As UK fashion businesses such as My-Wardrobe and Asos begin to ramp up their online presence overseas, we examine the benefits - and challenges - of international ecommerce
The recent news that premium etailer My-Wardrobe is to expand into France and Germany in 2011 will have many retailers thinking about international expansion online. The potential of international markets can be vast but research into new countries is vital, as is a clear strategy to ensure these retailers are at the forefront of international markets.
Online sales in Europe may not have reached the heights of the UK - where the market is expected to be worth £57bn in 2010, up from £49.8bn last year according to etail trade body IMRG - but they are growing nonetheless. Ecommerce sales in France reached €6.88bn (£5.87bn) in the second quarter of 2010, compared with €5.24bn (£4.45bn) during the same period the previous year, according to French technology consultancy Acsel, and online sales in Germany are about €15.5bn (£13.1bn) according to retail consultancy GfK Group.
My-Wardrobe will soft launch into France and Germany using the www.my-wardrobe.com platform, rather than following Asos’s example earlier this year and launching specific .fr and .de sites, as it wanted to deepen its understanding of the markets before investing in new sites. By bringing in local PR and digital agencies that understand the language and culture of each country, My-Wardrobe is hoping to develop a comprehensive understanding of potential customers in those territories.
The issue of whether to launch specific sites or use an existing platform is one that etailers must examine carefully. According to a report by market research firm Forrester Research, 40% of UK online shoppers have bought from a foreign website, compared with just 21% of Germans and 23% of French shoppers.
The main online markets etailers are prioritising for launch are the US, UK and Europe, which are worth about $221bn (£137.5bn), £57bn and €172bn (£145.9bn) respectively, accordingly to digital marketing firm Econsultancy. Attention is also being paid to India and Asia - Japan has the most m-commerce users, totalling 58% of the global market, according to etail consultancy IMR World. Before looking at specific channels like mobile, retailers must be aware of who is shopping online and where.
A report by research firm Nielsen Online shows that in the UK, Germany and Japan, 97% of web users make purchases online. Nielsen also states that, globally, the largest category in terms of volume of online purchases is books, with fashion, the fastest-growing category, coming second.
Understanding the locals
As for the popularity of shopping online, internet market research company eMarketer says Germany, France and the UK have the highest shopping site audience in Western Europe, which confirms the suitability of My-Wardrobe and Asos’s move into these countries.
To create a buzz around its French launch, Asos used clever, localised marketing initiatives - for example, by offering free delivery on Bastille Day, a national holiday. This country-specific knowledge will not only encourage sales but also build trust in a brand that has done its research. To aggressively enter these markets, PR and marketing campaigns are needed to create brand awareness, while companies must understand their new customers’ etail preferences, such as preferred web browsers.
A report in June from research consultancy FreshMinds, called Multi-channel Matters: a Route to Next Generation Retailing, looked into the challenges etailers can face when entering particular countries. These include “unsophisticated transport infrastructure” in emerging markets or countries where the online market is still relatively immature, and payment preferences. For example, in Poland credit card uptake is low and the majority of transactions are made in cash, meaning customers prefer to buy online and collect in-store.
Brazil is also on retailers’ radars, but it has its own challenges. The Brazilian ecommerce market was worth R$10.5bn (£3.79bn) in 2009 according to eMarketer, but Brazilian corporate and tax laws are so complex it makes sense to recruit an expert before entering the country. Andrew Robb, chief operating officer at etailer Farfetch.com, explains: “There are many challenges to generating revenue in Brazil: huge import tariffs make selling from the UK uncompetitive, and the other option of setting up in Brazil requires dealing with the difficult corporate law and tax system. A national Brazilian representative or manager is essential.”
However, Brazil’s clothing and textile industry grew in January to $51bn (£33bn) compared with $47bn (£30bn) the previous year, so it’s definitely a market to look into.
One fashion brand that has an established international presence is Ben Sherman. With local versions of its site for the UK, US, Germany, Switzerland and Australia, Ben Sherman specifically targets each audience in their own language and with a range of payment methods. A recent report by Martin Newman, chief executive of ecommerce consultancy Practicology, showed that 46% of Germans use online banking transfers when buying online and retailers must consider this if they are to appeal to the German shopper.
Newman says: “Ben Sherman was selling more to Germany, Austria and Switzerland than the UK because it had a separate direct-to-consumer business online being run by a licensee. The site was in the local language, it had local payment methods such as ELV (direct debit and bank transfer) and had product aimed at the local market. The more the retailer tailors its customer proposition to the needs of the local market customer, the more successful its site will be in that country.”
Other back-end developments need to be taken into account to have fully efficient processes ready for the international market, but Roger Burns, business development director of fashion at logistics provider DHL Supply Chain, says the FreshMinds research shows this can be overlooked. “The report reveals that some UK retailers prioritise investments in front-end point-of-sale improvements rather than back-end processes like stock availability, leaving them unprepared for international markets.”
Even technical requirements can differ from country to country. Some 38% of French customers say their favourite benefit of online shopping is the ability to compare products, while 34% of Germans like the speed and efficiency of online shopping, according to ecommerce specialist ATG’s Consumer Survey, which looked at consumer buying behaviour across Europe. As Chris Bishop, managing director at digital marketing agency 7ThingsMedia, explains: “The website needs to be local in every essence - not just a replica of the UK website with a currency converter.”
Average customer spend also needs to be investigated to give retailers an idea of whether a market is right for their offer. US consumers spend an average of $550 (£342) per year online, while in Norway the figure is €1,203 (£1,000), according to etail intelligence firm IMR World. One in 14 Brits spend more than £5,000 in one transaction online, according to ATG’s Consumer Survey.
With the British Fashion Council estimating the UK fashion market is now worth nearly £21bn, and IMRG and ONS figures stating that ecommerce represents about 18% of total retail sales, the UK market is booming. The amount of time spent online is rapidly growing, and as more retailers hit the web, shopping online is only set to grow in popularity.
The etail opportunities available internationally are huge, and with the right strategy retailers can gain mass exposure to untapped markets. Detailed research into a target country and the potential customer base will ensure etailers succeed overseas.
Proportion of web users in UK, Germany and Japan that make purchases online
Value of etail market in Europe
Proportion of UK online shoppers that have bought from a foreign website