I spent several days in Buenos Aires last week which was fantastic – great fun and really helpful in terms of understanding what’s happening in the eCommerce market. Wednesday was the annual eCommerce Day event: It was packed with well over a thousand people in the audience. I presented on global eCommerce trends that are set to impact the market in Argentina, and also met with a number of online retailers.
A handful of takeaways from these conversations:
eCommerce in Argentina is still at an early stage. There is tremendous interest in driving eCommerce in Argentina, but the real growth is yet to come. Today’s roughly $2B online retail market is dominated by MercadoLibre, with traditional retailers like Falabella, Garbarino and Walmart increasingly making the online channel a priority. Newer entrants like Dafiti are also carving out a niche in categories such as apparel.
Intra-regional cross-border eCommerce is very limited today. There was much discussion about cross-border eCommerce with China, but today little cross-border eCommerce exists within Latin America itself. Online retailers are anxious to tap into consumers in other countries in the region, but few have made concerted efforts in this area.
Most mobile initiatives are relatively new and focused exclusively on smartphones. Most online retailers’ mobile initiatives are in their infancy in Argentina. Many larger retailers are just rolling out mobile offerings (both apps and websites), and virtually all are focused on smartphones rather than tablets.
Back in July, I wrote about our upcoming report on tools and technology for eCommerce globalization. We’ve just posted the report (clients can view it here) – in it, we dive into the types of eCommerce solutions that brands are turning to as they expand globally and highlight some of the vendors that excel in these areas.
Overall, brands expanding internationally are looking for their technology partners to help them:
Launch international offerings quickly and efficiently. It’s common for companies to ponder global online expansion for years, then decide to build and launch new offerings in a matter of a few months. It’s generally up to the eBusiness leader to manage these rollouts, often with a limited budget. eBusiness leaders who know that global expansion is on the horizon must plan ahead and select technology partners that can help them meet these (often highly ambitious) goals.
Reach consumers through more than just the website. Global eCommerce expansion used to mean launching a series of new websites in different countries, perhaps with a mobile offering following several months or even years after the initial rollout. Today, however, eBusiness leaders need to plan for nearly simultaneous offerings across a variety of devices and touchpoints. eBusiness leaders are also increasingly relying on their technology partners to assist with additional channels such as marketplaces.
During grad school, I spent a summer teaching economics to university students in Uzbekistan – our summer campus was up in the mountains a few hours outside the capital city of Tashkent. To receive packages, we would have to request that the sender ship them to the university’s main office in the capital. When enough packages had arrived, the office staff would scramble to find someone to drive up to the summer campus to deliver them. The wait was often 2-3 weeks.
Last-mile deliveries are still a huge challenge. Years later, last-mile delivery to less urban areas continues to confound businesses around the globe. In almost every emerging market in the world, delivery times are still far quicker for consumers living in the big cities than those in more rural areas. A laptop ordered from a major online retailer in Brazil, for example, takes almost three weeks to get to the Amazonian capital of Manaus versus approximately one week to Rio or São Paulo. In Russia, the difference in shipping times between Moscow and Vladivostok is similar. Many online retailers piece together a variety of different courier networks or are forced to rely on local postal services to reach the most far-flung customers.
As brands eye a growing number of eCommerce markets around the globe, it’s important to understand the trends that mark early-stage markets and how these trends often evolve with time. The following factors suggest that an eCommerce market is still in an early phase:
Purchase decisions are made largely based on price. It is common to hear about consumers in early-stage eCommerce markets using the Internet to seek the lowest prices available on products. In markets like China and Russia, conventional wisdom shows that consumers go online to bargain hunt. However, over time, this dynamic gives way to consumers electing to buy from trusted retailers and those that provide a superior customer experience.
Online purchases are dominated by consumers in tier one cities. As eCommerce starts to take off in new markets, it tends to be the consumers in the largest, wealthiest cities that comprise the bulk of eCommerce markets. Whether it’s São Paulo and Rio in Brazil, Beijing and Shanghai in China, or Moscow and St. Petersburg in Russia, the top few cities tend to represent the lion’s share of early eCommerce revenues. Within the first few years, however, revenue growth starts to shift to smaller cities where offline product selection is more limited and the online channel helps fill the void.
I consider myself incredibly fortunate to have the job I do: Every year, I get to explore new markets around the globe and meet people who are equally passionate about building eCommerce businesses.
It's sometimes challenging to try and balance the fact that at Forrester, we are often brought to new places specifically to share our expertise — at the same time, our goal is to learn as much as possible while we're there. Many professionals looking to launch new offerings or pursue new partnerships outside of their own country face similar issues: They aim to both provide insights based on their experiences as well as to absorb knowledge that will help inform corporate strategies.
Having had some great meetings over the years and others where I’ve regretted my approach, I now try to adhere to three rules whenever I start a conversation with executives in a new market:
1. Come with a hypothesis, but prepare for it to evolve. Conversations flow much more easily if you have a framework or hypothesis for what trends you're likely to see in a market — just be ready for holes to be poked in different parts of your theory. In a recent conversation with the CEO of an online retailer in Russia, for example, I indicated that online travel sales often paved the way for retail eCommerce to take off, and asked if the situation was similar there. The CEO explained that in Russia, consumers' reliance on package tours — which are not generally sold online — meant that online travel hadn't flourished to the same degree as it had elsewhere in the world. Finding these exceptions is essential to understanding the nuances of each market.
I’m currently tackling a report on the tools & technology necessary for eCommerce organizations to expand internationally. It is one of the reports for the eCommerce Globalization playbook and aims to put a global lens on some of the research we’ve done on the eCommerce solution provider landscape. Numerous types of vendors contribute to the globalization process – in this report, we’ll examine only a few key areas including:
Global-Ready Commerce Suites. Pulling from our B2C Commerce Suites Wave last year, we’ll analyze which of the included companies scored particularly well on their globalization capabilities. We’ll also look at the commerce platforms that SMEs tend to gravitate toward around the globe, and identify some of the country-specific solutions that have emerged in different regions.
Global Commerce Service Providers. We will also be discussing which of the companies included in our Global Commerce Service Providers Wave excelled when it came to helping brands with their global market expansion and which ones have the most extensive global footprints.
In my post last month about global themes from recent events, I cited logistics as the scariest part of international expansion for eCommerce organizations. Nowhere is this more true than in emerging markets. Only a small percentage of warehousing facilities tend to be modern enough for eCommerce operations and identifying reliable fulfillment providers is a particularly thorny challenge. Horror stories abound:
For North American and European brands, one of the issues is that many of their existing logistics partners are not present in emerging markets – or do not provide the same depth of offerings in these markets – requiring brands to forge new relationships. There are, however, some less traditional types of players that brands are turning to as potential partners in the logistics space. Below are three models that have emerged beyond the typical suite of solution providers and examples of each:
Last year, we introduced our framework for how eCommerce markets evolve: Consumers come online to connect and entertain, then start to engage in eBusiness basics like online banking and travel.** Only later do they tend to start purchasing physical products online, with readily comparable goods like mobile phones, computer hardware and books being some of consumers' first online purchases. The final phase involves consumers buying across a wide variety of categories online, including those with a strong “touch and feel” component to them:
Clients can access our recently updated report on this topic, which includes lots of new forecast data and notes how countries have moved through these phases. Brazil, for example, which was solidly in phase 3 last year, has started moving toward the final phase, where categories like apparel and beauty start to become a much more critical piece of the eCommerce market. A look at the shift in MercadoLivre’s GMV category ranking in 2012 gives one snapshot of this evolution:
Also included in our updated report is a look at how online retailer offerings in each market tend to differ depending on the phase the country is in. This report forms the vision report chapter of our upcoming eCommerce globalization playbook.
The past few weeks have involved travel to a few different events, ranging from eTail Latin America in Miami to Internet Retailer Conference & Expo in Chicago to the Goldman Sachs dotCommerce Day in New York. Rather than summarize the events, all of which were incredibly valuable, I wanted to highlight some themes from conversations I had at these events with brands looking to expand into new markets.
Leading global brands are increasingly aware they need to vary their approach globally. A common assertion in articles about localization is that companies erroneously view Europe or Asia as “one country” and fail to take into account key differences between countries. My experience is that global brands have largely moved beyond this phase: The brands I spoke with are keenly aware that each market is different, and are anxious to understand how they’ll need to adapt their online offering. They may not understand all of the differences inherent in each market, but they know — or are learning — the right questions to ask. The challenge for brands is understanding which parts of their offering really need to change to meet local expectations (and therefore merit the investment required to make the shift) and which offerings will still resonate even if they differ from those provided by local players.
I am incredibly excited to announce that Ken Calhoon joins Forrester today in our eBusiness consulting practice. Ken has a fantastic background working with different organizations expanding internationally: Most recently he ran his own consulting firm focused on global expansion; prior to that, he spent seven years at eBay in different positions including VP, International Headquarters and VP, International Trust and Safety.