We’ll wrap up the series of posts we’ve pulled together this year on international e-commerce by highlighting some of the dialogue that the study stirred up.

One of the best comments came from a CEO-guy across the table who attended the session where Jim Okamura hit the highlights of the study and interviewed the esteemed panelists.  He had that slightly worn look one has at the last session of the last day, but he was totally into the idea of going global.

Finally he looked over at his VP of e-Commerce and said “Let’s just do this.”

The International Growth Story

Chris O’Neill, who runs Google’s retail practice, was a welcome opening host for the session.  He set that stage nicely by commenting that:

• Well over 50% of Google’s growth is from markets outside the U.S.
• In order for Google’s CEO to approve any program, it must have a global plan
• From an organizational perspective, discussions about international initiatives often revolve around the trade-offs between centralization and de-centralization

What should we watch for on the international front? According to O’Neill, innovations in payments “in a world without the financial payment infrastructure the U.S. takes for granted.”

And stay tuned for how machine translations will fulfill the vision of a border-less e-commerce landscape and where advancements in analytics will leverage data to understand international customer needs that are not being met.

A New Chapter in the Customer Experience Saga

Of the many barriers the study highlighted, the one that requires the most urgent attention is the generally poor online experience that most international shoppers encounter, an ironic similarity to the early days of e-commerce in the U.S. the study points out.

Another key finding was that an expanded range of strategic options has replaced the “all or nothing” mindset that until recently prevailed among international strategists.  Each option has its own different risk/reward profile and collectively, they provide online retailers and consumer brands greater strategic flexibility, which is critical in today’s challenging retail environment.

A “middle” stage of international e-commerce expansion is emerging, which the study calls the “Participatory” stage.  Aided in part by the emergence of “sell-and-ship” solutions providers, this stage offers online retailers a low-cost, low-risk way to dramatically improve the international customer experience while also ramping up global sales.

Global Logistical Expertise is Evolving Regionally

An interesting ancillary finding emerged on the expo floor at the Summit.  As one visited the vendors that are opening doors to international e-commerce, one found that those with logistical expertise currently tend to specialize in different regions of the world.

Not surprisingly CanadaPost/Borderfree excels in Canada while Pitney Bowes (e4x/fiftyone’s logistical partner) delivers the goods throughout Europe.

Access Technology Solutions has built a sophisticated network of trade channels and customs brokerages throughout Asia-Pacific. In fact you can ship express packages from the U.S. into Japan for about what it costs to ship from California to New York. And it can get there quicker.

Meanwhile Borderjump/Aeropost is fulfilling thousands of international orders daily throughout South America.  Look for some consolidation in this sector in the year ahead, but for now, choose your market and go with the strongest player in that region.

Social and Mobile: Hot Panel Topics

No way can we hope to pack in highlights from the report’s findings plus insights from the panel session at the Summit into this no-longer-short post.  Several quick take-aways for you.

One of the biggest challenges of going global is balancing existing brand equity/controls with the need for local relevance.  The panelists agreed that tracking and measuring brand equity is tough globally, especially in the Asia-Pacific regions.

However, social media is evolving as a means to cost-effectively tap communities and facilitate word-of-mouth ─ and by doing so, to better understand how to adapt brands to local market preferences.

Panelists also agreed that having a mobile strategy is an essential component of going global.  Depending on which international market you target, expect 20% to 40% of the traffic coming to your site to originate from mobile devices ─ and plan for women to over-index on mobile.

Organizational Catalysts?

The panelists provided advice for e-commerce professionals trying to push their leadership to go global.  After conducting initial market assessments, focus on understanding the types of payments that are locally relevant.

Accept that payment models will not be one-size-fits-all.  In China, expect to accept at least five types of payment.  In Germany, more than half your holiday orders may go out with an open invoice.

Next Stop: Monaco, October 26-28th

It’s always intriguing when you put almost a year into conducting a study and then it’s done.  But of course research is never really done, in fact, we’ve barely written the first chapter of the international e-commerce expansion story.

The next chapters will provide different viewpoints.  The Shop.org Global e-Commerce Summit will offer a diverse collection of best practices and insights from leading global e-commerce professionals outside the U.S.

And look for a quantitative study exploring international e-commerce expansion from the J.C. Williams team next spring, with a focus on how online merchants of different sizes are mastering global e-commerce.

Until then, enjoy the International E-commerce Expansion Benchmark Study, the most uncreatively-titled report out there today.

Thanks,

The J.C. Williams Group

Angela Kapp, Sr. VP – CRM & New Initiatives, The Estee Lauder Companies highlighted numerous examples of how consumer behaviors differ in respective global markets and showed how incorporating these differences into international merchandising plans can help shape successful brand strategies.

George Hanson, Sr. Manager of International Strategy at Lands’ End, emphasized the need for global collaborative planning and organizational alignment as the foundation of a successful international e-commerce expansion strategy.

Hanson also cautioned internationally-ambitious online merchants to resist their natural instinct to run.

Instead they must balance the desire to run fast with the need for an organizational structure that balances corporate and local market expertise.  By dedicating the time and resources necessary to align international organizations, retailers can build international merchandising and assortment plans that are more measurable and more easily adjusted as the business evolves.

Context Drives Expectations

Angela Kapp discussed how differences in global consumers affect brand expectations in different markets.  She mentioned that during her first trip to China five years ago, she noticed very few women wearing make-up.  Yet in France, women have worn make-up for ages.

She advised getting to know the consumer in different markets by using online surveys and market research to better understand unique consumer expectations.  By researching the context of a market (e.g. is service imperative or an after-thought?) brands can better understand how to position a product category accordingly and how to align merchandise with the consumers’ desire for the product.

She added that one should anticipate learning that some consumers will want to be told what to buy and some want to make their own choices.

Successful pricing strategies must also blend an understanding of market context and consumer expectations.  For instance, Kapp pointed to the differences between pricing expectations in Asia. In Taiwan “it is all about the deal” whereas in Japan price is highly correlated to quality.

Objectives First. Then Channels.

For brands pursuing international e-commerce expansion, it is important to first establish and prioritize objectives for your digital strategy.  Ask: Are we focused primarily on brand engagement?  Will the online channel be complementary to our other channels? Or is the real priority to satisfy our retail partners?

For global brands new to international e-commerce, Kapp suggested that they should try mini-sites and/or test marketing sites prior to committing to an e-commerce build-out.  In some cases this approach will offer more learnings more quickly than a “passive distribution” approach, which according to the J.C. Williams Group model means fulfilling international orders with little or no strategic planning or investment in the channel.

Kapp stressed that adding an e-commerce operation as a new channel of distribution is NOT the way to solve a brand’s problems.  Smart brands get the brand positioning right first and then engage consumers. After correctly positioning the brand among consumers, the next step is figuring out which channel makes the most sense.

Kapp’s closing point ─ the importance of having a clear strategy before building an e-commerce channel because resources will always be constrained ─ was a perfect set-up for George Hanson’s insights and suggestions.

The Global Balancing Act

Hanson prefaced his comments by stressing that organizational structure ultimately impacts the success of international merchandising.  Although planning collaboration is never finished, or as Hanson put it, “never optimized,” Lands’ End’s headquarters and its local in-country offices work very collaboratively and are always looking for the balance required for a 50/50 partnership.

One area where the balanced approach is paying dividends involves overcoming localization challenges. As we alluded to in a previous update on the JCWG study, overcoming localization barriers can consume significant organizational focus, especially regarding localizing marketing operations without departing from the brand.

Hanson stressed that appropriately leveraging local market knowledge is a key barrier to international expansion.  His team has found that establishing local expertise with native in-country talent is the way to go.  Along the way, Land’s End has found expats from corporate to be valuable (especially for the launch period), but Hanson advised retailers that expat input should be temporary.

Direct Collaboration: Us vs. Them Doesn’t Work

Given that Land’s End is a direct business, the creative elements of merchandising are very important, because the creative invites customers to interact with the brand.  Allocating creative control has been a key issue with the debate often revolving around determining the right mix of exporting the brand vs. supporting the unique needs for an international market.

Hanson touched on the importance of balanced collaboration by explaining that Lands’ End approach has evolved over the years.  The company has found that what works best prior to launching a product line is “all of us getting together and developing a global assortment strategy [and] at the end of the day we all agree on key themes and merchandise directions.”

Typically some themes need to be localized, but other directions, especially those unique to a market, are best left to the discretion of the local teams. For instance, the “creative” balance that works for Lands’ End is where locals drive marketing while corporate focuses on establishing brand standards and providing guidance.  When it comes to getting alignment on global merchandising assortment plans, especially for market specific products, it is crucial to let locals weigh in with the criteria.

In summary, Hanson offered the following take-aways:

• Executive leadership is critical for driving international growth.
• Balance the need to run fast with building the org structure to support the trek.
• Go native as quickly as possible when launching in a new country—locals know best.
• Due diligence is critical for new country entry— market, competition, legal, payment methods, and partnerships all need time and attention.
• Establish brand standards and a collaborative working culture.
• Align incentives and let the countries drive— and try not to get in the way.

A Quick Thanks to …

As we head towards the release of the international e-commerce benchmarking study September 23^rd at 3PM at the Annual Summit, the J.C. Williams Group would like to thank all the senior executives who joined us in the study, the international solution specialists who participated in workshops and briefing calls, our friends in the analyst community, the Shop.org team and of course, our sponsors, Access Technology Solutions and SafetyPay.

Thanks as well to Angela and George for sharing their experiences and insights with us.  If you’re interested in hearing more from them, Shop.org members can replay the webinar on demand.

Thanks,

The J. C. Williams Group

Given that many online retailers are still passively pursuing international opportunities, we’d like to draw from our initial international e-commerce research findings to offer one helpful way to think about localization. We’ll also share three insights about how to make sure localization initiatives are successful.

Localization: Not So Simple

Generally speaking, we’ve broken localization into two distinct categories ─ cultural and tactical localization. Cultural localization issues revolve primarily around consumer tastes and behaviors while tactical localization challenges encompass operational dynamics such as cross-border pricing discrepancies and region-specific regulations and/or policies.

Although we’ll dive deeper into the emerging localization best practices as we release the study’s findings at the Annual Summit, we’d like to share several key observations gleaned from the study.

Localize. Don’t Homogenize. Respecting cultural nuances will make a marked difference in your international conversion rates. Don’t assume that common languages mean similar cultural modes in different markets.  Don’t assume that what works in the U.S. will cross borders with the same degree of success.

For example, the credit card is the most popular payment type in the U.S. In Europe, the debit card is used far more extensively. In parts of Asia, installment billing can be quite popular.

Post-purchase consumer expectations vary widely as well. Given the worldwide footprint of the major shipping companies, one might think that using big domestic shippers provides the best “last mile” customer experience.

Yet often it is the local service providers that international customers know and trust. These relationships can really fuel word of mouth and help online brands build brand equity in new markets. In the U.K. for instance, Royal Mail is the customer’s shipper of choice. In Japan, local shippers like Sagawa Express and Yamato Transport use a wide range of options (including locals on bicycles) to literally provide white-glove service to online consumers.

Cookie-cutter best practices can crumble. Best practices in marketing can work quite well internationally. But be prepared to balance them with a deft touch of localization.

For example, given that seasonality and holidays are quite different across the globe, make sure to manage your marketing calendar with this in mind. Given the recent spikes of online buying ahead of holidays such as Mardi Gras, St. Patrick’s Day and Cinco de Mayo, planning ahead for ethnic holidays can be a big and often overlooked opportunity.

Different geographies also respond to promotional offers and messages differently (e.g. percentage off vs. dollars off). Canadians are more sensitive to the volume of promotional email than are their U.S. counterparts.

It’s very important to carefully balance localization priorities with “templated” best practices, especially those taken from more mature e-commerce markets.

Don’t try to boil the ocean. Localization is often a progressive exercise of trying, testing and learning. Accept that you’re not going to master every little thing. Ask for and accept help from local resources.

Perhaps most importantly, invest in comparative analytics and other tools that provide a better understanding of how consumer behavior and brand insights differ from market-to-market and from region-to-region.

What have you learned from your experiences with localization? We’d welcome your comments on the good, the bad and the ugly.

Join us August 12th for “Going Global – Merchandising for an Overseas Customer”

Please join the Shop.org community and Jim Okamura from the J.C. Williams Group on August 12th as he moderates Going Global – Merchandising for an Overseas Customer, a Shop.org webinar.

Joining Jim will be George Hanson, Senior Manager of International Strategy at Lands’ End and Angela Kapp, SVP – CRM & New Initiatives, The Estee Lauder Companies. Register here for the webinar and please stay in touch.

Thanks,

The J.C. Williams Group

We discussed this finding at the June Internet Retailer show with executives from a number of commerce platforms that primarily work with mid market retailers. The reaction was mixed.

Some validated the finding and others mentioned that they had seen an increased interest in international e-commerce capabilities in RFPs. A few admitted they hadn’t even looked at order-related data from their e-commerce clients that are shipping internationally.

One curious executive pulled together a data set that showed country-by-country destinations for all their platform clients’ international orders. Both the dollar volume of international orders ─ a seven-figure dollar total in a single month ─ and the broad global distribution was a surprise.

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Where Are International e-Commerce Orders Shipped?

The following charts break down the distribution of orders, first by region and then by the Top 10 country destinations.

Top destinations for international e-commerce orders (by regions).

Top 10 destinations for international e-commerce orders - by country

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Some observations:

<!–[if !supportLists]–>· <!–[endif]–>By only including orders shipped to a non-U.S. address, this data set doesn’t take into account international orders that were forwarded from U.S. shipping addresses maintained/serviced by international e-commerce solution providers and freight forwarders. This is a common way international customers receive goods from U.S. e-commerce sites.

<!–[if !supportLists]–>· <!–[endif]–>Although this is just a one-month snapshot, orders shipped by mid-sized retailers closely mirror the global distribution of all e-commerce orders (although Australian and French consumers seem to really enjoy shopping from the mid-market retail site and pure plays).

<!–[if !supportLists]–>· <!–[endif]–>Although e-commerce activity in emerging APAC markets is heating up, the UK alone generates 40% more e-commerce revenue than Japan, China and South Korea combined.

<!–[if !supportLists]–>· <!–[endif]–>When UK revenues stand apart from Western Europe, Canada (27%) accounts for almost as much revenue as the Western European countries combined.

<!–[if !supportLists]–>· <!–[endif]–>Australia is becoming an increasingly significant e-commerce market. This data point supports the conversations we’re having with senior international e-commerce executives.

<!–[if !supportLists]–>· <!–[endif]–>Japan generates slightly more e-commerce revenue than China although China’s growth is 3 to 4X that of Japan

This is one month of e-commerce orders totaling a seven figure aggregate dollar volume and therefore is a very small slice of the global e-commerce pie.

What does this data say to you?  What else are you seeing when you look at your international order volume?

Are you looking?

Thanks,

The J.C. Williams Group

P.S. We’re wrapping up the executive interview component of the study this month, so if you’re a senior retail executive in charge of, or involved with, international e-commerce and would like to join us, email jokamura@jcwg.com and kent.allen@researchtrust.com.

Regardless of how one ships internationally (freight forwarder, International cart, or do-it- yourself with a leading transportation carrier), pushing unexpectedly high international shipping costs onto the consumer can dramatically reduce conversion and repeat orders.

No real surprise there. High shipping costs are clearly a common pain point in the international customer experience, especially when commonly-used shipping calculators tabulate a much lower landed cost estimate for the end-consumer.

The day-to-day variance in the actual costs that domestic shippers (UPS, DHL, FedEx, USPS, Pitney Bowes, etc.) charge companies that ship direct to consumers can be startling. Ask around and you’ll hear horror stories about how the very same product arriving at the very same international destination costs $30 one-day and $109 the next ― for no apparent reason.

Nothing degrades the post-purchase experience quicker than duties and shipping /handling charges costing equal to or more than the cost of the product itself.

This frustrating variance in taxes, duties, customs clearance and related handling costs results in unhappy customers (when costs are passed on to recipients) and wasted resources spent by retailers (and their shipping partners) investigating the unexplained daily cost swings.

These costs may also be absorbed by international ecommerce solution providers who are using major commercial shippers for logistics instead of developing in-country solutions with regional players. Absorbing these costs makes their business model difficult to maintain. In the case of Comerxia, this contributed to a rapid and painful exit from the marketplace with more than a few unhappy retailers left in their wake.

What Works?

International shipping/logistics solutions where the customs clearing process offers shippers a competitive advantage instead of a costly headache can offer a win-win-win. International online shoppers buy more due to significantly lower landed costs, online retailers sell more products (and can trust that their customers receive a reasonable shipping rate and a good overall experience) and international ecommerce solution providers can run a long-term, profitable business.

The lessons today for online retailers and consumer brands shipping product internationally?

1. International e-commerce requires a lot more than just “flipping on the shipping switch” with their established domestic transportation partner. Even when these shipping partners can point to a global footprint, don’t assume this means they can deliver the same value (and operational focus) they deliver within the 48 states.

Relative to their domestic business, most domestic shippers aren’t yet shipping enough volume globally to justify the time and effort required to develop and maintain in-country, custom clearing partnerships in developing global ecommerce markets.

2. Make sure your shipping partner has built or is building dedicated distribution channels into global markets. As international ecommerce growth drives up international order volume, unbilled cost variances will cut painfully into the margins of shipping/logistics partners that simply outsource shipping to the major domestic carriers and rely on the “pre-bill” model (where the shipper has to absorb unexpected shipping variances).

It is true that building shipping and distribution channels into global markets from the ground up takes time and resources. But by establishing on-the -ground relationships with in-country custom clearing partners in global markets, international ecommerce solution providers and shipping/logistics partners can dramatically reduce costs and eliminate the unexplained ─ and unexpected ─ variances in shipping charges that drive international online shoppers crazy.

An added plus is that investing in these distribution and final mile relationships often leads to similar relationships in adjacent international markets that open new and cost effective trade routes to global consumers.

3. Shipping e-commerce and direct orders internationally doesn’t have to be expensive! Providing a total landed cost estimate is a very different from executing on that estimate. Today, control of the customs clearance process at the local level is poor at best. As the volume of international ecommerce shipping grows, online retailers that can tightly control the customs clearance process in their targeted global markets will emerge as the next engines of retail growth.

E-commerce sites and direct marketers that work with shipping/distribution partners that “own” direct channels into global markets will find that their landed costs drop dramatically, especially compared to what the major domestic carriers charge. Even when third party shipping partners receive volume discounts from these carriers, the landed costs charged by other shippers with proprietary distribution channels are still substantially lower.

On-the-ground relationships that smooth out the variances in the customs clearance process improve delivery times significantly and can dramatically lower costs.

Most importantly, by surpassing the expectations of the global consumer, the international e-commerce experience is vastly improved.

What has your international shipping experience been like to date? Let us know.

Thanks all,

The J C Williams Team

We’re a month into the International E-commerce Study that we’ll release at the ’09 Annual Summit.  A lot of retailers are asking, “Is now the time to take our e-commerce international?”

From helping retailers expand their e-commerce operations globally, we’re a little biased.  Now is definitely the time to push into global markets. 

Consider who has already gone global.  47% of Amazon’s net sales in ’08 originated from International Operations. Traditional luxury brands like Tiffany’s are sold on international expansion.  We’re seeing consumer brands with international recognition exploring e-commerce (and they’re far from being “traditional” retailers – much less online retailers).

On the other hand, eBags recently shut down its UK expansion, citing “the high cost of building a brand and an unfavorable exchange rate.”

If you’re not exploring where to go, what your market opportunity may be and what challenges you may encounter along the way, your competitor is.  In some cases, you don’t even know this competitor today.

“If the time is now, where do we go?” is the other recurring question.  “Europe? Asia-Pacific? Brazil is hot, right? What about China?”  Lots of different points of view on this ─ and good arguments on all fronts.

 What do you think?  We want to know which global markets are of most interest to your firm.

As we conduct the “going global” field research in the coming months, we want to make sure we’re covering the global e-commerce topics that are most important to you and your team.  We’ll weigh in with insights along the way. 

If you’d like to participate, give us a heads up.  Let us know how else we can to make it easy for you to weigh in and contribute. Tell us if you think we’re off-base ─ or when we need to dig deeper … or just move on. 

Thanks for contributing!

Jim Okamura (jokamura@jcwg.com)

Maris Daugherty (mdaugherty@jcwg.com)

Kent Allen (kent.allen@researchtrust.com)