Article Published by Internet Retailer
Every country is different, so pay attention to detail and don’t try to conquer the whole world at once.
In a saturated U.S. retail environment, many companies have chosen to seek growth internationally. And given the massive investment retailers must make to establish themselves in new global markets, many of them have opted to gain a foothold with an e-commerce offering first, prior to investing in brick and mortar. This strategy makes sense given the risks involved and the level of financial commitment a store presence requires.
I’ve been lucky enough over the last 25 years of my career to have traveled to over 50 countries, calling five of them my home. Throughout this time I’ve helped several companies to navigate the unfamiliar and often confusing territory of ‘going international’—that first time that you offer your products and services to consumers and companies outside of your home country.
In the Internet age, this topic may seem passé. After all, if I put up a website with international credit card processing and get UPS to ship anywhere, I’m open for business worldwide, right? Right. But is it really that easy? No.
There are many potential pitfalls in going international, and, maybe surprisingly, they apply to both worlds – offline and online. Here are 5 of the biggest things to avoid when taking the international plunge:
1. Starting too big
If I sell to one foreign country I may increase my sales by 20%, but if I sell to 100 countries I will increase sales by 2000%! It’s very tempting to see the world as one common market with customers consuming the same products everywhere. Outside of commodities, however, this is rarely the case, and even when adapting to local tastes is not an issue the level of complexity is automatically multiplied with each country added.
The well-publicized failure of boo.com stemmed from many bad decisions, not least of them was targeting 18 international markets at launch.
Recommendation: Start with one or two neighboring countries and build up experience.
2. Projecting your frame of reference on the world
Think of the stereotypical American tourist expecting everyone on his European vacation to speak English; raising his/her voice in an attempt to be understood. You don’t want to be that guy. News flash: Not everyone speaks English. This doesn’t mean you necessarily have to translate your website into multiple languages, but it does mean you need to research your market to know how local language could impact sales.
And don’t think that translation is enough – text that is brief and to the point may be OK for your domestic market, but foreign customers may need longer explanations and repetition.
Maybe you’ve been successful in domestic online sales and assume that localizing your e-commerce website and promoting via SEO/SEM is the quickest way to foreign sales. What you may not know is that online marketplaces dominate e-commerce sales in several regions of the world. In China, for example, marketplace storefronts account for 92% of all online sales.
Some items for your checklist include payment methods (not everyone pays with Visa/MasterCard), payment terms, expectations on delivery, service levels, return policies, packaging and labeling requirements.
Recommendation: Assume that most things will be different when selling abroad – that way you’ll be ahead of the game when you identify the things that can remain the same as your home market.
3. Ignoring the details
Identifying differences in marketing, sales, finance, and operations is a good start, but don’t underestimate the work required to fully investigate how the differences will impact the investment required to go international.
You know that selling in multiple currencies will impact much of your business including e-commerce, accounting, reporting, taxes, etc. But until you dig into the details you won’t be able to accurately predict the time and money required to implement. Do your pricing systems have multiple currency capabilities built in? Have you looked at historical exchange rates for your target currency and are you ready for a potential roller coaster of U.S. dollar margins? Have you investigated currency hedges to mitigate exchange rate risk?
If you’re exporting goods, have you researched import duties, local content regulations, shipping and customs clearance times? Exporters are often surprised at the complexities and costs of getting their goods to foreign buyers. Import/export regulations also change over time, requiring vigilance to make sure your international sales remain profitable.
Recommendation: Keep asking questions. As you delve into details don’t be satisfied with quick answers and never assume!
4. Ignoring the taxman
The good news for those with a U.S. frame of reference is that foreign tax codes are rarely as complex as those in the U.S. This doesn’t mean, however, that you can’t be caught out by a local tax you hadn’t anticipated. Sales tax, value-added tax, and import duties are only a few of the many taxes to investigate before selling abroad. Tax requirements are also subject to frequent review and changes by local and national governments. It’s not a good idea to run afoul of a foreign government on your first attempt to sell to its citizens.
Recommendation: Before you do anything else, construct a draft P&L of your foreign venture and plug in the tax numbers. Even before you dig in deeper to flesh out your complete cost structure you may find that the taxes alone will be a major challenge to profitability.
5. Going it alone
In the modern world of easily accessible information, you may be tempted to believe that your own research will suffice in uncovering and surmounting the challenges of going international. The road to foreign sales is filled with obstacles, but the good news is that it’s a well-traveled road. Many have passed before you and have learned from early setbacks. Take advantage of the collective knowledge of competitors, customers, friends, industry players, vendors and anyone else who has significant experience selling to the markets you’re targeting.