International sales increased an even faster 30%. The company also reported a record profit of $857 million during the second quarter and accelerated expansions ...
E-retailers are going global, and many see growth ahead.
Annual sales growth in e-commerce topped 20% for several years in a row, but that growth tumbled when the recession hit. To keep sales growing, or at least maintain them, e-retailers needed to either sell more to current customers or find new ones. And that's where international e-commerce steps in.
Going global enables e-retailers to tap new markets filled with potential new customers who often are familiar with American brands and are ready to buy, or are looking for unique, niche products that can't be found anywhere else.
Currently, 70.1% of U.S. chain retailers, web-only merchants, catalogers and consumer brand manufacturers sell online to consumers outside of the U.S., either on their U.S. e-commerce sites or through standalone sites dedicated to other countries, finds a new Internet Retailer survey.
Assessing the market
Of those not selling globally, 40.0% are currently assessing the viability of selling to consumers outside of the United States, according to the survey of 69 retail executives conducted in March by Internet Retailer with survey technology provider Vovici Corp. 12.5% of these merchants plan to start selling internationally within a year, 50.0% within one to two years and 25.0% in more than two years. 12.5% currently have no timetable.
Of merchants selling overseas, the survey finds better than two in five say 11% or more of their total e-commerce revenue comes from international customers.
"That is a staggering figure," says Jim Okamura, managing partner at Okamura Consulting, which specializes in e-commerce and international selling. "What is the size of the prize? That's what many retailers find tough to get a handle on. We've seen this quite often with a number of niche, usually web-only guys. They've found an untapped revenue source in overseas customers who usually have found them. The retailers may be doing little, the passive stage of international expansion, where they are leaving the customers to fend for themselves with duties, taxes and so forth, but they will take and ship orders overseas."
Whether a merchant is merely taking orders and shipping them to international customers or has a full-blown overseas selling system in place that takes care of duties, taxes and other fees as part of the ordering process, that merchant is likely feeling bullish about 2011, the survey finds. 21.7% of survey respondents project international sales will grow by more than 25% in 2011, 10.9% by 15.1-25.0%, 17.4% by 10.1-15.0%, 13.0% by 5.1-10.0% and 26.1% by 1.0-5.0%. 8.7% say overseas sales will be flat this year while only 2.2% say these sales are likely to decrease.
"One in five is a huge number for seeing more than 25% growth," Okamura says. "What we've been seeing is that in 2009 companies had international expansion on the radar but not part of the strategic agenda. This past year it made the strategic agenda for a lot of companies; that means they were willing to investigate, put a business plan together, figure out solutions. The survey results are clearly an indicator that many companies who have studied the overseas opportunity are feeling very bullish about it."
While many merchants are bullish, some find the challenges involved in selling internationally too daunting. Of merchants not yet selling overseas, 9.0% say that it requires too much investment, the survey finds. 7.5% say return on investment is insufficient, 13.4% cite regulatory complexity, 6.0% customer experience concerns, 6.0% inability to size demand, 7.5% technological complexity, 11.9% logistical complexity, and 10.4% say simply that it is not a strategic priority.
"'I'm not sure I'll get a payback' is really what comes from a lot of these answers," says Mike DeSimone, CEO of FiftyOne Inc., formerly E4X, an international e-commerce technology and services provider. "It's difficult to do a really good job without making a serious investment."
Some of the obstacles retailers point to are real, DeSimone adds. There are regulatory complexities; for instance, sales of nutritional supplements are restricted in certain countries, and some items can't be sold at all. A U.S. consumer can buy natural sleep aid melatonin online; in Canada a consumer needs a prescription.
"And not being a strategic priority makes sense for some retailers. Fresh Direct can't sell overseas," he says, referring to the online groceries retailer. "And office supplies guys, those products are highly commoditized."
While there are real hurdles in selling overseas, the survey suggests a majority of retailers are doing so now, and that they have great expectations. Not going global now could allow a competitor to stake a claim first, and build brand awareness and loyalty. The international market offers millions of potential new customers, and it might be unwise to ignore this opportunity.