Retailers shift their ad spending from TV, radio and print ads to digital ads.
Retailers open their virtual doors to international web shoppers.
U.S. consumers were among the first to shop heavily on the web, but other countries are catching up. Global e-commerce, including travel and auto purchases as well as retail sales, will increase 13.5% annually for the next four years to $1.4 trillion in 2015, predicts Cisco Systems Inc.'s Economics & Research Practice.
That means significant opportunities for experienced North American web retailers to expand sales abroad, and merchants like Gap Inc. and Williams-Sonoma Inc. are moving rapidly to seize that opportunity.
But retailers taking this route quickly find that each market presents challenges in terms of language, custom, payment methods, taxes, regulations and delivery. "Different countries are at different levels of development and have different risk and reward profiles which require retailers to tailor their approaches accordingly," says Hana Ben-Shabat, a partner at consultancy A.T. Kearney Inc.
Filling the gap
Many North American retailers start with the United Kingdom when expanding internationally. Consumers speak English there and they're buying online. Web retail sales in the U.K. grew 23.2% in 2010 to 48.8 billion pounds ($78.4 billion) from 39.6 billion pounds ($63.8 billion) in 2009, says trade group Interactive Media in Retail Group.
Apparel is one of the fastest-growing online segments, says IMRG managing director David Smith. "The online apparel space is growing at a rate of 40% annually and recognized brands such as Gap see that type of growth and want to create more market share," he says.
Gap, which has been selling online in the U.K. and nine other markets, announced this year plans to expand into eight more European countries, part of the retailer's plan to use international expansion to add $1 billion in new annual e-commerce sales and more than $500 million in operating income within three to four years. Gap, which posted web sales of nearly $1.3 billion in 2010, expects e-commerce and international operations to account for about 30% of revenue by 2013, says CEO Glenn Murphy.
When Gap goes live in a new European country, it first offers shoppers access to its English-language sites, then builds localized sites with local-language content and local currency payment options.
Gap is also expanding its physical presence, with 530 stores in 30 countries. But with a growing number of vendors providing local delivery and payment options, e-retailers can quickly expand online without a local bricks-and-mortar footprint.
For instance, Williams-Sonoma's youth-focused version of Pottery Barn, PBteen, is working with a fulfillment vendor to sell online in more than 75 countries.
Consumers can pay in dozens of currencies, and see prices that include taxes, duties and shipping costs based on the consumer's location. A consumer in Argentina, for example, clicks on a "shipping to" label on the site and then on the Argentine flag to select her preferred currency, the Argentine peso. When the consumer checks out, the applicable shipping, duty and tax amounts appear.
The retailer's international orders go to the vendor's U.S. hub, which then ships items to their destinations. Average delivery times for international orders are five to seven business days, according to PBteen.
"This is the first time PBteen will be accessible outside the U.S. and within easy reach of customers in over 75 countries worldwide," says Janet Hayes, president of PBteen. "Additionally, our loyal U.S. customers will now have the convenience of being able to ship to friends and family all over the world."