally decide to pull the trigger. A frenzy ensues. Digital business leaders are given just a few months to propose which markets to prioritize and how to enter those markets. Given how quickly the new international expansion must happen, business leaders seek out technology partners that promise rapid turnaround on new global initiatives. Solution providers that talk about launching new initiatives in years rather than months are often sidelined in favor of those that can execute more rapidly to fulfill the corporate mandate.
What will going global cost? Few leaders have access to an endless stream of cash when it comes to launching new global eCommerce offerings. To the contrary: It’s more typical to see businesses pouring a small fraction of what they invested in the domestic business into their international initiatives. Cost is therefore front and center when it comes to evaluating new technologies. Solution providers that can help businesses launch across multiple countries in a cost-effective manner are well positioned to capture new business, even when the prospect may be only ready to enter one or two new markets at the time of vendor selection. The exception? When a market is large or strategic enough to merit selecting partners with solutions that cater specifically to that market (think China).
eCommerce growth continues unabated around the world, with eCommerce being cited as a driver of overall economic growth in markets from China to Nigeria. Indeed, online retail revenues continue to soar in every market that we forecast—China alone will generate more than $1 trillion in eCommerce sales by 2019.
As eCommerce markets in different parts of the globe flourish, a growing number of digital business leaders are being asked to take their brands into new markets. What opportunities exist for eCommerce leaders looking to expand internationally? How are they tapping into these opportunities? Our newly updated report (client access req’d) addresses these questions. We find that:
Yesterday I had a chance to join the fantastic Global eCommerce Leaders Forum here in New York. Leaders from Puma, Borderfree and Alibaba delivered keynotes at the event, and in the afternoon, I did a quick presentation on five key themes in global eCommerce to tee up a panel on international expansion:
The Asia pivot. Arguably the biggest story in global eCommerce over the past five years has been the rise of China as an eCommerce force. No other eCommerce market has rivaled China’s ascent to power: Between 2009 and 2014, revenues increased by 16-fold, reaching over $440B in 2014. That shift fundamentally changed how brands view eCommerce in Asia. Instead of contemplating expansion into Asia only after years of operating in North America or Europe, a digital strategy for Asia—and China in particular—is now front and center for many brands.
Options for brands beyond direct sites. Today there are very few brands whose global expansion plans focus exclusively on localized, direct-to-consumer sites. Cross-border shipping and marketplaces —two relatively low-cost, low-risk approaches to international expansion—now factor into the consideration set of almost every brand evaluating new global markets. Indeed, today many solutions are available which enable brands to tap into online shoppers overseas without massive investments or years of preparation. While direct sites will remain a core part of brands’ global expansion efforts—and their value unrivaled in many ways—other approaches will increasingly supplement this tried and true method.
Latin America remains solidly on the radar of eCommerce leaders taking their brands global—at the same time, local players are rolling out sophisticated offerings of their own to compete with the growing number of international players in the region. Which trends will propel eCommerce forward and how big will these markets be in five years? Our newly published forecast addresses both topics for the three largest markets in Latin America: Brazil, Mexico and Argentina. We find that:
Young, increasingly digital shoppers are driving eCommerce across the region... The markets of Latin America boast not just a rising middle class, but also a young, digitally savvy population. Indeed, while the average age in the US is 38, in Brazil and Argentina it’s 31 and in Mexico just 27. These young consumers are accelerating the shift to online shopping and embracing mobile just like their counterparts around the globe. Still, business leaders that are eagerly eyeing the region must bear in mind that mobile commerce is still at an early stage—it does not yet represent the same high percentage of online sales as in some Asian markets.
Online retailers continue to rely heavily on core marketing tactics. Despite the bevvy of new and emerging marketing options at their disposal, eCommerce leaders continue to prioritize search and email marketing as the most effective tactics for acquiring customers. Not surprisingly, store-based online retailers find offline advertising more effective than other types of online retailers do, and web-only retailers find social networks to be a particularly good source of customer acquisition.