The expansion of e-commerce companies from their domestic markets into other countries is growing exponentially. According to a report from Absolute Reports, the global cross-border B2C e-commerce market size was valued at $976 million in 2022 and is expected to reach $2.7 billion by 2028.
However, it is too easy to forget that e-commerce businesses require a deep understanding of local cultures and consumer behaviour to successfully engage a new market. Indeed, according to a survey by the European e-commerce Report, 66% of European online shoppers prefer to shop on websites in their own language, and 40% would not purchase from a website that does not offer their preferred payment method. These factors show the importance of understanding local cultures and preferences.
While expanding e-commerce businesses internationally can offer significant growth opportunities, it requires careful consideration of the cultural and linguistic preferences of every nation to ensure success in foreign markets.
Businesses need to get the fundamentals right first. This includes understanding local market conditions, the total addressable market, and the popularity of products or services in the market. Without these insights, e-commerce firms may end up spending lots of money and gaining no traction.
The translation approach
One common pitfall of international expansion is taking the translation approach. This is where a company simply copies and pastes its existing e-commerce environment and tries to align it with local e-commerce standards. This approach ignores cultural nuances and local needs and only replicates what has worked in the company’s home market.
A study by the Harvard Business Review found that this copy-paste approach to international expansion often results in failure. The study examined 200 companies that expanded internationally and found that those who simply replicated their domestic business model in international markets had a success rate of only 7%, compared to a success rate of 29% for those who adapted their business model to local market conditions.
One example of a business that has faced challenges with this approach to international expansion is eBay. In 2015, eBay announced that it was pulling out of the Chinese market after a decade of struggling to compete with local e-commerce giant Alibaba.
eBay had attempted to replicate its successful US model in China, but had failed to account for the differences in Chinese consumer preferences and behaviours. Chinese consumers generally preferred to pay with online payment platforms like Alipay rather than PayPal, which was the dominant payment method on eBay’s platform. Additionally, eBay’s lack of local market knowledge or strong logistics infrastructure put it at a disadvantage compared to Alibaba, which had established partnerships with local delivery services.
To avoid such pitfalls, businesses should consider other scenarios for international expansion. Transcreation is an approach to international expansion where businesses take into account the cultural nuances and local needs of a new market to create a product or service that is culturally adapted to that market. This approach recognises that simply replicating what works in the home market may not be enough to succeed in a new market.
When IKEA expanded to China, it adjusted its product offerings to better suit local tastes and preferences. For example, it introduced smaller furniture items, as many Chinese homes are smaller than homes in the West. IKEA also adapted their marketing strategy to emphasise the social and familial aspects of furniture shopping, which is important in Chinese culture.
But the most effective strategy is glocalisation, which involves creating a product or service that is adapted to meet the specific needs of a local market, while maintaining a global brand image. This approach takes into account not only the cultural and linguistic differences but also the unique preferences, behaviours, and attitudes of the target market. Compared to transcreation, glocalisation takes a more holistic approach that considers a broader range of factors.
Amazon takes this approach to international expansion, which involves tailoring its platform and services to suit the local market. For example, in India, Amazon launched Amazon Pantry, a service that allowed customers to order groceries online and have them delivered to their doorstep. This is a service specifically tailored to the needs of the Indian market, where online grocery shopping started to become increasingly popular.
By taking the time to research and adapt their offerings to local market demands, Amazon has been able to successfully expand its e-commerce services globally and establish a strong presence in various countries.
Insight needed to glocalise
But to achieve a winning glocalisation strategy, insight is crucial. Brands must gather valuable knowledge about the market, competitors, and customer behaviour, which help to make informed decisions about how to operate and expand. Traditionally, businesses would seek insight by using a market insights agency, interviewing potential customers, and doing competitor analysis. However, this approach can be time-consuming and costly.
There is an alternative approach to gaining insight, which is to use real time insights in total market demand based on search and social data to understand how consumer needs and trends are evolving and to tell you what you need to know. By using a solution like this, companies can save a lot of time and money. It can help them to identify market trends before they’re trending, have a deep understanding of consumer needs before the world knows and determine whether a market will be worthwhile for them. It also provides insights into whether there is demand for a product or service, the country’s online orientation behaviour, which products to prioritise and which to deprioritise, what kind of messaging to use in marketing campaigns etc. In short, it provides exactly the right ingredients for an effective go to market strategy.
To get the most out of search and social data, companies need to scan the entire global market and identify which country is most opportune for them. This approach should also show how large the total addressable market is, how big the competition is, and how popular your kind of products are. By sharing all this insight on one dashboard, companies have the best opportunity to determine if their products are suitable for a specific market.
Bottom of funnel approach
What’s also important to bear in mind is that e-commerce businesses should take a bottom-up approach to marketing during an international expansion, focusing on building a solid foundation and generating revenue before scaling up to more expensive and riskier marketing tactics.
The initial focus should be on sales channels that are cost-effective and provide a good return on investment. Digital sales channels are often a great place to start, as they can reach a large number of potential customers at a relatively low cost. Once a company starts generating revenue it can reinvest its earnings into these channels to maximise results.
Once a company has a solid revenue stream, it should invest in above the line media to put more pressure on its brand and product in the market. By building a solid foundation and generating revenue before investing in channels that solely build brand awareness, companies can ensure that they are not taking on unnecessary risk while still achieving long-term success.
How to use agency support
Brands need to find marketing agencies that can provide the necessary support and expertise to help them navigate the complex world of international marketing. The first step is to recognise that trying to expand on your own is often not the best approach. There are significant hidden costs involved, and without local knowledge, brands can quickly find themselves struggling to make headway in new markets.
When considering marketing agencies, brands should look for those that have expertise in their specific area of need. For example, does the agency have the right infrastructure to help the brand grow profitably? Can they help the brand localise marketing campaigns tailored to local consumer needs and preferences? Are they able to identify which markets to expand into and offer strategic guidance on the best approach?
One critical area where marketing agencies can support brands is in identifying and understanding local cultural nuances. Brands need to tailor their messaging and marketing efforts to fit the specific cultural context of each market they enter. A marketing agency with local knowledge can help brands navigate these differences and create campaigns that resonate with local audiences.
There are two clear routes to expansion. The first is replication. By replicating the ecommerce store and marketing channel mix in a new country, companies may drive growth. But this can be a start fast / learn fast approach, and can result in wasted time and money with a high chance of failure. The key risks to the replication approach are caused by the lack of geographical relevance – such as competition, product demand, messaging strategy.
The other approach is investigation. Companies taking this route will start by gaining the right insights first – on competition, actual demand for products or services, prioritised channels, alignment of messaging with local standards and so on. This can be a cost intensive and slow approach, but one that creates the right strategy based on local market data. On this foundation, companies can then move on with their roll out plan.
While both go to market strategies may be enhanced by working with an agency that can roll out a robust digital strategy, the investigation approach is the most prudent way to invest money and gain ROI.
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ABOUT THE AUTHOR
Martijn Zoetebier, Group Director Business Development, Linehub.
Group Director Business Development & Executive Committee Member at Linehub and Managing Director a.i. at Conversive (part of Linehub) with a background in economics, marketing & sales. Previously worked at Booming, Daisycon and pensioenplanner. 15 years of experience in leading and developing teams. Skilled in Digital Marketing, Growth Strategy, Management Consulting & Company Management.