Expanding Your E-commerce Business to Global Markets
There are 7 and a half billion people in the world, and only 325 million of those are in the U.S. If you’re looking to grow your e-commerce business and you’ve saturated your home market, foreign expansion should be at the top of your list for your next strategic move.
Not only does foreign expansion bring you to new customers, open up doors for higher revenue, and transform you into a global company, but also it’s become one of the greatest competitive differentiators for U.S.-based businesses. Only 1% of America’s 30 million companies sell internationally. U.S. companies are some of the least globally expansive of all worldwide companies. This is likely because the American economy is robust, competitive, and innovative, so a lot of companies find growth and excitement within our coasts.
But the rest of the business world acknowledges the serious value of foreign expansion. Global companies, when executed effectively, can mitigate their risk, compete at higher levels, and grow at a faster rate than just domestic ones (even when the domestic economy is strong).
Still, for many e-commerce companies, the idea of branching out overseas is daunting. A lot of questions arise. What does the audience look like? Will they be interested in the product? How much will we have to change or adapt? What does the competitive sphere look like? What kind of security is required? How will we handle operations, warehousing, and shipping? What are the government regulations and taxes?
And the biggest question always comes down to: is it too risky?
We’re going to take you through some steps to make sure you cover your bases while looking into your e-commerce business’ potential for foreign expansion.
1. Look for E-commerce Markets
In most cases, you don’t want to reinvent the wheel. You don’t want to attempt online expansion in a country that doesn’t yet use e-commerce. Some countries are still developing with the online world, whether due to technology or culture. Some big tech companies are making headway in these countries, but it’s likely not in your best interest at this point to try to forge a new path.
Instead, consider expanding into foreign markets that are already heavily using e-commerce—but are begging specifically for more U.S. products. The biggest e-commerce markets are as follows:
China is the world’s biggest e-commerce market, recently inching the U.S. out of first place. More mobile apps and improved logistics networks have fueled this growth. China possesses a large population with a shopping and commerce-oriented culture. Additionally, China’s production and logistics infrastructure are strong, which makes it easy for e-commerce companies to find low-cost solutions for behind-the-scenes operations.
Asia overall has received a lot of attention from foreign companies for these reasons. Japan is also high on the list because it’s a leader in m-commerce (mobile-commerce). South Korea, India, and southeast Asia have also been asking American companies for more products and offerings.
European countries like Germany, France, and Russia are still led by in-country businesses. However, they’re looking for more foreign goods, especially as they gain greater footholds in globalization. France is accepting a surprising number of foreign businesses, and American companies find the move from the U.S. to France easy. Russia has the largest population of European internet users, but online sales only equal 2% of total sales, which leaves a lot of room for growth and innovation.
Canada and Australia used to be overlooked, but they have some of the fiercest online shoppers in the world. American companies, like Amazon, have taken notice of these huge audiences ripe for the picking. They’re similar in shopping patterns to America, so a lot of smaller retailers feel comfortable testing the “overseas” waters in these countries.
This doesn’t mean one of these countries will be right for your business, though. It also doesn’t mean that your company will work in the entire country—you may choose to expand to certain cities at a time. However, if you’re feeling lost, these are good places to start your international search.
2. Consider the Audience
Just because a country likes e-commerce doesn’t necessarily mean they’ll like your e-commerce company. You want to make sure that you are entering a market with strong potential. You’ll want to consider the following questions in your search:
Which countries are already visiting my website and showing interest in my product?
Which countries are searching or purchasing products like mine?
Who are my competitors in that country? Who is the top competitor?
Is there a cultural fit between our brand and the lifestyle of this market?
You also want to consider how easy it will be able to gain a foothold with that audience amidst the cultural sphere. Remember that higher competition means a higher barrier to entry, but zero competition could also be a red flag that the market isn’t viable.
So how do you better understand your audience?
Look at Google Trends
Google Trends is a great way to analyze different keywords and trends based on geographic region. You can simply search your product in that location, and Google Trends will give you an idea of the frequency of searches for a given period of time.
Play around on Google for a lot of easily accessible data about trending searches. For example, on Google Search Console, you can check the Status and Performance report of a keyword segmented by country. You can even look at your website’s Audience broken down by geographic regions to see where your overseas visitors are coming from.
Focus groups are one of the best ways to learn more about your market beyond just demographics. You can determine an effective price point, product modifications, and even distribution channels. Learning the intricacies directly from the source is the best way to mitigate the risk of expansion failure.
Host a Campaign
Hickies, a shoe company, actually used a Kickstarter campaign to do market research when expanding globally. They launched the campaign worldwide and waited to see where most of their investors came from. They noticed they had a lot of interest coming from Japan, so they considered that a worthy market to tap into.
Don’t be afraid to use investing platforms or even social media to see where most of your regular followers are coming from. If you’re noticing that you receive many inquiries from a specific country or city, it’s worth looking into. You may already have a foothold there without even putting in the effort.
3. Look at the Government
Once you have a good idea of the potential for the market, you want to look at the external variables. Is it easy to sell in this country? What are the duties and taxes? Does it have a sound political and economic environment?
Keep in mind that some governments are reluctant to accept foreign business, so they make it particularly challenging to break into their market (especially for smaller businesses).
You’ll want to be aware of the following factors in that country:
Labor or raw material restrictions
Corporate organization governance
Employee contracts and laws
You’ll also need to consider whether you want to form a new subsidiary or register a branch overseas. There’s a lot to consider, which can feel overwhelming. One mistake could cost you and your business big time.
So how can you learn these rules and regulations and make sure you’re operating legally with minimal costs?
The best way is to work with a trustworthy local representative or lawyer in that country. They can give you information about local business protocol and laws. You can also work with lawyers at home who specialize in global expansion.
Check out these 10 legal considerations when expanding overseas by Blue Marble.
4. Evaluate Infrastructure.
Does the country have the infrastructure in place for your e-commerce store? You’ll want to look at the online, banking, and physical makeup of your market.
First, do they have online access? If you’re an e-commerce store, you want to expand to countries that have strong and widespread internet access. If your customers can’t easily access your store, they won’t buy. For example, some countries are still predominantly “Internet Café,” meaning people access their internet in public places and not at home. If it’s easier for them to get to a physical store than an online one, you likely won’t have a strong market.
Second, what would banking and payment look like? How would you accept local currency, and where would you keep your money? The term “international banking” actually scares off a lot of business owners from expansion, simply because it seems overwhelming. But cross-border banking isn’t that complex, as long as you have a skilled banker and legal team on your side. We typically recommend outsourcing banking to a company like Barclays or other trustworthy third-party.
Third, is there physical infrastructure in place? Are there roads that will bring your goods from warehouses to the customers? Is there land for warehousing and/or production, if needed? What would this look like logistically? Also, consider the cost. How much would shipping and operations cost? For example, much of India is still very rural, so a strong majority of your customers might not be accessible by road and shipping costs would be too high.
You might also want to take note if there is a country culture of fraud or rip off products. Some regions are known for their knock-offs of brand name goods, which could cause you to lose customers or land you in constant legal battles that aren’t worth fighting.
5. Scale slow and steady.
You don’t want to throw yourself into a new country without having all of the facts and preparations in place. Excessive expansion is the fastest way to kill your business. There is a lot of money and risk involved, and your business needs to be prepared to take that on.
Think of international expansion as if you’re starting a business from scratch. How do you choose products based on your audience? How do you price and distribute those goods? Then, consider these questions within the context of a different government, tax system, and infrastructure.
The key to successful foreign expansion lies in meticulous research, asking questions, and getting quality partners to support you.
If you’re looking for quality partners, start with Seller’s Choice. We know how to grow online businesses at home and overseas to see optimal success. Drop us a line to start the conversation about your expansion.