Forrester Research, Inc., 60 Acorn Park Drive, Cambridge, MA 02140 USA Tel: +1 617.613.6000 | Fax: +1 617.613.5000 | www.forrester.com The Global eCommerce Opportunity by Zia Daniell Wigder, March 28, 2014 For: eBusiness & Channel Strategy Professionals KEY TAKEAWAYS eCommerce Globalization Is Still In The Early Stages Despite many companies’ desire to establish a global eCommerce footprint, most international expansion efforts are still at an early stage today. US and European brands’ initial expansion focus still largely remains each other’s markets, with regions such as Asia Pacific and Latin America coming later. Maturing eCommerce Ecosystems Are Driving Interest In Emerging Markets Global brands have tended to shy away from launching eCommerce offerings in markets where eCommerce ecosystems are in their infancy and partnerships are challenging to navigate. is situation is changing rapidly as more solution vendors make emerging markets a priority. eCommerce Companies’ Approach To Global Markets Has Shifted Today’s international expansion efforts look decidedly different than those in the past. Brands looking to expand globally today are more likely to employ an international shipping strategy as part of their approach, turn to marketplaces to sell their products, and use a single eCommerce platform to power all of their global websites.
Transcript
Forrester Research, Inc., 60 Acorn Park Drive, Cambridge, MA 02140 USA
The Global eCommerce Opportunityby Zia Daniell Wigder, March 28, 2014
For: eBusiness & Channel Strategy Professionals
KEY TAKEAWAYS
eCommerce Globalization Is Still In The Early StagesDespite many companies’ desire to establish a global eCommerce footprint, most international expansion efforts are still at an early stage today. US and European brands’ initial expansion focus still largely remains each other’s markets, with regions such as Asia Pacific and Latin America coming later.
Maturing eCommerce Ecosystems Are Driving Interest In Emerging MarketsGlobal brands have tended to shy away from launching eCommerce offerings in markets where eCommerce ecosystems are in their infancy and partnerships are challenging to navigate. This situation is changing rapidly as more solution vendors make emerging markets a priority.
eCommerce Companies’ Approach To Global Markets Has ShiftedToday’s international expansion efforts look decidedly different than those in the past. Brands looking to expand globally today are more likely to employ an international shipping strategy as part of their approach, turn to marketplaces to sell their products, and use a single eCommerce platform to power all of their global websites.
Gone are the days when most brands offered just one or two international sites: Today, a global eCommerce footprint is the end goal. To reach that goal, companies are taking a strategic look at the opportunities around the globe and balancing the size of each market with factors such as ease of entry and the competitive landscape. Their approaches have shifted substantially over the past few years and now take into account the new technologies and solutions available to help streamline market entry. In this report, we examine how eCommerce organizations are tackling global markets, where they’re falling short, and what they can do to maximize the opportunities abroad. This report updates our report of the same title that was originally published on April 17, 2013.
Table Of Contents
Brands Are Looking To Boost Their Global Footprint
For Many Global Brands, eCommerce Still Centers On North America And Europe
Markets Become More Attractive To Brands As eCommerce Ecosystems Mature
Today’s Global Expansion Looks Different Than In The Past
For Many eBusinesses, The Biggest Challenges Are Internal
RECOMMENDATIONS
Plan To Be In The Globalization Game For The Long Haul
Notes & Resources
We used data from Forrester’s online retail forecasts in the writing of this report.
Related Research Documents
Asia Pacific Online Retail Forecast, 2013 To 2018November 26, 2013
European Online Retail Forecast, 2012 To 2017March 13, 2013
US Online Retail Forecast, 2012 To 2017March 13, 2013
The Global eCommerce OpportunityLandscape: The eCommerce Globalization Playbookby Zia Daniell Wigderwith Martin Gill, Lily Varon, and Rebecca Katz
BRANDS ARE LOOKING TO BOOST THEIR GLOBAL FOOTPRINT
International expansion is top of mind for many eBusiness executives: In a recent survey of US-based online retailers, 75% of respondents ranked international expansion as either “very important” or “somewhat important” to their overall business strategies.1 Yet in many ways, most eBusinesses are at a very early stage of global expansion. Few see more than half of their revenues coming from international markets — companies like Asos.com and eBay Marketplaces that take in roughly 60% of their revenues from outside their home markets are the exception rather than the rule.2 Indeed, for the majority of brands, international eCommerce revenues are limited today but growing.
For Many Global Brands, eCommerce Still Centers On North America And Europe
Many global brands today still take a very US- and Europe-centric approach to international expansion. With the US online retail market expected to reach $291 billion and Europe forecast to reach €143 billion ($199 billion) this year, these two regions represent a large percentage of the overall market (see Figure 1). Yet other regions of the world, including markets such as China and Brazil, are charging ahead with eCommerce at far faster growth rates than those of the US or Europe; China’s projected $373 billion eCommerce market this year will surpass that of Europe by a wide margin.3
We can summarize companies’ approaches to these different regions as follows:
■ North American and European businesses tend to look at each other’s regions first. It’s rare to find US and European brands that do not expand into each other’s market first with an eCommerce offering. In both regions, it’s not just a matter of market size and the eCommerce ecosystems being well developed; it’s also the fact that channel conflict is less of an issue than it is in other parts of the world. In both North America and the leading markets of Western Europe, the paradigm of brands selling direct is well established. Additionally, the geographic proximity of European markets to each other makes it relatively easy to serve multiple markets from a centrally located warehouse — even those markets in Central Europe. US and UK online retailers are also prone to expanding to each other’s countries given the common language: UK eCommerce players such as Asos, Boden, and Topshop have made the US a big component of their international expansion efforts.
■ Asia Pacific is top of mind for leading brands. In the past, it was most common to see global brands offering a single website in Asia Pacific, generally for Japan. Increasingly, however, brands are adding China, South Korea, and Australia to their offerings. Some are even foregoing European offerings in favor of ones that focus on Asia Pacific: At Coach, for example, eCommerce sites were available for China, Japan, and North America before Europe. For many brands with aspirations in China, a brand store on Tmall may precede a traditional B2C eCommerce offering, as many brands view a Tmall entry strategy as a relatively easy way to gain insights into the market before investing further.
■ Latin America is rising in importance. Latin America is increasingly hitting the radar of global brands selling online: Wal-Mart recently launched eCommerce in Mexico, for example, while a wide variety of global brands — ranging from Netflix to The North Face — sell in Brazil. Brazil tends to be the first market for online retailers, as its $19 billion market size currently dwarfs others in the region; the country also remains the one major market in Latin America where online shopping has extended well into the middle class. Global brands tend to prioritize Brazil and Mexico as the two regional powers, yet they are starting to take notice of other online markets in the region: Germany’s adidas, for example, sells direct in Colombia as well as Brazil.
■ More brands are looking to the Middle East and Africa. While global consumer technology giants like Dell and Microsoft have operated websites in these regions for years, companies in later-adopter categories such as apparel are taking greater notice of the eCommerce opportunity in these two areas. Most companies interested in the region target the rapidly growing and wealthy markets of the Gulf States in the Middle East first; Burberry, for example, now operates eCommerce websites for the United Arab Emirates (UAE), Kuwait, and Qatar. Many brands, however, have not yet made the leap to offering localized sites for the region, due largely to the relatively small markets in the region and the complication of shifting site navigation to right-to-left languages such as Arabic and Hebrew. In Africa, most global brands continue to focus on South Africa, although infrastructure issues and payments in the country — while improving — remain a hurdle to eCommerce adoption.
Figure 1 Projected Online Retail Sales For 2014: The US And China Lead eCommerce
Source: Forrester Research, Inc.94042
Projected online retail sales for 2014
US$291B Europe
€143B ($199B)
Mexico (incl. C2C)$2.8B
Japan$66B
Brazil (incl. C2C)$19B
India (incl. C2C)$3.2B
China (incl. C2C)$373B
Argentina (incl. C2C)$3.3B
Source: Forrester Research Online Retail Forecast, 2012 To 2017 (US); Forrester Research Online RetailForecast, 2012 To 2017 (Western Europe); Forrester Research Online Retail Forecast, 2013 To 2018(Latin America); and Forrester Research Online Retail Forecast, 2013 To 2018 (Asia Paci�c)
Markets Become More Attractive To Brands As eCommerce Ecosystems Mature
Technology developments such as increased broadband and mobile penetration drive more consumers online. Yet a mature eCommerce ecosystem is equally critical to making companies willing to explore and invest in new markets. The following developments are now driving more businesses to expand into newer, developing eCommerce markets.
■ eCommerce platform providers are extending their capabilities in emerging markets. Leading eCommerce platforms have aimed to stay one step ahead of global brands’ expansion efforts. Not surprisingly, many of these platforms first focused on Europe and North America, with only a handful establishing a strong presence in emerging markets early on. Over the past few years, however, a presence in markets such as China and Brazil has moved from being a nice-to-have to being a must-have for leading eCommerce solutions. As a growing
number of platforms accommodate local needs, such as installment payments in Brazil or unique customer service requirements in China, they are better able to help global brands compete with local retailers that offer such services. Vendors such as Demandware, hybris, IBM WebSphere, Intershop Communications, and Oracle ATG have all made global capabilities a key component of their offerings.4
■ Payment service providers are streamlining the addition of new payment types. In addition to eCommerce platforms being able to support a wider variety of markets, a growing number of payment service providers are helping retailers ensure they offer the payment types that online shoppers prefer. It’s unlikely that there is any area beyond language that is more important to localize than payments. The way consumers prefer to pay online varies greatly, with a number of unique permutations: For example, a number of local eWallet solutions exist throughout the emerging markets, ranging from Alipay and Tenpay in China to WebMoney and Yandex.Money in Russia to cashU in the Middle East. In Brazil, the preferred alternative payment method is the boleto bancário, a printable, bar-coded invoice. Vendors such as Adyen, CyberSource, Digital River World Payments, GlobalCollect, and WorldPay are helping retailers streamline the addition of a wide variety of new payment types.
■ Logistics providers are building out networks. As well as using the existing logistics infrastructure, it’s now quite common for retailers to build their own logistics networks: In China, for example, Jingdong and many others operate their own logistics networks. Increasingly, retailers are also looking to leverage these networks to launch logistics services for others. Those retailers that have taken the time to invest in their own delivery networks are well aware of what a valuable asset these networks are, particularly in emerging eCommerce markets where it can be challenging to reach consumers in remote areas of the country. In Russia, for example, leading online retailer Ozon offers O-Courier; in India, Rocket-Internet-funded Jabong.com launched its own third-party logistics offering GoJaVAS.
TODAY’S GLOBAL EXPANSION LOOKS DIFFERENT THAN IN THE PAST
Successful global initiatives have eluded many companies: Operating in new countries requires companies to understand shoppers with different demands and to navigate new sets of rules and regulations. It’s therefore not surprising that many eCommerce organizations have tiptoed rather than run into new international markets.
In just a few years, however, the landscape of global eCommerce has shifted. As recently as 2008, the types of companies that sold online internationally were different, as were their approaches (see Figure 2). What has changed in these five years?
■ Companies across all categories are now expanding aggressively online. Traditionally, consumer technology companies have had the broadest international eCommerce footprint. The fact that consumer technology companies have expanded rapidly internationally — and that their products are often some of the first that consumers purchase online — means that this category has thrived.5 Companies such as Dell and Symantec offer online stores in dozens of markets around the globe. By contrast, brands in other categories, such as apparel, have tended to be more conservative in their global approach, focusing on the well-established eCommerce markets of the US, Europe, and Japan. Increasingly, however, global brands across all categories are turning on eCommerce capabilities in more regions of the world, often mirroring their offline presence. Even online grocery retailers — known to have some of the most complex logistics — are becoming increasingly aggressive with their global eCommerce sites. Tesco, for example, operates transactional websites in markets such as Poland, Ireland, and South Korea.
■ Brands are adding a more diverse set of countries to their lists. As discussed above, global expansion has traditionally been a crawl rather than a run, especially among US and European brands. Many Asian brands, too, stayed close to home, often focusing exclusively on their own domestic markets. Now, however, brands are increasingly turning their attention to a much broader group of global markets. It is no longer uncommon to find global brands with eCommerce operations in North America, Europe, Asia Pacific, and Latin America. Brands like Puma, for example, offer eCommerce across all four of these continents, as does Amazon.com (albeit with different business models that reflect the local environment). Asia-based brands are also expanding internationally: Japan’s Uniqlo, for example, operates eCommerce sites in markets across Asia, Europe, and North America, while China’s Vancl has launched an English-language version as well as a website for Vietnam.
■ Businesses are increasingly relying on international shipping to reach consumers. Today, a common way for brands to test the international waters and supplement their existing global eCommerce sites is to ship internationally. Almost half of all online retailers in the US said they shipped internationally using one of the major carriers (see Figure 3). eCommerce giants Amazon and eBay offer extensive international shipping programs, while an increasing number of other brands also employ shipping to reach global online shoppers. A growing number of brands — ranging from Ann Taylor to Crate and Barrel to Macy’s — rely on vendors like Borderfree (formerly FiftyOne) in the US to manage their global logistics: The percentage of online retailers using one of these vendors increased from 19% in 2010 to 29% in 2012.6
■ Brands are turning to marketplaces as an option to enter new markets. Another shift in brands’ international expansion efforts is an increased focus on marketplaces — either as a market-entry strategy or as a supplement to a traditional B2C eCommerce site (see Figure 4). The one market where this approach is extremely common is China, where Tmall’s dominance of the B2C market means it has become a common way for brands to enter the market. Taobao did not create Tmall as a marketplace for brands until 2008 and only launched Tmall as a
website separate from Taobao in 2010, yet the site has seen phenomenal growth, with global brands ranging from Levi’s to Nike to Samsung, since then. In other markets, marketplace options are less commonly used by global brands, but they are growing in popularity. Options range from Amazon to eBay to Rakuten as well as emerging offerings like MercadoLibre’s brand stores in Latin America. Marketplaces offer brands a templated, relatively easy way of selling to international consumers, even though some of the limitations of these marketplaces constrain a brand’s creativity. They also provide small sellers with the potential to reach global consumers.
■ Companies are relying on a single platform to power all global sites. Another shift is to using a single eCommerce platform for all global sites. In the past, it was not uncommon to find brands using a different platform for their domestic site than for their global ones. This wasn’t by design — rather, it was generally due to the fact that companies wanted to move forward aggressively with global offerings but found their domestic platform limited in global capabilities. The lack of technology partners that can support them has had a major impact on eBusinesses’ ability to expand internationally (see Figure 5). Today, however, brands have a better sense of their current and future global needs and are selecting eCommerce solutions based on these needs. Increasingly, brands will operate all of their global websites on a single platform that can be managed more easily than in the past.
■ Organizations are carefully straddling centralized versus localized control. The final way in which companies have adapted their global strategies is in their approach to how they staff their global eCommerce operations. Global companies have struggled to find a balance between centralization and localization: They have tended to either over-centralize, leading to poorly localized global sites, or to over-localize, leading to challenges such as inconsistent brand experiences.7 Today, companies are aiming to maintain some centralized control over global websites while ensuring that their sites are sufficiently localized to resonate with local audiences. Many brands today are establishing global templates for websites with key areas that can be localized — such as language and currency, as well as promotions and payment types.
Figure 2 Today’s Globalization Efforts Differ From Those In The Past
Source: Forrester Research, Inc.94042
Typical globalization in the past(through 2008)
Typical globalization today(2013 and beyond)
Limited, with companies generallyonly using standard mail carriers
Rarely if ever Heavy reliance on marketplaces inAsia with the greatest focus onTmall in China; more limited butgaining momentum in North America,Europe
Different eCommerce platforms arecommonplace for each country orregion.
Companies are migrating to oralready using a single platform forall global websites.
Binary: either largely decentralized(e.g., each local of�ce isresponsible for the local website) orlargely centralized (e.g.,headquarters has complete controlover all websites)
Hybrid model whereby websites allrun on a single global platformthat is managed centrally, butlocal of�ces provide extensiveinput to ensure the offering meetslocal requirements
How extensive is internationalshipping?
How extensively do brands usemarketplaces to sell theirproducts?
What is the typical eCommerceplatform approach?
What staf�ng model arecompanies using?
Commonplace, with much greaterreliance in the US on partners likeBorderfree and InternationalCheckout
Mostly consumer technologybrands
Which types of brands haveembraced eCommerce aroundthe globe?
All categories, ranging from apparelto grocery to travel
• For US brands: Canada and theUK. Some focus on other largeEuropean markets and Japan.
• For European brands: otherEuropean markets, NorthAmerica, and Japan
• For Asian brands: largely theirown markets
• Much greater focus by all globalbrands on launching eCommercesites across Asia Paci�c, includingChina and Australia
• Heavy focus on Brazil in LatinAmerica, with Mexico attractingincreased interest
• Increased focus on smallerEuropean markets as well as Centraland Eastern Europe
FOR MANY EBUSINESSES, THE BIGGEST CHALLENGES ARE INTERNAL
Brands looking to expand internationally face the usual litany of external problems to overcome, from stiff competition to infrastructure challenges and regulatory issues. Yet for many businesses, internal hurdles are often the hardest to surmount; they threaten the success of their global businesses even more than external ones. Beyond core issues such as channel conflict are factors that many eBusiness executives can influence. Three key mistakes that threaten to trip up organizations’ global efforts are:
■ Building unreasonable ROI scenarios. Perhaps the biggest mistake companies make when preparing for global initiatives is not planning for just how long it takes for these initiatives to be profitable. In a recent survey, almost half of all B2C respondents indicated that they expected to see a return on their investment in new global initiatives within one year — a nearly unattainable goal for most companies; some 37% of B2C businesses and 53% of B2B businesses said they expected payback in one to two years — also a challenging time frame (see Figure 6). Just 11% of B2C and 16% of B2B companies indicated that they expected to see payback in three to five years, a time frame that many experienced online retailers cite as most accurately reflecting their experience.
■ Failing to devote sufficient resources to new global efforts. Another common mistake is for companies to try to enter global markets with small teams or with funds that fail to cover the cost of competing in the new market. In China, many global brands operate websites that resemble stripped-down versions of what they offer in the US or Europe — despite the fact that China is a massive eCommerce market with sophisticated local players. Many even fail to employ localization best practices — such as ensuring that sites compensate for the fact that languages like Chinese and Korean take up less text space than English. Companies serious about competing in a market like China will need to devote resources in line with the market’s size and potential.
■ Not hiring in advance for globalization. Finally, many brands — particularly those with a traditionally domestic focus — are interested in expanding internationally yet have little in-house expertise in markets other than their own. Savvier brands have started to bring in talent from multiple regions of the world. A more global team not only provides more diverse perspectives that can lead to innovation but can also help companies with new market entries. Those companies that have leaders with experience in key new global markets can tap those leaders for insights — they are in the enviable position of having not just market expertise but of being able to combine that with knowledge of the corporate culture.
Figure 6 eBusiness Pros Set Themselves A Challenging ROI Time Frame For New eBusiness Efforts
Source: Forrester Research, Inc.94042
Base: 66 eBusiness and channel strategy professionals(percentages may not total 100 because of rounding)
Source: May 2012 Global eBusiness And Channel Strategy Professional Online Survey
B2CB2B
“When you launch an eBusiness effort in a new market, how quickly do you expectto see a return on the investment?”
Within the �rst 12 months of operation
Within one to two years
Within three to �ve years
Relatively quickly in mature eBusinessmarkets, but longer in developing ones
46%
37%
11%
6%
21%
53%
16%
11%
R E C O M M E N D AT I O N S
PLAN TO BE IN THE GLOBALIZATION GAME FOR THE LONG HAUL
Brands today are increasingly realizing that they can’t put all of their eCommerce eggs in one geographic basket: To do so is more risky than diversifying. Yet many are not thinking in the right way about global expansion. To succeed internationally, eBusinesses should:
■ Consider assessing the opportunity in a low-risk way first. Companies that already sell offline in global markets have a solid understanding of how their brand resonates and which products sell best. Those companies that have not yet sold to international consumers may want to take a lower-cost, lower-risk route, such as international shipping, to gauge the demand for their products prior to making an investment in local infrastructure. Likewise, companies entering complex eCommerce markets like China may want to explore an option such as Tmall to learn more about the competitive online environment before making a bigger investment.
■ Build enough time into ROI scenarios. Nothing kills a global business faster than the expectation that the business will pay for itself with new revenues in a short period of time. Brands launching direct-to-consumer websites, for example, will be competing against much more established channel partners selling their products; online retailers launching for the first time in a new market will have to build a brand from scratch. Both of these
initiatives will take time. Don’t expect a new global business to be profitable in the first one to two years, particularly in emerging eCommerce markets where conversion rates are lower than in mature markets and you may need to make more extensive adaptations to the business in order to compete.
■ Extend best practices — and best tools and features — into global markets. Brands are routinely tempted to launch in new markets with little more than the basics. This approach is particularly apparent in emerging markets, where it’s challenging enough just to get an online business launched. Yet by leaving behind best practices in areas such as ratings and reviews or product recommendations, brands are missing out on an opportunity to differentiate themselves from the competition. Take the time to understand local user behavior and ensure that as you expand into new global markets, you bring with you tools and features that can help win over local users and provide an experience that your competitors don’t.
ENDNOTES1 For more on metrics on online retail global initiatives, see the January 29, 2013, “The State Of Retailing
Online 2011: Merchandising, Headcount, And Global Strategies” report.
2 Source: Sarah Butler, “Asos enjoys 37% rise in sales,” The Guardian, March 20, 2013 (http://www.guardian.co.uk/business/2013/mar/20/asos-enjoys-rise-in-sales) and “eBay Inc. Reports Strong Fourth Quarter and Full Year 2012 Results,” eBay press release, January 16, 2013 (http://investor.ebayinc.com/releaseDetail.cfm?ReleaseID=733959%20).
3 Source: Forrester Research Online Retail Forecast, 2012 To 2017 (US); Forrester Research Online Retail Forecast, 2012 To 2017 (Western Europe); Forrester Research Online Retail Forecast, 2013 To 2018 (Latin America); and Forrester Research Online Retail Forecast, 2013 To 2018 (Asia Pacific).
For more on the size of global online retail markets, see the November 26, 2013, “Asia Pacific Online Retail Forecast, 2013 To 2018” report, see the March 13, 2013, “US Online Retail Forecast, 2012 To 2017” report, and see the March 13, 2013, “European Online Retail Forecast, 2012 To 2017” report.
4 For more on how eCommerce solution providers performed in an assessment of their globalization capabilities, see the September 24, 2012, “The Forrester Wave™: B2C Commerce Suites, Q3 2012” report.
5 For more on the four phases that markets pass through on the path to eCommerce maturity, see the June 25, 2013, “The Evolution Of Global eCommerce Markets” report.
6 For more on how online retailers are servicing international customers, see the October 28, 2010, “The State Of Retailing Online 2010: Key Metrics And Multichannel And Global Strategies” and see the January 29, 2013, “The State Of Retailing Online 2011: Merchandising, Headcount, And Global Strategies” report.
7 For more on how companies are dividing up their central and local responsibilities, see the November 29, 2010, “Staffing For Effective eBusiness Globalization” report.
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