In its second-largest acquisition, Amazon buys the company for $970 million.
(Page 3 of 3)
It took Amazon about 18 months to launch its first Asian site 13 years ago. Zazzle, an online retailer of personalized apparel and related merchandise, moved more quickly by deploying technology designed to facilitate data transfers among computer systems and web sites. The e-retailer says it reduced by about 50% the time it would have taken to build an e-commerce site entirely from scratch by planning ahead and using advanced technology, chief financial officer Jason Kang says. When Zazzle, which sells customized T-shirts, business cards, holiday and special occasion invitations and gifts, began building its internal e-commerce platform in 2005 it developed the codes, applications and templates to add content in different languages and process foreign currencies.
To launch an international web site quickly, Zazzle also relied heavily on technology that facilitated communication between various e-commerce, customer service and order fulfillment systems. In 2010 Zazzle launched an e-commerce site in Australia and another in Japan within a few months of each other, Kang says. The Japanese site features product and customer service content entirely in Japanese and prices in yen. Before launching in Japan, Zazzle also utilized Transcosmos Inc., a call center services and Internet marketing company with a specialty in Japanese e-commerce, to refine its search engine optimization and paid search marketing programs to include the most relevant keywords and phrases used by Japanese consumers.
"We thought our international plans through and built out our e-commerce platform to handle what we wanted to do in Asia ahead of time," Kang says. "That approach has made it easier for us to launch any new international sites or upgrade existing ones."
Newegg also used its own internal technology and dozens of Chinese web designers and systems programmers to develop Newegg.com.cn, Chou says. But for Newegg the biggest challenge to building its e-commerce base in China was figuring out how to appeal to Chinese shoppers. In particular, Newegg further needed to differentiate its web store and brand from big Chinese electronics retailers that sell both through physical stores and online, such as Suning Commerce Group Co. Ltd. (No. 5).
To compete, Newegg built a delivery network using regional and local carriers to offer next-day shipping in several major Chinese cities. Newegg also says it was among the first web retailers in China to offer live chat as a customer tool, expand its product inventory to include household appliances and sell longer-term product warranties and installation services. "We continue to focus on localization efforts and improving the online shopping experience for customers," Chou says.
Some U.S. retailers such as Newegg have to begin from scratch to build their e-commerce base in Asia and across the Pacific. But chain retailers such as Gap are using their store networks and established names to break down barriers to entry. Gap only opened an e-commerce site in Japan in October, but the apparel retailer has been building up its national network of about 130 Gap, Banana Republic and Old Navy stores since 1994.
Gap, which generated 2012 Internet Retailer-estimated Asia web sales of about $36.4 million, and also sells online in 17 other Asian countries besides Japan, tied its e-commerce launch in Japan very closely to its stores. When Gap launched Gap.com.jp the site featured Gap's universal shopping cart technology that lets a customer choose products from all Gap sites and check out once, and free local shipping. Content is in Japanese and includes size charts and photos illustrating how garments fit, photos and captions with multiple angles and colors, and the ability to zoom to see fabric and details.
Other customer service features allow Japanese customers to return merchandise bought online to a store within 30 days. "Internationally, we have seen a great response from consumers who shop our brands online," says Iris Yen, Gap senior director of Asia online. "We want to give our customers the ability to shop how, when and where they want."
To sell successfully online in Asia and avoid costly startup mistakes, U.S. merchants first need to decide which of the widely diverse Asia-Pacific markets represent the best opportunity, say e-commerce analysts. In many emerging Asian online retail markets, such as India and Vietnam, consumers typically go through a four-stage evolution, says Forrester's Wigder. Once they have a personal computer or mobile device with a steady Internet connection, the first phase is going online and using the web to explore content and use social media. The next two steps involve basic e-commerce steps such as booking a trip online, banking or purchasing books and music. The final step comes when consumers are hooked on online shopping and begin to purchase such products as apparel, electronics, health and beauty items, or order their groceries online.
"A big barrier to entry can be reduced or even eliminated if a U.S. merchant can really understand when consumers in a particular Asian market are ready enough to buy what they want to sell," says Wigder. "Sometimes misreading the market and going in too early can be as costly as coming in too late. The right timing can be crucial."
Even though it took about a decade to build its base in China, and it faced multiple challenges along the way, Newegg believes its timing was just right for China. In 2001 it was clear that China was beginning to lay the foundation for e-commerce. The country's Internet population was growing and the Chinese government was giving foreign investors tax breaks for investing in e-commerce.
More importantly, through its existing Chinese business and cultural experience, Newegg could develop key supplier relationships and observe China's growing transformation into a consumer-driven economy. "We have been working on expanding into new product categories and developing business in more cities," Chou says. "All of these initiatives will help make Newegg China stronger and healthier."