December 22, 2010
Nearly one year ago, I asserted that the global economic downturn had not slowed the international expansion of eCommerce initiatives. In 2010, online retailers continued their push into new global markets: Gap launched eCommerce sites in the UK and China while starting to ship internationally to other markets; Amazon launched its first new localized Web site in six years; Zara went live with eCommerce sites in six European markets.
The push toward global expansion is poised to continue in 2011, with few companies suggesting that international markets will represent a decreasing percentage of revenues in the future. And while Canada and the UK still rank as the top destinations for US online retailers operating abroad, it’s not just the markets of North America and Europe that are attracting attention. Indeed, companies increasingly cite emerging markets as key to long-term growth. A survey of business executives just released in the McKinsey Quarterly indicates that more than 75% of those surveyed expect to see revenues from emerging markets within the next five years; more than one-third of companies expect those revenues to represent more than 25% of the total.
Looking forward to 2011, we expect to see the following trends:
- International shipping options will be increasingly commonplace. The arrival of a variety of solutions that enable online retailers to ship worldwide means that more and more retailers are using shipping to reach online consumers around the globe. Indeed, my colleague Sucharita's report on the State Of Retailing Online 2010 showed international shipping to be by far the most popular way US online retailers are reaching international consumers. We’ve started interviews to update a report we did back in 2009 that looked at some of the global shipping options for online retailers — stay tuned for a report that will look at vendors like FiftyOne, Bongo International, International Checkout, Borderfree and several others, as well as the solutions provided by international shipping carriers like UPS and FedEx.
- Companies will leverage their domestic infrastructure before going fully global. International expansion used to be largely an all-or-nothing approach, with companies either remaining focused on their domestic market or investing vast sums in new localized sites and warehousing facilities abroad. By contrast, an approach that’s gained traction recently has involved leveraging domestic infrastructure as long as possible until international revenues merit increased investment abroad. UK-based online retailer Boden, for example, had a dedicated Web site for the US but didn’t establish a warehouse and customer care facility in the US until one-third of its turnover came from the US market. Similarly, US companies are looking to international shipping solutions to help build (and gauge) demand in international markets before investing more extensively. Companies like Threadless now offer site content in languages other than English but fulfill orders from the US.
- eBusiness globalization departments will continue to be centralized. Many US companies over the years were taken to task for not adapting to local preferences and needs — companies responded by pushing responsibilities and operations out to local offices. Management difficulties ensued, however, resulting in a recentralization of responsibilities. eBusinesses today are now looking to a new type of centralized model that leverages efficiencies enabled by improved eCommerce technologies but also takes into consideration the unique nuances of each global market. We discuss this topic in greater detail in the recently published report on Staffing for Effective eBusiness Globalization.
- China will be top of mind for many eBusinesses. Over the past two years, a large percentage of the inquiries we fielded on eCommerce in Asia focused on Japan. Increasingly, however, China has been the market that eBusinesses are most interested in understanding as they look to tap into online consumers in Asia. Indeed, with the world’s largest online population and a nearly $50 billion consumer eCommerce market (growing at a CAGR of more than 25% over the next five years), China is the one eCommerce market poised to rival that of the US longer term. And with a small but growing traditional B2C online retail sector, the supply side in China is evolving rapidly. Within the next month, we’ll be publishing a summary of some key eCommerce trends in this burgeoning but incredibly complex market.
- Brazil will also be on the radar of eBusinesses expanding internationally. While Brazil was frequently cited as one of the most promising markets back in the early days of eCommerce, investment in eCommerce largely came from local Brazilian retailers rather than their counterparts abroad. Aside from a handful of online retailers in the technology space (e.g., Dell, Symantec), few leading US online retailers launched localized sites for online consumers in Brazil. Wal-Mart bucked the trend with an eCommerce launch in the country in 2008; in 2010, Sephora acquired 70% of Brazilian online retailer Sack’s. The next 12 months will likely bring in increased interest in this rapidly growing market — in Q1 2011 we'll be publishing an online retail forecast that will include category growth in Brazil over the next five years.
2011 should be an exciting year in global eCommerce — we look forward to hearing more from eBusinesses expanding their global footprint, as well as from those helping these businesses succeed.