You are successful in your own territory. You have honed your product or service and know how to make your business a success domestically. Now is the time to expand abroad.
The scale is exciting; get this right and you can turbo-charge your business. So, how do you make this a success?
I met up with Parry Jones, MD of print media at The Specialist Works, to discuss international expansion. Jones specialises in helping ecommerce businesses with just that. The Specialist Works is a customer acquisition media and advertising agency that employs 140 staff with clients such as Photobox, Boohoo and The White Company. For more information about The Specialist Works, visit: www.thespecialistworks.com.
First, you must put customer acquisition at the heart of your decision where to launch. A quick Google search will tell you the scale of each country, both in terms of population and ecommerce penetration (check out www.top500guide.com).
Shipping, storage and local law are key
And understanding the demand for what you offer must be the number one factor. However, none of this tells you how easily you will acquire customers.
Start by looking at where you have been successful domestically:
- How scalable are these channels in the new territory?
- Do your (new) competitors use these channels?
- How do costs differ from what you pay at home?
- How does response rate change by country?
Take the USA and UK, for example. Both are similar in having advanced ecommerce scale (the UK is the third biggest ecommerce territory, yet has only the twenty-first highest population). Media pricing in the USA and UK is relatively low, but so are response rates. You may think you are getting a ‘good deal’ whilst paying above market pricing. But not all channels within a country are priced the same. German print-media costs a lot more than in the USA and UK, whilst TV advertising costs about the same as in these countries. Make sure you use a media partner that understands these nuances.
Understand your enemy
Each territory comes with its own set of invaluable tools to better understand the competition. Read your competitors’ accounts, understand where they are advertising, (roughly) how much they spend and even the creative they use.
Of course, do things better. But learning what has fuelled competitor growth can inspire your own. Plus, they know what works and what does not in their local market.
Localise your proposition
Retain what makes your business successful whilst ensuring it appeals to each new territory. McDonald’s famously mixes global and local marketing strategies. Ask yourself why domestic customers buy from you and whether international customers think the same.
Graze and Hello Fresh needed to understand US food culture when expanding to the USA. They have mixed a tried and tested model, with local knowledge, to maximise launch success.
You must understand the buying habits of any new territory. Ecommerce is driving an increasing ‘coupon-culture’ across Europe; but this is nowhere near as developed as the USA. Use local, direct response specialist creatives to get this right.
Decide whether your national identity is a help or hindrance
French fashion brand Petit Bateau is sold in boutique fashion stores in London; hop over the Channel, and they are stocked in supermarkets. They have taken advantage of how British people perceive French fashion, targeting a different audience in the UK.
Whether you play on your national identity or not, you must produce local language advertising. People engage with advertisements in their first language.
Colloquialisms mean that you should use local experts (Americans, Australians and Brits do not speak the same language).
So, which media channels should you prioritise?
Search, social and affiliates can be turned on quickly and are relatively low risk. Transactional inserts work in core ecommerce countries. Use TV when you are ready to scale your business seriously.
Get all these things right, nail your creative and proposition, and you are well on your way to expanding successfully!
9.1 Deep dive: selling to Chinese consumers
I met up with the team at Global-E, a provider of cross-border retailer solutions. They enable retailers to transact locally with customers in more than 200 destinations worldwide, offering a localised, international customer experience. We reviewed the current state of the market through a study of the UK’s top 150 online retailers. Using the research findings, we are here making recommendations for UK retailers looking to break into the lucrative Chinese ecommerce market to increase their international revenue.
Key findings
- Today, more than two-thirds (71 per cent) of large UK etailers ship internationally and over half (55 per cent) ship to China. However, the quality of the shopping experience offered to shoppers overseas varies wildly.
- Just over a quarter (26 per cent) of retailers that ship to China offer shoppers the ability to pay in yuan and present prices in local currency.
- Furthermore, only 22 per cent of retailers that ship to China offer Chinese shoppers the ability to pay using local payment methods.
Introduction
China is undergoing massive change. Home to 1.355 billion people, China has now overtaken the USA as both the world’s biggest economy and the world’s largest ecommerce market.
In spite of China’s economic growth slowing in recent times, the country’s ecommerce market is continuing to expand at record pace. This year alone, the Chinese are set to spend more than $911 billion online; an increase of 35 per cent or $239 billion on 2015.
Within the next two years, China’s ecommerce market will top $1 trillion, making it bigger than the ecommerce markets of the USA, UK, Japan, Germany and France combined.
Online shopping in China is largely being fuelled by greater internet and smartphone penetration, an expanding middle class with higher disposable income and greater consumer confidence, with over half of Chinese internet users having now made a purchase on the web.
Rising demand for foreign products is also spurring growth, with China tipped to become the world’s largest cross-border ecommerce market by 2020. Driven, in part, by fears over the scale of counterfeit or poor quality goods on sale domestically, China’s rapidly growing ecommerce market offers great opportunity for trusted international retailers to grow sales.
However, with online retailers in China improving logistics and mobile platforms, and leading players such as Alibaba launching initiatives to combat counterfeiting, UK retailers must act quickly if they are to encourage preference for their own products and ecommerce services.
So, what can UK retailers do to win over shoppers in China?
Market trend: counterfeiting fears drive international ecommerce sales, as shoppers seek out authentic goods
Counterfeiting remains a major problem in China. The country is reported to be responsible for the production of more than 70 per cent of all counterfeit goods globally, according to the UN Office on Drugs and Crime, and ecommerce has presented an easy target for counterfeiters to exploit.
Figures released by state news agency Xinhua in 2015 revealed that more than 40 per cent of goods sold online in China in 2014 were fake or of bad quality. In the same year, it is estimated that Chinese shoppers may have spent as much as $177 billion online on counterfeit or inferior products.
Furthermore, China has been hit by a number of high-profile counterfeiting scandals in recent years. In particular, 2008’s milk scandal, which saw more than 300,000 babies drink infant formula contaminated with melamine, sent shockwaves around the world. Whilst more recently, the discovery of more than 20 fake Apple stores and a fake Apple factory in China has highlighted the scale of the problem that counterfeiting presents in the country today.
Chinese marketplace Alibaba has also been criticised by the US trade office for enabling the sale of counterfeit goods in China. The marketplace is reported to have spent more than $160 million to combat the sale of fake goods, with founder Jack Ma previously referring to the problem as ‘a cancer that we have to deal with’.
Faced with such uncertainty when shopping both online and offline, a growing number of Chinese people are choosing to buy from online retailers based outside the country, that are perceived as being more trustworthy.
A recent report commissioned by PayPal reveals that 52 per cent of Chinese internet users plan to make purchases from international etailers this year, with retailers in the USA, Hong Kong and the UK among the most likely to benefit. The top three drivers behind this trend are desire for greater quality, authenticity and value.
State of the market: UK retailers failing to offer fully localised shopping experience for Chinese shoppers
Today, more than two-thirds (71 per cent) of large UK etailers ship internationally and over half (55 per cent) ship to China. However, the quality of the shopping experience offered to shoppers overseas varies wildly.
A study of the UK’s top 150 online retailers, commissioned by Global-e in January 2016, found that just 1 in 10 (10 per cent) retailers that ship to China offer shoppers a Mandarin-language shopping experience. Since the majority of people living in China do not speak English fluently, shoppers are likely to feel unconfident about making a purchase if they are expected to use and translate an English-language checkout.
Just over a quarter (26 per cent) of retailers that ship to China offer shoppers the ability to pay in yuan and present prices in local currency. In the rest of the cases, retailers are leaving shoppers in China to estimate for themselves how much products will cost to buy, which means shoppers could be hit by sudden currency exchange fluctuations or fees from their bank.
Furthermore, only 22 per cent of retailers that ship to China offer Chinese shoppers the ability to pay using local payment methods, such as e-wallets and bank transfers (like Alipay or Tenpay), which account for more than 80 per cent of ecommerce payments in China. Of retailers that do accept Chinese payment methods, 42 per cent offer a single option, barring some prospective customers from making a purchase.
Whilst more than 40 per cent of Chinese shoppers prefer to prepay all taxes and duties in advance, when making a purchase online, according to Global-e customer data from 2015, very few UK retailers currently offer this functionality. Almost all (98 per cent) retailers that ship to China do not provide full duties calculations and pre-payment, which means that shoppers may be stung by unexpected charges or taxes.
Although more Chinese shoppers are open to shopping from international etail websites, many still have concerns. The biggest areas of concern are identity theft or fraud (54 per cent), currency exchange fluctuations (52 per cent), language issues (50 per cent) and shipping and delivery (47 per cent), according to research published by WorldPay. Merchants that will be able to address these concerns and give shoppers a seamless localised experience will be able to boost conversion rates.
Retailers must take a localised, customer-centric approach to tackle China’s ecommerce market
As the world’s biggest ecommerce market, and one of the fastest-growing markets worldwide for cross-border ecommerce, China offers UK retailers a great opportunity to grow sales internationally. However, the majority of retailers are failing to exploit this market fully.
Although more than half (55 per cent) of large online stores in the UK offer shipping to China, most retailers are falling short of Chinese shoppers’ expectations by failing to offer pricing in Chinese yuan, adjusted content, Chinese local payment methods or import tax calculation, which can all help to improve the shopping experience and make shoppers feel more confident about making a purchase online.
To improve the experience and grow sales in China, retailers cannot afford to offer shoppers a second-rate experience. Unexpected delays to delivery or surprise fees for tax or shipping can quickly sour a great online experience, whilst failing to localise the online store can make shoppers nervous.
To make the most out of cross-border ecommerce opportunities in China, retailers should:
- improve the experience of Chinese shoppers. The first rule of international trade is that, in order to be successful, customers must enjoy the same experience, regardless of where they are in the world. Retailers should offer shoppers in China the same high-quality experience that shoppers in the UK and elsewhere expect to receive.
- offer multiple shipping options at reasonable rates. To give Chinese shoppers the confidence to buy, retailers must offer greater choice as well as competitive prices. This is especially critical in China where clearance processes can be very lengthy for non-experienced carriers. Moreover, it is important to have a simple and transparent returns process in place so, if something goes wrong, shoppers will be confident that it will be resolved quickly and easily.
- display prices in Chinese yuan. There are few things more off-putting than exchange rate uncertainty when buying from a retailer in another country, and this is particularly disconcerting at times of high currency fluctuation. Retailers should present shoppers in China with prices in the local currency, so that shoppers can feel confident about how much they are paying.
- try to put the customer’s mind at ease. Most shoppers in China expect and prefer to pre-pay customs charges or handling fees when shopping online, so retailers should avoid any potential for nasty surprises by being upfront about these charges and offering pre-payment.
With ecommerce sales in China set to exceed $1 trillion next year, retailers must pay more attention to China in the years ahead. However, delivering a localised shopping experience does not have to require a dedicated Chinese website or months spent negotiating with the local supply chain. With a specialist partner, retailers can start tapping into China’s ecommerce market in a relatively short timeframe and without a huge investment.
9.2 Case study: Vivobarefoot
Barefoot shoe manufacturer Vivobarefoot looks at replacing expensive distributor model in favour of direct-to-consumer sales strategy to support greater volumes.
By appointing three new specialist third-party providers in the areas of warehousing/logistics, payments and customer service, Vivobarefoot is able to support future growth of esales both in the UK and globally. By centrally locating everything in the UK, there is no need to duplicate facilities in individual countries and there is less time and expense in management and training. This approach allows the shoemaker to enter new markets easily, effortlessly and cost-effectively.
Key findings
- Ninety per cent increase in sales conversion due to the availability of multi-lingual speakers.
- Three hundred per cent increase in overall unit esales.
- The number of pairs of shoes sold on the company’s own website and shops will increase from 70,000 this year to 311,000 in 2020.
Interviewee
Paul Walker is head of ecommerce at barefoot shoemaker Vivobarefoot, where he is responsible for the company’s online global sales strategy. Previously, Walker worked at Carphone Warehouse creating website propositions and modelling and, prior to that, he was responsible for merchandising and esales of computing goods at Dixons.
About Vivobarefoot
Established in 2003, Vivobarefoot (www.vivobarefoot.com) makes what the company describes as the best barefoot shoes in the world. Created without compromise around its patented Pure Barefoot Technology, its products are the epitome of ancient wisdom with modern technology; designed in London, with a sole for every terrain, to live your life barefoot. The business was founded by two cousins Galahad and Asher Clark who are from seven generations of shoemakers.
The culmination of five years’ research and development saw the release of the first Vivobarefoot shoe in 2004 – the first minimalist shoe with a patented, ultra-thin puncture-resistant sole. The shoe was designed to offer both maximum sensory feedback and maximum protection. Whilst growing its ecommerce business, the company also currently has 20 stores dedicated to the Vivobarefoot brand, with plans to double its global footprint in the next five years.
General online retail strategy
Over the last two years, Vivobarefoot has been on a journey to move away from a traditional, multi-tiered distribution model towards selling more directly to the consumer, combined with an underlying mission to become one of the most influential shoe brands in the world.
Previously, the shoemaker relied on an expensive and complex supply chain that included several suppliers and the transportation of goods between different third parties before finally reaching the end customer. The barefoot shoe specialist made the decision to simplify the way it sold its classic style of footwear that stands out anywhere in the world, by adopting a direct sales approach based via its ecommerce platform that serves a range of key markets, including the UK, Europe and USA.
The philosophy behind its direct sales strategy was to reduce the costs and to help them to ‘sell the brand’ of Vivobarefoot. The result of this ‘personalised’ brand experience would, in turn, sell the shoes themselves. To make this happen, the company completely redesigned its website so it was easy to navigate and also worked on simplifying its brand messages. Part of the branding was to appeal to what the company refers to as ‘healthanistas’ or people that are devoted to leading healthy lifestyles, such as yoga and running. This is also being achieved by targeting customers who engage with complementary brands through affinity marketing. In addition, Vivobarefoot recognised the importance of personalising the brand experience, which represented its next major challenge.
To help achieve this degree of personalised contact, all website visitors and prospects, whether new or existing customers, will be presented, with the aid of ‘programmatics’, tailored marketing messages and adverts that are unique to them and are based on buyer or search history. Similar to ‘re-marketing’, programmatics goes one step further in that it replaces standard messaging with a customer’s particular preferences unique to them.
With a growing community of 90,000 online followers, the company will also be exploring how it can optimise social media buying through the likes of Instagram, Facebook and Twitter.
Since 2014, the company has increased its online sales from 10,000 to 70,000 pairs of shoes per year. To fund its future global growth, in March 2016, Vivobarefoot launched its first crowd-funding initiative via Crowdcube to raise £750,000. Over the next four years, the company will focus on growing its ecommerce from 30 per cent to 60 per cent, by launching an updated brand experience website with enhanced functionality as well as 15 local language sites with multi-currency options. This identical experience will be backed up within its growing number of offline stores.
The Case
The problem
Faced with increasing online demand for its shoes across all its ecommerce sites in both the USA and Europe, Vivobarefoot decided that it needed to review its current fulfilment strategy so that it was better prepared to handle the growth potential that would be made possible through its direct-to-consumer sales model.
Head of ecommerce for Vivobarefoot, Paul Walker explains, ‘Previously, we had a single supplier that handled customer service, payments and warehousing respectively. However, as online sales rocketed – 116 per cent growth from 2013–14 and 300 per cent growth from 2014–15 with further growth projected from 2015–16, we realised that we needed a greater number of external resources that were specialists in key areas that would be able to support the increase in volumes at a competitive price point.
‘We therefore wanted to find three UK-based partners that were specialists in customer service, payments and warehousing/distribution. In particular, the customer service partner would need to have experience of etailing already and, in particular, the shoe market. They also needed to have the resources to provide multi-channel (including social media) and multi-lingual native speakers for the USA and European countries, such as Portugal, Spain, Italy, France and the Netherlands.’
The background
According to Walker, the company addressed each supplier relationship in turn, but the overriding philosophy was to find partners that already had experience in their particular sectors as well as sufficient resources to scale in line with Vivobarefoot’s own expansion. It was also essential that each partner would have the ability to operate on a cross-border basis, allowing the company to expand internationally, with minimal barriers.
The logistics/distribution partner was relatively simple, as they decided to go with an established ecommerce warehousing and logistics specialist PNC Global Logistics Ltd (PNC) in Birmingham, who already provided wholesale fulfilment and freight fowarding for Vivobarefoot. PNC already had facilities set up for other online brands, such as Rapha and Penfield, allowing Vivobarefoot to take advantage of their economies of scale and their understanding of a business model that mirrored its own. The online payments side of the business was also straightforward, with an agreement made with Sage to manage all etransactions globally, supported by PayPal.
For the customer services partner, this was slightly more complex as there were more providers to choose from, dependent on size, experience and location.
The company eventually selected outsourced customer contact centre Ventrica (www.ventrica.co.uk) for a number of reasons. ‘Firstly,’ says Walker, ‘We felt that they had a genuine interest in our brand and product and we wouldn’t just be another account to them. They already had experience of another shoe manufacturer and this was really important, as we require an exceptional level of knowledge across our extensive product range. We offer a range of barefoot shoes and, although they are fundamentally the same (barefoot!), there are, at any one time, between 50 and 60 different styles that differ based on the environment and terrain they are used in, in order that we can offer a shoe for all occasions – from mountains to oceans, with everything in-between, so there are subtle differences.’ After visiting the supplier’s team and their operation, Vivobarefoot was convinced they had the capability to support its growth and plans for the future.
According to Walker, Vivobarefoot has a policy of working with specialist third parties that share the same values and aspirations as themselves. ‘What all the suppliers we picked had in common was that they genuinely showed that they wanted to work with us as a brand, and we could see that there would be mutual ongoing benefits for both parties as we grew. We believe this is critical as we wanted to be able to reward our partners and help them to share in our success over the long term.’
The fact that all suppliers were UK-based was also driven by the company’s strategy of centralisation and simplification that would make all relationships easier and more cost-effective to manage, without also having the additional expense of setting up and duplicating supplier partnerships in every country.
The solution
The transition from a distribution to a direct sales channel was fairly seamless. There was a pure recognition within the business that, if it wanted to be able to reach more customers via ecommerce, then it would need to introduce new processes, infrastructure and services that would allow the company to grow rapidly. To achieve this goal it was clear that it had outgrown its current supplier who completely understood that the company needed to split the provision of its warehouse/logistics, payments and service. Once they had made this decision, the migration to the new partners was very smooth.
The new warehousing and logistics facility was up and running within three months and the payment gateway was rolled out within weeks of initial contact. In parallel, after an intensive training course, the outsourced customer service provider began working for Vivobarefoot in 2014, in readiness for the seasonal peaks of Black Friday and Cyber Monday. Walker says, ‘As with any ecommerce operation, our online business is subject to peaks and troughs through the year.
‘When we first started the relationship, we expected there to be a lot of unknowns in terms of resource requirements and that it would be a learning experience. But, when we have experienced spikes in demand, as a result of an advertising campaign or promotion, our outsourced contact centre partner has always responded well and has up-scaled its resources accordingly.’
Walker continues, ‘We are also seeing many benefits from centralising everything in the UK. Not only does it reduce our costs, it also saves time in training, as we only have to do this once rather than replicate in multiple countries for both the English and international language teams, plus it helps with the consistency of our overall customer communications.’
Vivobarefoot is also proud to be a London-based brand, so it made perfect sense for it to have everything in the UK. The USA is a significant market for the company and Americans like to speak with someone with an English accent, so it reflects its core brand values.
Most of its buyers are affluent and often speak English. However, since the company introduced native speakers, sales conversions have gone through the roof. In particular, in Spain and Italy, like-for-like sales grew by a massive 90 per cent in the first month of trade. This shows the impressive return on investing in multi-lingual speakers who they also use for translations for additional website updates, like a promotion.
The importance of 24/7 and multimedia communications
The fact that the service team is available 24/7 helps to meet and surpass customers’ expectations, as they wish to be able to call or communicate over other channels, such as email or Facebook, at any time of the day. The team currently consists of four full-time equivalents (FTEs) as well as having access to the supplier’s bureau facility that is a dedicated team that works across a range of different brands.
The outsourced contact centre operates three overlapping shifts with three separate dedicated teams that are all Vivobarefoot experts and manage emails, Facebook correspondence, Feefo responses and other customer care queries relating to the shoe manufacturer’s Amazon merchant account.
Introduction of PayPal has seen conversion rates soar
As part of the brand’s mission to simplify the buying experience for its customers, the company has also recently introduced support for PayPal that saw a 30 per cent transfer of payments from Sage, with a marked increase in conversion rates.
Results
Since making the changes to reach more customers via ecommerce and the appointment of specialist partners based in the UK with capacity to support additional volumes, Vivobarefoot has seen some impressive results in terms of increased sales and customer satisfaction ratings.
By using tools such as Google Analytics and its ecommerce platform Divendo, data has been collected to measure such stats, as the average website conversion rate that has risen from 1.9 to 2.5 per cent (25 per cent above what is considered ‘good’ for other comparative brands) with regional variations, including the UK site performing at 3.6 per cent, peaking at over 7 per cent, and a 90 per cent increase in sales conversion due to the availability of multi-lingual speakers, better delivery options and solutions, and a 300 per cent increase in overall unit sales due to better availability of sales thanks to a centralised stock pool.
With its revised model, Vivobarefoot is now entering the Swedish and Danish markets and will also focus on expanding its presence in the USA, which accounts for 40 per cent of overall sales. Overall, shoe sales are estimated to rise from 273,000 pairs this year to 664,000 in 2020. Crucially, though, the number of pairs of shoes sold on the company’s own website and shops will increase from 70,000 this year to 311,000 in 2020.
Critical success factors
For VivoBarefoot, there have been a number of critical success factors. One of these has been the careful choice and selection of suitable third-party suppliers that are all experts at what they do. Without this access to knowledge in the areas of warehousing, logistics, payment processing and service, it would have been more difficult for Vivobarefoot to compete on a level playing field with rivals or larger competitors. In parallel with Apple, the ability to control and reinforce the brand experience through its own Vivobarefoot stores has also been invaluable in building a loyal fan base of online customers.
Lessons learned
Walker recommends:
- Do not be afraid to try out different marketing techniques across different channels. You need to be prepared to take a few risks, as this will help you to develop in the long term.
- Always work with third parties where there is mutual trust, respect and, of course, a two-way beneficial relationship, otherwise it will not work in the long run.
- There is a lot of noise out there in terms of what retailers should be doing, but the key is to really focus on what is best for your particular business, your brand and your customers’ expectations. Find the right tools, platforms and providers that fit your specific objectives rather than just follow the crowd.