By Vladi Shlesman, Managing Director, EMEA at ChannelAdvisor
Brands and retailers need to maintain or grow their business to survive these tough times. Typically, there are two potential ways of doing this. The first is to sell more in your current market, which can be challenging in an economic downturn when consumers are more mindful of their spending. The second option is to expand into new territories and sell elsewhere, with a new pool of consumers. This could be the key to the brand’s survival during difficult economic times.
Research into the intentions of C-suite professionals within consumer electronics brands carried out by ChannelAdvisor, a CommerceHub company, found that three-quarters of respondents are exploring the second option and are planning to expand into four or more countries in the next 12 months. With such a large proportion of businesses looking to expand their territories, it is important to understand both the opportunities and the difficulties associated with doing so.
Challenges of expanding – it’s all in the planning
With each territory comes a unique set of challenges and for businesses, selecting the right countries and channels to expand your business and reach the right audiences is key to success. In assessing potential channels and markets, brands need to consider a variety of factors to select the most appropriate avenues for selling abroad. Careful consideration and planning will pay dividends in the long-term. Think about:
- Brand positioning and audiences – is there brand awareness in the market, a physical presence, where are the key audiences shopping?
- Data requirements and key product data points for each channel and audience – is the product title optimised, does your product description include the right information for the audience?
- Logistics and fulfilment – is an in-country warehouse necessary, what are the additional costs and taxes for shipping cross-border?
- Commerce prerequisites – do you need a trading company in the country?
- Profitability – taking into account platform costs, logistics and fulfilment costs and advertising to ensure product visibility, what volumes are required to ensure profitability targets are achieved?
Having a good understanding of these factors will ensure that brands and retailers are setting themselves up for success when planning cross-border expansion.
Unexpected barriers
Taxes, regulations plus any other unforeseen costs can have a big impact on your business and its profitability if not properly managed. Customers can be easily dissuaded from buying when confronted with high unexpected costs, such as tax or delivery at checkout. To combat this, it is important to be transparent with customers about fees and invest in tools which can handle processes such as currency exchange and pricing changes.
Brands should also plan for changes in returns policy, shipping and payment options among other factors which will be different in international markets. Utilising available technology to centralise and automate operations is key to seamlessly expanding into new territories. Doing so will also reduce the staff needed to deal with manual operations such as inventory management, freeing up time for bigger-picture work such as strategy and marketing.
Deciphering demand
To succeed in cross-border e-commerce, businesses must gauge the scope of demand for their products in the proposed markets. This means conducting research and analysis to decipher which country is best for your business to expand into. Marketplaces offer brands a great way of testing the water in new markets and expediting the research phase, with relatively low investment and risk.
Businesses should have a strong idea of their competition in each location, to understand their place within the market and what sets them apart. Brands should look to engage partners in the territories they wish to expand into, in order to gain invaluable regional insight.
Once countries and channels to expand into have been selected, using technology to automate processes will enable sellers to scale on new channels quickly, allowing them to easily test, learn and adjust as they launch in new markets.
Be aware of all advertising options offered by your chosen sales channels and take advantage of these promotional capabilities to propel your business forward in its new home.
Benefits of international sales
While cross-border e-commerce requires an investment in terms of upfront planning and logistics, it can be a smart strategy for businesses. Selling internationally can open your business up to much larger and more varied markets. Selling in different time zones such as the UK and US allows you to sell around the clock, with one market awake and online while the other sleeps. Additionally, selling in multiple markets can help with distribution of excess stock. The variety in trends and consumer habits in various countries increases your likelihood of shifting this stock. While for example, winter coats may have gone out of season in the UK, they will be required elsewhere, therefore extending the lifespan of your products. All of this is a benefit for brand awareness and potentially an increase in sales.
With so many opportunities for cross-border e-commerce, and technology which can make expanding into multiple territories simple, it is no wonder that three quarters of C-suite professionals in our survey of consumer electronics businesses said they are planning to expand into four or more countries this year. Remaining in one territory could be a missed opportunity for brands in 2023 and beyond. But one thing must be front and centre when assessing and planning ventures into new markets, and that’s profitability. If a business can invest the time and research it takes to expand into international markets profitably, it can offer brands growth opportunities despite a challenging economy.
