You are ready to expand your e-commerce business into a new country.
The prospect is incredibly exciting. You’ll gain access to a new talent pool, grow your customer base and face a brand new challenge. The growth opportunity ahead is huge.
But, before you get blinded by your potential success and start searching for the perfect offices and brightest talent, you need to do some critical research.
That’s why we’ll explore some of the key questions you need to ask (and answer) before saying yes to that move.
Understand the New Market
No two locations are the same. Tastes shift within different areas of the same city!
If Manhattan’s various neighborhoods attract such unique crowds and businesses, countries with diverse cultures and history will definitely have certain preferences.
When Wal-Mart expanded their grocery stores into Germany, they found the formula that worked so well in the US did not fit with the existing habits of German shoppers. The ways people shopped for goods in the two countries was starkly different.
Most shoppers picked up goods on foot on a regular basis from small, specialized stores- they weren’t used to driving to megastores at the edge of town for a weekly shop.
While e-commerce businesses face different challenges than brick and mortar stores, there is an important lesson to be learned here. Understanding the values, behaviors and attitudes of shoppers before you make your move is crucial for success.
1. Does the current infrastructure support e-commerce?
Your success, and failure, depends on the ease with which potential customers can buy your goods. And, as an e-commerce business, that success hangs on the country’s current online infrastructure.
When examining a new country, study the way people shop. Are they used to ordering online? Do they have go to websites? Do certain e-commerce giants dominate the landscape? Is there a secure, established payment gateway you can use?
As an e-commerce business you rely on fast, secure internet connections and payment methods that work online. Your ideal market will needs to have these things.
Next, you need to make sure that there’s a strong enough shipping infrastructure that lets you deliver goods quickly and safely. Do goods get stolen often? Are the roads good enough to carry shipments and deliver everything in perfect condition?
You are reliant on good roads, shipping services, a strong internet connection and an online shopping habit. So no matter how great the opportunity, make sure these building blocks are in place.
2. Is there a natural customer base?
Different places prefer different products. An e-commerce store that solely specializes in hot weather gear will not be a natural fit for Alaska.
Before you commit, research local tastes and preferences. Ask questions like:
- Do people already buy similar products?
- Is there room for a new player?
- Are there enough potential customers to justify the cost?
The market needs to be large enough to justify the investment and yield a sufficient return.
Speak to local experts and, ideally, travel to the country you want to expand into and get a feel for it. Get to know the social and cultural preferences of the local people. The size of the global marketplace can often create an idea that consumers are the same, but not accounting for differences is a grievous mistake that will hurt your business.
3. Is there a sufficient culture fit?
Every business has a unique culture. Your company values are part of what you leverage to gain new customers. Is your potential new market a fit? Is it compatible with your values?
People from diverse parts of the world have distinct ways of communicating and specific established norms. What’s polite in certain circles can be perceived as exceptionally rude in others. The pace of life differs.
While language differences shouldn’t prevent you from expanding into new territories, it is something worth considering early on. Research your brand name and logo to see if there are any existing prejudices surrounding your name.
You’ll need to attract local content marketing experts to create brand new content for the market and repurpose and translate existing content. You’ll also need customer service specialists who can fluently communicate and provide an exceptional customer service experience. How easy is it to find these people?
4. What’s the competition like?
Who are they and how well are they performing? Do you have sufficient competitive differences and advantages you can leverage and draw on?
Do certain companies hold a disproportionate amount of the market share? Are there stubborn local champions that enjoy enormous amounts of loyalty? Your customers are creatures of habit: they’ll keep doing what they’ve always done until you can prove that you are the better choice.
Study your competition: Analyze everything they do from the way they package their products to their delivery methods and identify ways you can beat them.
5. Are any of your key products likely to be restricted?
While you may think your product is completely innocuous, check for country specific restrictions. New Zealand has a ban on remote training collars for dogs that run on certain radio frequencies and Vietnam prohibits shipping playing cards.
Research your potential market and make sure your products aren’t restricted or prohibited under local laws- both the written, and the implied.
Calculate the True Cost of Expansion
There are a lot of different costs you need to consider.
1. Taxes, legal costs and international law
When you expand into a global market, you’ll have to deal with a number of regulatory issues and bureaucratic red tape. It’s part and parcel of the expansion. Research just how much jumping through these extra hoops will cost you.
What are the agreements like between where you are and where you are shipping to? What kind of financial burden will that place on you? An accurate cost estimate now, will help you better understand potential profit margins.
And, while taxes are not the most exciting topic, you need a strong awareness of how taxes in the new area will impact your business. Certain counties and cities leverage their own taxes so many sure you take those into account.
2. Shipping Costs
As an e-commerce business, providing high quality, timely shipping is a top priority.
Check packaging and labeling requirements as well as the reliability of local services. How does the cost of shipping compare and how much of that would you need to pass on to the consumer?
You’ll need to follow local regulations so make sure you understand the cost and best practices for shipping products to your new customers.
3. Hiring and building a foothold
Most people like the option to deal with local customer service support. E-commerce giant Zappos built an entire company on the premise that their customer support was US-based.
If you are serious about expansion and your team isn’t fully remote, you’ll have to rent an office space and hire talent.
Research just how much this would cost you. Can you afford quality office space and still hit your margins? Is there an existing local talent pool you can tap into? Find an area that supports both.
Meticulous Research Saves Money
Expanding into a new country is a thrilling endeavour.
When you get it right, the payoff can be huge!
A bit of research at the early stage can help you understand and avoid potential problems before they appear and make the transition a whole lot smoother. It will save you stress, money and make your eventual success taste sweeter.
Floship Guest Post – About the Author
Crucial Vacuum Founder Chad Rubin grew his e-commerce business to an 8-figure business in 7 years.
He is a Top 250 Amazon Seller, and co-founded Skubana as an all-in-one ERP system and operations platform designed for high volume sellers to run and automate their business. It integrates with most e-commerce marketplaces, 3PLs, and warehouses, provides profitability and multi-channel inventory management, and compiles all of your marketplaces on a single convenient dashboard. Learn more at info [at] skubana.com or sign up for a 14-day trial.
Follow Chad on Twitter @ecommrenegade or connect with Linkedin.com/in/chadrubin