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 global e-commerce in 2015. The results of the survey were clear: More than ever before, manufacturers have an increasing appetite for international expansion through their e-commerce channels, and their expectations for speed-to-market and profitability are aggressive. At Digital River, we’ve helped thousands of merchants enter new online markets successfully, and we have some advice to offer companies that are on the brink of their first international expansion project.
1. Adjust your expectations to your investment
Two-thirds of the leaders we interviewed told us that 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 tremendous growth of e-commerce worldwide. To be successful in new markets, however, merchants 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.
2. Start where you are
Forrester predicts that the global market will double by 2018, and the fastest growth will happen in China and elsewhere in Asia, Latin and South America. That’s where most companies are rushing to establish e-commerce operations first. But before you rush to enter today’s emerging markets, ask whether there’s low-hanging fruit to pluck first. Think about expanding your online footprint in markets where you already have a presence through traditional retail channels. Starting from where you are, you’ll develop your skills in international online expansion in a market where the barriers to entry are lower: an existing customer base, brand recognition, and some comfort with the local e-commerce environment. Sure, the Chinese e-commerce market is projected to grow to $1 trillion by the end of the decade, and your company will definitely want to sell there. But if customers are already buying your products in German stores, it makes sense to target Germany in your expansion plans, too.
3. Reach out to other pioneers
Even if you don’t want to be the very first international entrant in a particular country, you certainly want to be among the first. The trouble with being a pioneer, of course, is that the territory is still largely unknown. Our research shows that merchants considering international expansion are understandably anxious to benchmark their expansion plans against the successes of other merchants. Fortunately, we observe that merchants — including early adopters — are surprisingly willing to share their experiences of entering new markets. Reach out to your peers in other C-suites. You might be surprised at the help you’ll get.
4. Be realistic
The branded manufacturers that were interviewed had very aggressive expectations about speed-to-market in international expansion. A full 82 percent of the leaders we interviewed expected to go from funding an online expansion initiative to generating revenue within a calendar year — and approximately 10 percent expected to be able to do it within three months.
But make sure your expectations of speed-to-market are aligned with reality. For a merchant 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 launch into a new international market on their own resources frequently take a year or longer to go from zero to revenue. Subsequent launches into new digital markets can be faster, of course. But that first one will take some time.
5. Know your limits—and partner to transcend 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 partners can be tricky, it makes sense for merchants to work with a select few third-party partners. When selecting third-party vendors, consider the full range of expertise you’ll need to expand successfully: 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. And third-party partners can get you to revenue faster, too — our clients, for instance, can start making money in new international markets within 90 days.
Eric Christensen is group VP of commerce business infrastructure at Digital River, a global provider of commerce-as-a-service solutions.