Many consumers around the world are shopping on retail websites outside their home countries, looking for goods they can’t find at home, better prices or products they trust. Meanwhile, retailers and brands increasingly are seeking to serve these global shoppers, and the prospects for growing sales and profits from international e-commerce have never been greater.
While it is still early days for international e-commerce for many North American retailers, merchants and brands report that selling globally via the internet is easier than ever. Among the factors opening the door to international web sales are the growth of online marketplaces that provide an avenue to reach millions of shoppers, improved services from vendors for handling everything from customs clearance to fulfillment and the growing comfort among shoppers the world over in shopping online.
Retailers are affirming the promise of international e-commerce both by what they do and what they say. Several leading North American brands and retailers have expanded their international and cross-border operations in the past year. And many see global expansion as an important source of growth, according to a survey earlier this year of 111 retailers and brands by Internet Retailer and the Global E-Commerce Leaders Forum, an organization dedicated to helping retailers and brands sell internationally via e-commerce.
Nearly 48% of survey respondents reported 2017 growth in overseas web sales of at least 15%. And 80% of respondents called international e-commerce “a critical source of our e-commerce growth in the future.”
The survey sample was not scientific and likely skewed toward companies investing in international online sales, given that 80% of survey respondents sell online outside of their own market while only about half of Top 1000 retailers do so.
What’s more, answers to one survey question suggest bigger brands may have an edge: 78% of respondents called international online sales “suitable for us because we have many international customers and followers of our brand and products.” That underscores that the retailers and brands likely to have the most success selling globally are those that many online shoppers already know or are finding through search engines or social media.
New customs fees
Whatever their size, companies face obstacles when they sell internationally. Survey respondents pointed to such hurdles as regulations that vary by country on product safety, marketing practices, customs and taxes. Language, customer service and fulfillment all present challenges, they say. And there is a relatively new factor: More governments are tightening customs regulations or introducing new fees as they see more parcels arriving for their citizens from international websites.
But some North American retailers are tackling those hurdles with major investments. Here are four recent examples:
- Amazon.com Inc. launched a web store in Australia in December, its 13th e-commerce site outside the U.S. Amazon.com.au is one of 10 Amazon non-U.S. sites that operate marketplaces where other retailers and brands can sell. In April, the retailer also updated its mobile app with an international mode that lets consumers shop in five languages and pay with 25 currencies.
- Wayfair Inc., the fast-growing home goods online retailer, has launched websites in recent years in Canada, the United Kingdom and Germany. Those sites generated $446.6 million in sales in the first half of 2018, or 14.6% of the company’s net revenue, up from 11.0% a year earlier.
- Benefit Cosmetics LLC, the San Francisco-based unit of French luxury conglomerate LVMH, has expanded to 42 global e-commerce sites that let consumers shop in their own languages and pay with local currencies. The cosmetics brand says it has nearly doubled the number of consumers it interacts with online in the last two years since expanding internationally.
- Walmart Inc. in May paid $16 billion to acquire a 77% stake in Flipkart Group, operator of India’s leading online retailer and marketplace. That puts Walmart into competition with Flipkart’s biggest rival, Amazon, which has pledged to invest $5 billion in India. While Amazon hasn’t disclosed sales for its India site, Internet Retailer estimates consumers purchased $10.3 billion worth of goods on Amazon.in in 2017.
These moves underscore the allure of international e-commerce, which already represents big business for Top 1000 retailers. 72 retailers in the Top 1000 operate a total of 295 country-specific e-commerce sites outside of the U.S. and Canada that together booked $109.9 billion in sales in 2017.
Those sales numbers, however, are skewed by Amazon, which operates 12 e-commerce sites outside of the U.S. and Canada, nine of them with online marketplaces where other merchants and brands can sell.
Most of those sales took place on Amazon’s international sites, which, counting Amazon’s Canada site, accounted for $76.2 billion in revenue by Internet Retailer’s estimate. That’s just over half of Amazon’s retail-related 2017 revenue (sales of goods by Amazon itself plus commission from marketplace sellers). Not counting Canada, Amazon’s international sales totaled $73.2 billion, Internet Retailer estimates, or 48.8% of its retail-related revenue. (Amazon does not break out sales by country.)
But, even without Amazon, other U.S. Top 1000 e-retailers generated $28.5 billion in 2017 web sales from outside of North America, nearly 9% of their web sales, based on Internet Retailer data.
For all U.S. Top 1000 e-retailers, including Amazon, Europe led the way with 118 country-specific sites that produced $47.4 billion in revenue, followed by Asia-Pacific with 63 sites and $49.9 billion in sales. Outside of the U.S., Top 1000 retailers operated the largest number of sites in Canada (33), followed by the United Kingdom (32) and Germany (17). However, Japan led in 2017 sales, followed by Germany, the U.K. and China.
Key global targets
The Internet Retailer/GELF survey confirmed that Canada, Western Europe and Asia-Pacific represent the key international priorities for retailers and brands. Within the Asia-Pacific region, Australia and New Zealand were the most important countries to the greatest number of retailer respondents, as 41.2% of respondents said those countries represent at least 1% of their international e-commerce sales. The fact Australia and New Zealand are English-speaking countries could reduce some barriers to entry, but the survey did not address specific reasons. Next were China at 36.5% and Japan at 28.4%. South Korea and Southeast Asia followed, both at 18.9%.
But there are other ways to reach international online shoppers besides operating dedicated websites abroad. Top 1000 retailers also are increasingly reaching global shoppers via web marketplaces, not only those operated by Amazon and eBay Inc., but also such shopping sites as JD.com and Alibaba’s Tmall in China, as well as Mercado Libre in Latin America.
Amazon’s sites easily topped the list of global marketplaces in the Internet Retailer/GELF survey, with three-quarters of respondents who sell on multi-merchant portals saying they work with Amazon, with eBay and China’s Tmall the next most popular.
Many marketplace sellers rely heavily on services Amazon offers to expand internationally. Especially popular is Fulfillment by Amazon, which will store and ship items for sellers on Amazon sites, and even handle fulfillment of orders from retailers’ own sites.
Tech Armor is one e-retailer that relies on FBA to handle delivery of orders it gets from Amazon marketplaces in Europe, Canada, Mexico and Japan, as well as the U.S. FBA makes it easier for Tech Armor to expand into new markets, says Joseph Jaconi, co-founder and general manager of the retailer of smartphone accessories like screen protectors, cables and earbuds.
“We don’t have to go out and look for and interview third-party fulfillment services,” Jaconi says. “We can rely on Amazon to do that, and we can focus on growing our brand.”
The most common way that North America’s top online retailers serve global consumers is by taking orders on their primary websites and shipping merchandise abroad. Nearly half of the Top 1000 fulfill orders to consumers in such major European markets as the U.K. and Germany, and more than a third to such countries as China, Russia and Mexico.
Even small e-retailers can sell internationally these days, in large part because of the growing number of vendors that specialize in cross-border e-commerce.
For example, Butler Luxury, a 5-year-old web-only retailer of high-end clothing hangers, uses Webinterpret to translate its full product catalog into four languages besides English (German, Spanish, French and Italian), and more limited translation in other languages. Webinterpret, through an alliance with PayPal, also enables Butler Luxury to accept payment in 25 currencies.
When the e-retailer receives an order from abroad it sends the merchandise to a Webinterpret warehouse in the U.S., which consolidates client shipments for bulk shipping to overseas markets. Butler Luxury CEO Mike Cregan says the savings from bulk shipping enable his international customers to pay less than half the shipping fee they would pay if he sent each parcel individually. Parcels typically arrive in under 10 days to international destinations, he says.
Cregan says international sales make up one-third of his annual online revenue of just over $1 million.
Whichever sales channel they choose, North American e-retailers increasingly recognize the growing opportunity to satisfy the thirst of China’s increasingly affluent customers for imported goods whose quality and safety they often trust more than they do domestic products. 386 of the Top 1000 ship to Chinese consumers, and 106 sell on Tmall, an Alibaba marketplace that caters to foreign brands as well as larger Chinese companies.
Those are sizable numbers, given the barriers of distance and language China presents. One reason they are so high is the Chinese government in recent years has loosened restrictions on individual Chinese consumers making small purchases from foreign websites in a nod to the desire of middle-class urban Chinese consumers for better products. In response, Alibaba and JD.com, the country’s two biggest e-commerce companies, have created shopping sites geared to Chinese consumers seeking foreign goods, and specialist firms have emerged to help overseas companies sell online in China.
It’s a big opportunity. Retail purchases by Chinese consumers on foreign websites increased 29.1% in 2017 to $110.68 billion, according to market research firm eMarketer Inc. To put that into perspective, cross-border purchases by Chinese consumers were equivalent to more than 24% of total U.S. e-retail sales of $453 billion in 2017.
International e-commerce no doubt represents an opportunity to increase sales, but it also presents considerable obstacles.
[email protected] | @dondavisIR
This article is excerpted from the “2018 E-Retailer Global Expansion” report, which is now available from Internet Retailer’s research department. Learn more about our reports and databases here.Favorite