The online-only fragrance retailer Phlur will sell samples of the scents, but marketing will rely heavily on images.
U.S. e-retailers are expanding overseas andthe smallest are leading the way
Just a glance at the monthly numbers of the American balance of trade provides painful confirmation that America long ago lost its global hegemony in manufacturing. Yet America`s leading retailers are the most proficient merchants in the world and U.S. web sites are global leaders in the commercial use of the Internet. Given that record and the efficient global reach of the Internet, it would seem that America`s web-based retailers are well positioned to sell merchandise online overseas.
According to a web-based survey conducted by Internet Retailer, e-retailers in the U.S. are already leveraging this competitive position to expand their sales to foreign markets, and most believe their penetration of foreign markets is only in the early growth stages. Even now, 36% of 186 American e-retailers who completed the survey report that 10% or more of their annual online sales come from customers outside the U.S. And in five years, nearly 52% of respondents believe their foreign orders will hit or exceed 10% of all their web sales.
71% sell outside U.S.
The survey was e-mailed in early April to all subscribers of IRNewsLink, Internet Retailer`s e-mail newsletter, and responses were collected and analyzed using web survey technology by Web Surveyor, which has partnered with Internet Retailer in a series of monthly surveys of the e-retailing industry. 71% of the 186 respondents to the survey report that they regularly fulfill online orders from customers outside the U.S., and two-thirds of those have used the web to serve foreign markets for three years or more. The 29% of respondents who do not process foreign orders from their retail web sites report that their principal reason for avoiding the global online market is the difficulty and cost of shipping merchandise outside the U.S.
Interestingly, the movement abroad by American e-retailers has not been led by the largest web merchants. Rather, the very smallest of online merchants--those with less than $1 million in total online sales--exhibit the greatest propensity to serve foreign markets, possibly because their merchandise is so specialized and hard to find locally that it naturally attracts foreign customers. Another explanation may be that the number and types of merchandise they sell on the web make fulfilling foreign orders easier than for larger e-retailers with more SKUs. Whatever the reason, nearly a third of these small online merchants get 15% of their web sales from foreign markets. By comparison, only 18% of online merchants with web sales of $50 million or more have the same level coming from outside the U.S.
But the leadership that the smallest sites now have in generating foreign web sales appears to be a head start that will not be maintained very long. The largest e-retailers, which for a variety of reasons focused on the U.S. market first, are now gearing up to generate and fulfill orders submitted from customers abroad. Aside from their competitive edge in e-retailing, their drive into the global market is no doubt fueled by the declining value of the American dollar--which makes U.S. merchandise more affordable for shoppers with euros or other foreign currencies--and by the expansion of more affordable worldwide package delivery services. Whatever the reason, the biggest retail web sites see a bigger global market in their future. 46% of web sites with annual sales of $50 million or more predict that 15% or more of their annual sales will come from outside the U.S. in five years. That compares to 18% who are at that level today.
The same global sales trend is apparent among web sites with annual web sales between $4 million and $10 million. Today, 28% of this group gets 15% or more of their annual online sales from outside the U.S.; five years from now, half of them expect to reach that level. Similarly, while 15% of retail sites in the $1 million to $3 million annual sales range today get 15% of their sales from abroad, 31% believe they will hit or exceed the 15%-plus level in five years.
Other key findings:
The perceived shipping problem. 42% of respondents report that the difficulty and cost of shipping merchandise overseas is their biggest obstacle to selling to markets outside the U.S. The amount of fraud involved with foreign online orders was cited by 25% of respondents as the biggest obstacle to foreign sales. All other factors mentioned as possible barriers for foreign web sales (language translation, currency conversion, foreign VAT taxes, returns processing and servicing foreign customers from a U.S. base) were not seen as serious problems by a significant percentage.
The American bias. What`s good for American web shoppers is good for foreign shoppers. That appears to be the attitude of most respondents. 82% use the same URL to service both foreign and domestic markets; 74% present product prices in U.S. dollars only; and 74% use only English at their sites. That American bias likely limits the ability of U.S. e-retailers to maximize their sites` global merchandising potential. Most consultants who specialize in developing foreign retail web sales argue strongly that developing separate URLs for foreign markets, quoting prices in local currencies and using a foreign market`s native language are all keys to success in generating foreign retail sales.
Canada and England rank as top foreign web markets. 47% of respondents reported the United Kingdom and 19% said Canada account for the greatest amount of foreign sales. Canada was mistakenly left off the multiple choices in the survey, and those naming Canada as their top foreign web market did so by writing in the country name next to their "other country" selection. While this may have resulted in an understatement of the Canadian percentage and an overstatement of the U.K. share, it is clear that Canada and the U.K. together account for the overwhelming percentage of foreign sales at American retail web sites. Since both are predominantly English-speaking markets, this result should come as no surprise given the reliance by American e-retailers on English-only web sites.