International E-Commerce: Going Global

The opening of Apple's Shanghai, China flagship store, with 25 more slated for China, marks another milestone in global brands' international retail expansion. But while store-based international expansion has been the privilege of the biggest multichannel brands, online retailers can expand another way: through international e-commerce.

Online retailers of all sizes are selling internationally, and many more are on their way. The potential upside is vast, yet challenges are many and few best practices have yet to emerge.

So why are online retailers growing beyond their domestic markets? Slowing e-commerce growth rates in the U.S. and U.K., especially when compared to high growth in populous markets like China and Brazil, provide motivation to go global. Also, in many markets where e-commerce has yet to hit the apex of growth (based on early sales indicators), the appetite for U.S. brands and products is strong.

While e-commerce matures around the globe, online retailers are increasing their investments and providing better customer experiences through new solutions and added resources. Pure-plays have been the early adopters — successful examples include Overstock, Zazzle and Threadless, not to mention the behemoth Amazon; multichannel brands are lagging, but will most likely catch up as they meet or exceed pure-plays in capability and investment.

A driving force behind the recent surge in international e-commerce expansion has been the emergence of technology and logistics companies with specialized solutions to improve overseas customers' experiences. Companies such as FiftyOne, Access Technology Solutions, BorderJump and International Checkout provide e-tailers with low investment, cross-border solutions, with end customers benefiting from pricing in local currencies, better shipping, returns and improved customer care.

Solution providers in payments and fraud management are also improving their international capabilities, allowing retailers to focus on their core business — generating and serving customer demand.

Global Challenges
While opportunities are plentiful for international e-commerce expansion, my firm's research also points to many challenges for retailers. Customer-facing barriers need to be addressed by e-tailers of all sizes. High shipping costs and customs duties are factors that degrade the shopping experience for consumers. And providing customers with return options further complicates the process. Finally, the cultural nuances of a market will always prove challenging for a foreign retailer.

The recently published Visa e-Commerce Cross-Border Handbook for U.S. retailers illustrates cultural barriers that merchants may face, helping them develop their Canadian online strategies. The handbook recommends creating a Canadian experience by using Canadian English, metric measurements and ensuring marketing campaigns reflect the country's unique seasonality and ethnic diversity.

However, in our experience with large e-tailers' international planning, their inability to handle internal barriers has been most vexing. Inadequate executive buy-in, disagreement on the size and risk of the opportunity, brand risk, lack of resources, defining the desired customer experience, and return on investment-challenged business cases all contribute to international projects being put on the back burner. But for how long? Worldwide e-commerce growth will likely peak in the next two years to five years, so building your international foundation should be happening now.

A Three-Step Solution
So, how can retailers get the go-ahead from upper management to go global? Here are three steps to follow to get executive buy-in:

Market Opportunity. Initiate a robust market assessment that includes financial opportunity and competitive "white space." Determining market potential, or the "size of the prize," provides a baseline business case to help e-tailers understand resource requirements needed at later stages to reach end goals. Establishing a strong case for international e-commerce expansion can vary dramatically by country or region as market data is inconsistent or may require costly market research.

Strategy. An investment in market due diligence can pay off in the critical path of gaining internal alignment among a broad stakeholder group. From the executive team or board of directors to department heads in merchandising, marketing, operations and finance, everyone will have a say in the proposed international expansion. Having a sound analysis of the financial and competitive opportunity of international e-commerce grabs the attention of the right managers, and quickly gives a sense of priority vs. other internal projects typically focused on the domestic market.

Organization. Before implementing, create a blueprint of your "new" international e-commerce organizational design. Where will international e-commerce operations sit in your current structure, given that it will cut across functional and business unit silos, for example? Sure, mapping out responsibilities and planning processes sheds light on the alignment challenge, yet all of the internal reflection is wasted unless key success metrics are also included in the organization design.

While only a few considerations and challenges have been touched on here, all retailers venturing abroad must ensure they understand the basic pitfalls that first movers have experienced. With a greater wealth of knowledge available, sophisticated technology, analytics and experienced business partners, retailers seeking greener pastures abroad have a lot to gain — and greater resources to help them succeed.

Jim Okamura is a senior partner at global retail consulting firm J.C. Williams Group (jokamura@jcwg.com).