Anita Balchandani, Partner at OC&C Strategy Consultants outlines the opportunity internationalisation ecommerce is opening up for British retailers and the capabilities that retailers will need to adopt to succeed.
The rapid evolution of ecommerce is not only changing the speed with which retailers can access new markets, but it has also opened the door for companies of all sizes to welcome in a global customer.
IN 2014, OC&C published a study in partnership with Google analysing the rapid internationalisation of British e-commerce. Online sales generated by UK retailers from international markets are expected to soar sevenfold to £28 billion by 2020. Whilst in 2012 online sales from outside the UK were worth £4 billion and made up 14% of total online sales, they are predicted to outpace domestic growth to make up 40% of total online sales by 2020.
Ecommerce is clearly a great opportunity for ambitious small and medium sized businesses. Our research revealed that many smaller UK-based retailers, with examples such as Farfetch, Isabella Oliver, Surfdome and Corsets UK leading the way, are already embracing international opportunities more rapidly than their larger, less agile, counterparts. Small and mid-sized companies currently receive nearly half (47%) of their online searches from overseas, tend to ship to more countries and offer multi-lingual sites. In comparison, only 13% of online searches for retailers with turnovers of more than £250 million come from outside the UK.
Expansion through online channels means it is now possible to build a strong market position in months, rather than decades, and at a fraction of the cost. Already, over 40% of Britain’s top-100 etailers in the UK serve over 40 countries and this is happening faster than ever before. International expansion is much less capital intensive now and supported by the ability to rapidly test and iterate before investing in localisation, so the nature of risk has also changed.
With all this in mind, there are some strategic and operational considerations that I would suggest to any SME looking to capitalise on this opportunity, in order to avoid falling at the first hurdle.
Retailers need to carefully assess which markets are more favourable for expansion based on their individual circumstances. For example, countries like Russia and China have a huge potential customer base but are also extremely challenging. In China for instance, local partnerships are required to navigate the market successfully and retailers are often required to tailor their shipping to offer ‘cash on delivery’. There are of course a number of countries closer to home that are relatively easy to access. Even markets such as Germany, France and the US that tend to be classified as ‘mature’ are still emerging in ecommerce terms and offering plenty of growth potential.
Retailers need to bear in mind that international ecommerce requires new capabilities. These include; the ability to analyse and interpret data to uncover pockets of demand and potential growth; taking local insight and adapting quickly to suit it; and understanding how fluctuations in currency influence price points.
British small and medium businesses have a lot to gain by operating with an international mindset, and many are already reaping the rewards. Where the prize is substantial, there is always a threat. Retailers who discount the international opportunity should think again – consumers are shopping the globe from the comfort of their home (or mobile phones), and those who fail to see themselves as serving an international customer base may find their domestic customers defecting to the best propositions from around the world. The UK is the world’s second largest ecommerce market, and many are looking to colonise it.