What Online Retailers Must Know Before Entering New International Markets

Merchants have an increasing appetite for international expansion through their e-commerce channels. Late last year, Digital River commissioned Forrester Consulting to survey 130 executives and decision-makers at branded manufacturers in the U.S. and U.K. We wanted to know more about how companies are thinking about international expansion. The results of the survey were clear: More than ever before, companies are focused on geographic expansion in new online markets, and they have aggressive expectations for speed to market and profitability.

Here are a list of tips for companies that are on the brink of their first international expansion project:

1. Begin where you are. Forrester predicts that the global online market will double by 2018, and forecasts the fastest growth in China and elsewhere in Asia, Latin and South America. That's where most companies are rushing to establish e-commerce operations first. However, before you hurry to enter today's emerging digital markets, think about expanding your online footprint in markets where you already have a presence through traditional retail channels. By starting from where you already are, you'll develop your skills in international online expansion in a market where the barriers to entry are lower, with an existing customer base, brand recognition and some comfort with the local retail environment.

2. Calibrate your expectations to your investment. Two-thirds of the leaders in the Forrester study said expanding into new international markets was a high priority, or even "critical," within the next year. That kind of urgency is more than justified by the vigorous growth of e-commerce worldwide. To be successful in new markets, however, retailers must back up their eagerness with careful investment. After all, entering a new digital market means much more than translating your website into a new language. It means ensuring the right e-commerce experience for the specific market you're entering. Investing in deep local expertise is crucial to successfully navigating the technological, legal, regulatory and cultural complexities of a new international market.

3. Expect challenges. The branded manufacturers Forrester interviewed had very aggressive expectations about speed to market in international expansion. A full 82 percent expected to go from funding an expansion initiative to generating revenue within a calendar year. Eight percent expected to be able to do it within three months.

Make sure your expectations of speed to market are aligned with reality, however. For a company operating exclusively domestically, the first unassisted foray into international e-commerce will be complex, surprising and possibly much more costly than anticipated. In our experience, merchants that enter a new international market on their own resources frequently take a year or longer to go from zero to revenue.

4. Know your limits — and partner to overcome them. Expanding into new international markets isn't easy, and it takes deep local and global expertise. That's why 95 percent of the leaders interviewed use third-party vendors for at least some of their international business functions. Since managing multiple vendors can be tricky, it makes sense for merchants to work with a select few third-party partners. When choosing partners, consider the full range of expertise you'll need to grow successfully. This could include e-commerce business infrastructure, tax and compliance expertise, in-country legal entities, customer service, fraud management, and liability.

Working with a capable third-party partner can diminish the risks and increase the rewards of entering new international markets. Furthermore, third-party partners can get you to revenue faster, too.

Eric Christensen is group vice president of commerce business infrastructure at Digital River, a global provider of Commerce-as-a-Service solutions. Eric can be reached at echristensen@digitalriver.com.