The acquisition will add more than 300 products to L’Oreal’s lineup.
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The company is initially working on its business-to-business strategy because of the way India has set up its government regulations for e-commerce. Today foreign companies must comply with regulations that only allow foreign companies to develop a business-to-business e-commerce organization with a single brand or own more than 51% of an Indian retail organization. Foreign investors also must agree to make an investment in infrastructure improvements and use local businesses as part of their supplier network.
In 2011 Vistaprint acquired Printbell, a Mumbai-based printing products and business-to-business e-commerce services company, for an undisclosed sum. Vistaprint has since invested more than $5 million into the operation and renamed it Vistaprint India Marketing Solutions Pvt. Ltd.
The acquisition helped Vistaprint avoid several long-term startup challenges, Inkster says. By acquiring a local company with existing production facilities, affordable labor and an expertise in building an e-commerce business in India, Vistaprint was able to get its Indian operation up and running in about a year. India contributed to Vistaprint's Asian sales that grew 44% in 2012 to $61.2 million from $42.5 million in 2011, making it the company's fastest-growing region. Vistaprint didn't break out specific numbers for India.
"In India, we purchased a company, made significant investments in both the web site and manufacturing, and are looking for rapid organic growth going forward," Inkster says. "Acquiring Printbell gave us the foundation upon which we can grow and enabled us to move more quickly than if we had started purely from scratch."
Other U.S. retailers also are choosing to make acquisitions or form joint ventures to facilitate entry into Asia-Pacific direct-to-consumer e-commerce. In October, Wal-Mart received final approval from the Chinese Ministry of Commerce to acquire a 51% stake in Yihaodian (No. 42), a Chinese mass merchant site with annual sales in excess of $220 million. And in May, Macy's invested $15 million in VIPStore Co. Ltd., a China-based online retailer of luxury and fashion brands.
Macy's had been selling online in China and elsewhere in Asia through an agreement with FiftyOne Inc., which delivers goods worldwide. But Macy's made a specific investment and marketing deal with VIPStore to develop a deeper understanding of Chinese web shoppers, which could total as many as 400 million consumers by 2017, research firm eMarketer Inc. projects. "VIPStore gains us additional experience in the fast-growing Chinese market and to better understand how consumers across China interact with the products we sell," says Terry J. Lundgren, Macy's CEO.
Without a thorough understanding of how consumers shop online in a particular Asian country, it's tough even for big U.S. chain retailers to build a sustainable e-commerce base, says Jim Okamura, managing director of Chicago-based retail consulting firm Okamura Consulting. In September, The Home Depot Inc. announced plans to close its seven big-box stores in China as a result of weaker than anticipated consumer acceptance of Home Depot's do-it-yourself retailing strategy, Okamura says.
Home Depot says its future e-commerce plans will involve developing more relationships with established Chinese online retailers, possibly including 360Buy Ltd. (No. 3), a mass merchandise site with annual Internet Retailer-estimated web sales of $9.63 billion. "U.S. retailers have a flawed plan if they try and enter Asia without knowing how to create a really unique online experience for local shoppers," Okamura says. "It can be very tough to go it alone."
Follow Amazon's path
To be successful in Asia-Pacific web retailing, particularly in Japan, U.S. web merchants should look closely at Amazon.com, which likes to enter a country early and with an e-commerce initiative that includes a fully developed product inventory, customer service program and web site features built entirely around local shoppers, Okamura says.
In 2000 Amazon was one of the first U.S. online retailers to enter Japan. But rather than learn and sell in a foreign e-commerce market as it went along, Amazon first studied the buying and web site navigation habits of nearly 193,000 Japanese consumers who were already steady customers on Amazon's U.S. site. Amazon then developed and launched Amazon.com.jp as a book store entirely in Japanese and with an extensive inventory of about 1.7 million books from mainly Japanese authors or popular titles translated into Japanese.
At the same time it was building an e-commerce site, Amazon also opened a headquarters in Tokyo, and a regional distribution center and customer service center. Amazon's research and early investments in Japan are paying off, says Scot Wingo, a veteran Amazon watcher and CEO of ChannelAdvisor, a U.S. company that helps retailers sell online at marketplaces such as eBay Inc. and Amazon. Today Japan is Amazon's second-largest foreign market with sales that increased 18.7% to $7.80 billion in 2012 from $6.57 billion in 2011. Japan in 2012 also accounted for about 26.2% of Amazon's international sales of $29.80 billion and 12.8% of total sales of $61.09 billion.
"Amazon likes to do its homework and make a big enough investment in all the right things to position itself to grow as the market grows," Wingo says. "That strategy has worked for them very well in Japan."
Today Amazon operates 11 Japanese distribution centers and carries about 50 million products on Amazon.com.jp, the company says. Amazon isn't the biggest e-commerce company in Japan—with 2012 Internet Retailer-estimated sales of about $9.76 billion, Rakuten Inc. (No. 2) is the market leader. But Amazon keeps rolling out new initiatives to keep its Japanese operation expanding.
In October Amazon began selling its Kindle Paperwhite and Kindle Fire tablet computers and opened a Kindle book store selling digital content in Japanese. In 2012 Amazon also added more products to its fashion and foods product category and looked for new fulfillment space to expand same-day delivery to more of western Japan. Today Amazon offers same-day delivery in Tokyo and about a dozen other cities. "Amazon is setting the bar a lot of other U.S. and Japanese retailers will have to meet," Wingo says.