January 29, 2008, 12:00 AM

Opportunity and obstacles face U.S. e-retailers expanding abroad

Internet activity is growing faster in other countries than in the U.S., presenting U.S. online merchants with the potential for substantial sales growth abroad. But three U.S. e-retailers that have expanded overseas caution that there is a lot to learn.

Paul Demery

Managing Editor, B2B E-commerce

With consumer use of the Internet growing faster in many other countries than in the relatively mature U.S. market, international expansion offers the possibility of substantial new revenue streams for U.S. online retailers. But three U.S. retailers with international e-commerce experience-Wal-Mart Stores Inc., eBags Inc. and The Timberland Company-say there is a lot to learn about each market entered.

“You don’t just translate your U.S. model overseas,” Soren Mills, vice president of strategy and business development at Walmart.com, said during a panel discussion last week at the Shop.org Strategy and Innovation Forum in Orlando. “The products local customers may expect to find in a store may be very different from what you sell in the U.S. The quality profile might be different, colors, assortments, categories all will vary. You need to listen to the customer and sell them products they want at the price they want.”

The international opportunity was sketched out by Zia Daniell Wigder, a senior analyst at JupiterResearch who specializes in web site globalization. She notes that while 20% of the 1.2 billion Internet users are in North America today, by 2011 that region will represent only 17% of the 1.5 billion web users. Among the large growth areas will be Asia-Pacific, particularly China, growing from 38% to 42% of the global online population. Europe will decline from 28% to 26% of the global web user base, although there will be growth in emerging Eastern European economies, Wigder says.

But expanding abroad means taking into account of local regulations, the availability of reliable delivery services and consumer attitudes. For instance, Wigder notes, while 79% of Swedes say they will pay more for quality and convenience, only 55% of Germans hold that view.

Payment methods and preferences vary by market, with many Europeans leery of entering credit card data online, or even using credit cards. Invoicing and cash on delivery are common in many markets, which forces U.S. e-retailers to weigh their willingness to accept such payments. “We’re excluding anything that involves giving product before we receive the money,” says Troy Brown, a senior director at Timberland, which launched its first international site in the United Kingdom last fall.

Wal-Mart, which has established web sites in the 14 countries where it operates stores, accepts both in-store and online whatever payment methods are popular in a given country, Mills says. PayPal, which has become popular in certain European countries where eBay, PayPal’s parent company, is strong, can be a good alternative for consumers who don’t want to pay with credit cards, says Peter Cobb, cofounder and senior vice president of eBags.

Cobb says eBags picked Europe to start in part because in many countries stores are not open on Sundays or in the evening and may close during lunch. Outside of big cities, retail areas tend to be small. All that makes online shopping a more attractive alternative.

Timberland, which derives more than half its revenue outside of the U.S., used its UK stores to build awareness of its new web site, pasting decals on store windows and providing store associates with site-promoting cards to hand to customers, says Rolf Schultz, director of international e-commerce expansion. Wal-Mart, which does a brisk grocery delivery business in the UK, promotes its web site on the sides of its trucks and sometimes has delivery drivers hand out leaflets touting the site in neighborhoods where they deliver.

For web-only retailer eBags, paid search has been a big tool for introducing its brand in Europe, along with public relations initiatives and optimizing the site so it shows up prominently in search engine results, Cobb says. Initially, eBags went to great lengths to respond to customer complaints, for instance, sending a replacement product to a customer without asking for the original purchase to be returned. “Eventually that became too expensive,” Cobb says, “but we wanted to come out with an edge in service.”

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