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“The products that are moving are the ones that it’s most economically feasible to distribute, with high value relative to weight and distribution costs,” Morris says. “The same things are going to hold true in Europe, not only in the type of product which sells online, but also in how the Internet will grow in terms of site functionality and the level of integration among channels. It’s really been mirroring the U.S. very closely, and we have no reason to believe that won’t continue.”
Beyond the market opportunity and product category match, e-retailers need to determine something more difficult to measure before heading abroad, and that’s their degree of commitment to the selected market. More than just capital, it’s best measured in the degree of management’s buy-in as well. Being successful in a foreign market has organizational, technical and long-term strategic implications tied to resource allocation. “We spend a lot of time with our clients at the beginning to see if they’re truly committed to globalization,” Morris adds. “For us it’s probably a larger question than the size or assets of a company.”
U.S. e-retailers ready, willing and able to hit the beach at Omaha must first face two essential truths that have challenged the assumptions of many a U.S. executive online and off. They are: One, there is no European market. It’s really a collection of 12 or more highly diverse individual markets, and to treat it as anything else is a mistake. Two, what works in the U.S., no matter how well, won’t necessarily work abroad.
Attempts to meet these challenges have set U.S. web merchants on a variety of strategic paths generally involving some degree of country-by-country localization. “You can’t simply translate the language on your site and expect to serve the entire world out of your data center in Silicon Valley. A bet-the-farm-and-embrace-the-continent-in-one-fell-swoop approach doesn’t work,” says analyst Steven Vonder Haar of the Yankee Group, Boston. “If you want to be an e-retailer in a global market you have to have all levels of operation in individual markets-merchandising, marketing, site development. In essence, if you’re Amazon, you’re creating a mini-Amazon for Britain, for France, and for Germany.”
The view from Wisconsin
Or a mini-Lands’ End. The Pride of Dodgeville has traveled far beyond Wisconsin to become one of the most aggressive U.S. retailers in the pursuit of online markets abroad. In November, it launched its sixth country-specific retail web site by adding Italy to a line-up which has grown to include the UK, Ireland, Germany, Japan and France in the past year. All of Lands’ End’s foreign sites use the local language and currency, but localization doesn’t stop there. Out to build a global brand presence, the company takes a country-by-country merchandising and marketing approach.
For Europe, it selects about one-third of its total U.S. SKUs , choosing those that make the most sense for the designated markets. With an established catalog business in Germany and the UK, Lands’ End is able to look at order history to make that choice. It also uses daily sales reports, and a team of local merchants in each country who keep an eye on trends and work with the Dodgeville team on selection. Every product in the company’s UK warehouse selected for Europe is offered on every Lands’ End web site in Europe, but they can be featured in different ways to make sure they fit the market.
“Our merchants in France know what French customers are looking for, their tastes, and what they’re buying,” says Sam Taylor, Lands’ End international vice president. “If you look at the French home page, although the look and feel of the site are the same across countries, you’re going to see a different product there than on the German or UK home page.”
Products also receive different prominence according to local tastes. Germans, Taylor says, go for brighter men’s ties and button-down shirts, while the UK favors straight collars and more conservative tones. Outerwear is featured in the early fall on the web sites of northern countries, but not until the next season in Italy, where cold weather doesn’t arrive until later. “It’s so easy to re-merchandise on the site-you can do it daily if you want to,” Taylor says.
Yes, but at what cost? Lands’ End already sold to more than 180 countries from its catalog, originally shipping from Dodgeville. So it had a fair idea of who its European customers were before it even launched its first country-specific catalog in the UK in 1991. The catalog business in turn yielded data that helped launch the country-specific web sites and justified investment in a UK warehouse and call center and a German call and return center.
The catalogs also established a brand presence in Europe, making it possible for the company to limit offline promotion of the web sites to PR events surrounding the site’s launch in each country and to limit online ad spending to a few top portals, both U.S.-based and local, in each country.
But Lands’ End’s real secret weapon overseas is also available to any other retailer with a developed Internet infrastructure: the investment already made here is easily leveraged abroad. An established Internet infrastructure made it cheaper for Lands’ End to open each successive market in Europe. Taylor won’t talk dollars, but he offers an index for comparison of IT costs. “Let’s call the index 100,” he says. “When we launched our Ireland site, our IT cost was 23. The French site that followed cost 8, and the Italian site was 6.”
Thus the launch in France cost one-twelfth the launch in the UK, and the Italian site, one-sixteenth. “The beauty of the Internet is its scalability,” Taylor says. “Once you have the infrastructure in place, you copy it and in terms of your investment, this is where the benefits really play out.”