Six Essentials to Win in Global eCommerce

This article was first published in Retail Week in November 2015.

E-commerce is fundamentally changing the way retailers do business, opening up a whole new world of consumers at the click of a mouse. The opportunity is undoubtedly huge, but in this fast-moving environment success hasn’t always come easy. Although many British retailers are reaping the benefits, many others could do more to capitalise on the opportunities e-commerce can offer.

Recent research by OC&C, Google and PayPal has found that e-commerce in the world’s four largest markets — the UK, the US, China and Germany — will have doubled in size to an astonishing £640bn by 2018. What’s more, cross-border trading between these countries is also on the rise — and the UK is in a strong position to reap this opportunity. Britain is the most popular online overseas destination for German shoppers, and the second most popular in China and the US.

Many UK retailers, both pure-play and multichannel, are succeeding outside our home market. ASOS is a fantastic example of cross-border success, currently delivering around 60% of total sales from overseas. Meanwhile, lesser-known Graze, the ‘healthy snacks by post’ etailer, exceeded 100,000 customers in the US just three months after its nationwide launch.

Notwithstanding these standout examples, there are plenty of cautionary tales of businesses who have struggled to crack established e-commerce markets. But the US, China and Germany represent too great an opportunity for UK retailers to ignore. So — what does it take to win in these markets, each with its own highly unique characteristics?

1. Know your pull factors

Even in well-served markets like the US, UK retailers are still well placed to succeed. The key is to harness the power of a retailer’s proposition while understanding what customers in each market are looking for — and what would make them choose British over a local player.

Our research revealed that the top three reasons for international customers to buy UK products are uniqueness of products, price, and trust in quality, but there are important differences between markets. For both Americans and Germans for instance, uniqueness of product wins out; in China, trust in quality and authenticity are primary purchase drivers.

These insights will help retailers decide which aspect of their proposition they should highlight or invest in. So, in the US and Germany, it pays to offer products or styles that local players don’t: German customers demand value more than their US and Chinese counterparts; Americans love distinct British heritage; while in China, instilling trust in quality and genuine products is key to attracting customers.

2. Focus to climb fast

Boden, Graze, ASOS and MyProtein have been among the fastest-growing companies in overseas markets because they have understood where to focus their efforts, both in terms of the markets they choose to prioritise and the capabilities they need to win in them. ASOS has focussed on being accessible everywhere, partnering with local couriers to provide hassle-free returns; developing their mobile website, apps, a Facebook shop, and Pinterest in multiple languages — especially important for their younger demographic; and introducing zonal pricing to compensate for currency movements and reduce barriers to purchase. MyProtein and Graze on the other hand, have tailored their products to particular tastes in each market.

All of these retailers have also adopted a focused approach when choosing which markets to enter and when. For example Boden uses data to identify new sources of cross-border demand and then focus resources on understanding local customer needs — and how best to serve them.

3. Adapt for online ecosystems

The digital landscape is not the same the world over. British retailers need to be aware of local variations and develop strategies to target consumers that take this into account.

In Germany, for instance, search is king — it’s where UK retailers are likely to pick up the bulk of online customers, so optimising for search will be instrumental to success. In the US, Pinterest is increasingly popular and an important route to target customers, so retailers entering this market should consider digital executions incorporating this channel.

China has a unique internet ecosystem, which requires a markedly different approach to Western markets. Marketplaces are the dominant online retail platform and supplant search engines as the starting point for shoppers: of Chinese shoppers who reach UK retailers’ websites, nearly a third do so through marketplaces such as TaoBao and Tmall, compared with 21% through search. Messaging app WeChat is another important means of reaching Chinese consumers, many of whom have leapfrogged straight to mobile.

4. Break barriers beyond the basics

International ecommerce is such a compelling opportunity because people are intrinsically open to shopping overseas. Today, a third of people don’t identify any major barriers to shopping in a country outside of their own.

By and large, many retailers have addressed the basics of serving overseas markets well — including delivery costs, returns, data security, customs fees and tracking. Although UK retailers have done this basic ‘skimming’ fairly successfully, a further 60% of overseas demand could be opened up by tackling barriers beyond the basics — enabling retailers to localise and making their offer more relevant.

So what does this delving deeper entail? It requires targeted investment: ensuring websites and customer support are available in the local language; allowing payment in local currency and adapting pricing for each region; building brand trust; enabling different payment methods depending on local needs; and investing in the last mile to prevent delivery time becoming a barrier to purchase.

5. Price smart for currency movements

Currency may not be a primary barrier to shopping from overseas, but it is still an influencing factor for cross-border shoppers, especially for Chinese and Australian customers. There are many different ways of tackling this issue, with trade-offs to be made between clarity to consumers and operational complexity. Selfridges for example, offers delivery to over 60 countries, but prices entirely in British Pounds, giving ease of price management and removing risk from currency fluctuation.

Conversely, online specialist iHerb offers 35 different currencies with prices floating with exchange rates — enabling customers to see the exact price they will pay. Different again is the model adopted by Topshop, which has local prices in each currency — enabling it to benefit from a more premium positioning in the US.

Each model has its costs and benefits, so retailers need to weigh up the pros and cons in their specific industry to decide which works best for their own business.

6. Lead the growth of mobile

Mobile shopping is growing fast in Germany, the US and particularly in China where two thirds of consumers say they shop on mobile. With nearly 40% of online shopping purchases in the UK taking place on mobile platforms, UK shoppers are at the vanguard of a trend that is sweeping the globe. This means that UK retailers, who are accustomed to catering for mobile savvy shoppers, are uniquely positioned to exploit the international growth of mobile retail. Orienting e-commerce offerings to be mobile first will be key to success — a responsive website or mobile friendly payment system could be the reason an international customer chooses a British retailer over a local competitor.

For many UK retailers, success to date has come from ‘skimming’ a large number of markets through international shipping and payment solutions. Success in the future will require them to move from this ‘go broad’ strategy to one which enables them to ‘go deep’ and be locally relevant in the world’s largest and fastest growing e-commerce markets. Although care is advised, the multi-billion dollar incentive is big enough to attract even the most cautious retailer.