The acquisition will add more than 300 products to L’Oreal’s lineup.
Web retailers span the globe in search of new customers and sales.
The U.S. web retail market continues to grow at an annual rate of about 25%, but an increasing number of merchants already are looking past what’s happening at home and casting an eye on the next big prize: selling online overseas.
In the U.S., the number of total online shoppers is expected to peak at about 161 million around 2010, says Jupiter Research. But other parts of the world, including Europe, are only now beginning to reach a critical mass of online shoppers and sales. European Internet users will spend an estimated $94.4 billion shopping online in 2006, a figure expected to rise by 113.2% to $201.3 billion in 2009, according to Forrester Research.
But even though more U.S. web retailers are selling online overseas and many others will soon extend their e-commerce business to include another country, most merchants remain in the very early stages of developing merchandising and technology strategies that will attract and retain foreign shoppers, according to Internet Retailer’s latest monthly survey.
In some ways merchants are treating their foreign sales as incremental revenue rather than viewing overseas retailing as a significant new business opportunity. The survey reveals that of the more than 250 chain retailers, catalog companies, virtual merchants and consumer brand manufacturers taking part in the research 62.6% are selling online overseas. But the survey also reveals that web retailers are doing very little marketing to reach a broader audience of international shoppers and that most merchants are making only a limited investment in such critical areas as web site design, currency conversion tools, international shipping cost calculators and multi-lingual content.
Meanwhile, of the two-thirds of respondents who are selling overseas, only 15.9% operate a separate foreign e-commerce site. Of the online retailers that do operate a separate foreign web store, 38.1% operate one or two foreign web sites, 28.6%, two to five sites and 33.3% with more than five foreign e-commerce sites.
One key to generating more online sales in the U.S. is increased marketing of all kinds-in particular paid search. Yet only 16.2% of chain retailers, catalog companies, pure-plays and consumer brand manufacturers utilize local search engine marketing; only 13.1% conduct foreign e-mail campaigns; and only 4.6% have developed an overseas affiliate network.
Search for foreign sales
The survey was e-mailed in early September to all subscribers of IRNewsLink, the magazine’s e-newsletter, and the responses were collected and analyzed by WebSurveyor Corp., which has partnered with Internet Retailer in a series of surveys on the web retailing industry. The survey reveals that most online merchants have interest in selling beyond the U.S. 42.2% have been selling online in a foreign country or attracting overseas customers to their web sites for at least five years, compared with 24.4% with a foreign web retail program that is less than 2 years old and 34.3% with an overseas operation or merchandising strategy that’s been in operation between two and five years.
America’s web-based retailers are well positioned to sell merchandise online overseas. The U.S. retail industry has established numerous brands and products that appeal to foreign shoppers. U.S. web retailers can also leverage their existing merchandising strategies and technology platforms to accommodate new overseas markets. Interestingly, the movement overseas has not been led by America’s largest retail chains and direct marketing firms. The survey shows that small online merchants are moving ahead of chains, catalogers and consumer brand manufacturers to take advantage of selling merchandise over the web to a foreign customer base. 68.4% of companies taking part in the Internet Retailer survey are virtual merchants vs. 14% identifying their company as a chain retailer, 8% as a cataloger and 9.7% as consumer brand manufacturers.
Smaller pure-play companies can often respond more quickly to available overseas opportunities than larger and more established chains. Many virtual merchants also sell within distinct online niches, which can make it easier to attract and retain overseas customers. But regardless of size, web retailers across the board clearly see their overseas base as a longer term opportunity. Today, the Internet Retailer survey shows that foreign visitors to U.S. e-commerce sites or separate sites built by U.S. retailers to attract customers in a particular country or region are nascent. Foreign web sales as a percentage of all online sales are also nominal.
The survey asked the participants to disclose what percent of their monthly web traffic is comprised of foreign visitors. Another question asked web retailers to identify what percent their foreign sales make up of their overall sales. In both instances, the response from web retailers revealed only a small amount. Foreign sales make up less than 5% of total revenue for 50% of all companies, including 15.2% where 1% or less are sales made to overseas customers. 34.8% say foreign sales represent between 5.1% and 25% of total sales and 9.1% report having overseas revenue that accounts for more than one-quarter of all sales while 3.3% don’t know.
Foreign web traffic is another case of retailers building slowly and steadily toward a critical mass of new and repeat visitors. Overall 10.6% of companies in the survey report that foreign traffic makes up less than 1% of their total monthly web traffic, compared with 34.1% between 1% and 5%; 16.7% between 6% and 10%; 15.9% more than 10%; 13.6% more than 25% and 9.1% don’t know.
Close to home
For now U.S. web merchants are expanding closer to home where it’s easier and cheaper to build a foreign e-commerce capability and fulfill orders. 50% of merchants taking part in the Internet Retailer survey say Canada represents their biggest foreign market, followed by Europe at 30.6%. Not surprisingly, given the time and effort needed to build e-commerce sites and features that attract diverse groups in Asia and other developing Internet markets, retailers are only attracting a small amount of traffic from regions such as the Pacific Rim and India. Only 2.3% of retailers are selling online to shoppers in India; 3.8% in Korea and Japan; 3% in Central and South America and 3% in Mexico. 7.3% list other countries as their chief source of foreign sales.