To build successful international ecommerce, your website and your presence on e-marketplaces play an equal role. It is important to understand however, that your audience on e-marketplaces and on your website, are likely to be different. It is possible that your website will need to sell a different range of products to maximise your opportunity. You also need to understand that some products are better for e-marketplaces and others will perform best on your own website.
Don’t compete in the way that everyone else is. Provide a product or service that is different, as selling on cost will ultimately lead you to eroding your profit margin to an unsustainable point.
It all boils down to one question: Are you cheap, or are you different? If your company is heavily focused on offering low cost as a strategy, then you have less chance of succeeding online. To successfully benefit from online export led growth, differentiation is key. However, differentiation is a scale – the Strategy Scale. Within the Strategy Scale some products will perform better online, others will generate more income on e-marketplaces.
Before we look at where the product offering sits on the Strategy Scale, it is important to understand the notion of Normal vs. Super-Normal profit.
Normal profit is the amount you need to make to stay in the market. Super-Normal profit would be where a company makes more than that.
An example would be an accountant running their own practice – let’s call him Fred. Assume that Fred doesn’t mind whether he works for himself or not. Fred can earn £50k per year working for one of his competitors. If his profit is less than £50k, then Fred might as well be working for that competitor. If it is £50k, Fred is making Normal profit. If, however, Fred makes £100k, he is making Super-Normal profit. If this happens then more accountants will enter the market. This will increase supply and reduce price, until all accountants are making Normal-Profit again.
This is in a world without barriers. In the real world, we can erect barriers to protect our Super-Normal profit.
Think about Apple. Apple have patents, they tie you into an eco-system of products, they have great marketing, they control their supply chain etc. In so doing, they create barriers to protect their Super-Normal profit.
Before you protect Super-Normal profit, however, you need a strategy to generate it.
Where am I currently?
You can get an estimation on where each of your products fit on the Strategy Scale, by completing this quick online questionnaire, and matching your percentage to the below scale: calculator.thrivedigitalagency.co.uk
There may be a crossover and no definitive answer to where your products sit on the scale. However, understanding where products sit on the scale will help you to develop a winning strategy.
Cost (0-25%) – Very difficult to export online if solely focused on cost. You are unlikely to yield normal profits as competition is high and it is not possible to erect barriers to entry. Competing to export internationally is almost impossible. Other countries (such as China) will be able to produce products more cheaply than it is possible to in the UK. You will need to carry out market research to explore new product development (NPD).
Cost focused (26-50%) – Customers are searching for your products. Tools such as AdWords, Facebook advertising, and other forms of PPC are useful. E-market places will likely provide a key source of income, but as small margins are made, you will need to focus on selling high volumes. Skills in SEO and SEM can lead to competitive advantage and normal profits can be made.
Differentiation focused (51- 75%) – Customers should be searching for your brand, rather than your products. E-marketplaces are still key to this strategy, but your website can generate significant income, as PPC advertising on website will compete with other retailers. Decide whether this threatens listings. Competitive advantage is obtained through using both strong brand communication, and SEO (and potentially SEM). Supernormal profits can be achieved in the short-run.
Differentiated (76-100%) – Solely differentiated products can be exclusive to your website. PPC advertising does little as customers want the product and it can only be purchased direct. It may not be the customer’s first purchase; they will already be brand loyal. Competitive advantage comes from developing a strong brand and communicating it to the target audience. Supernormal profits can be maintained in the long-run.
As differentiation is a sliding scale, you need to have a product ecosystem that spans a differential focus as well as having differentiated products. If you don’t have a product in any of these four categories, then you need to be thinking about NPD.
You need the right approach on both your website and e-marketplaces to succeed. This means offering different products to suit the different markets. A different product can be sold at a higher price, and a higher priced product will need a different website.
For more information on winning international ecommerce strategy, you can now download our latest guide: Is Export Led E-commerce Growth Right for My Business?