If there's something you've bought offline that you weren't able to buy online, we're probably thinking about that.”
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U.S. consumers were among the first to shop heavily on the web, but consumers in many 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 and reach an estimated $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 new market presents its own challenges in terms of language, custom, payment methods, taxes, regulations and delivery. “There is no ‘one-size-fits-all’ formula for global expansion,” says Hana Ben-Shabat, a partner at consultancy A.T. Kearney Inc. “Different countries are at different levels of development and have different risk and reward profiles which require retailers to tailor their approaches accordingly.”
For many North American retailers, the United Kingdom is the first stop when expanding internationally. Not only do consumers speak English there, but they’re buying more online every year. Online retail sales in the U.K. grew 23.2% in 2010 to 48.8 billion pounds ($78.4 billion) from 39.6 million pounds ($63.8 billion), according to Interactive Media in Retail Group, a British e-retail trade group. Online apparel is one of the fastest-growing segments of online retailing in the U.K., 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,” says Smith. “It’s a nice niche, but the competition is mounting daily. The fact that the Gap name is well known here gives them a head start.”
Gap, which has been selling online in the U.K. and nine other markets, announced this year to expand sales into eight more European countries. The move is part of the retailer’s plan to use international expansion to add about $1 billion in new annual e-commerce sales and more than $500 million in additional operating income within three to four years, the retailer says. Gap, which posted web sales of nearly $1.3 billion in 2010, says it expects its e-commerce and international operations to account for about 30% of all 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. It then builds localized e-commerce sites with local-language content and local currency payment options. To make it easier to shop all brands, the sites feature Gap’s universal shopping cart technology so that a consumer buying on a Banana Republic site, for example, can then add items from the Old Navy site and check out once.
Gap is also expanding its physical presence, with 530 stores in 30 countries. But with a growing number of vendors offering support for local delivery and payments, e-retailers can quickly expand online without a local footprint.
For instance, Williams-Sonoma’s youth-focused version of Pottery Barn, PBTeen, recently launched an international sales program using a fulfillment vendor. That’s enabled the retailer to sell online to shoppers in more than 75 countries.
Consumers can pay in dozens of currencies, and the web site shows a price that includes 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 Argentinean flag to select her preferred currency, the Argentinean peso. The exchange rates are updated daily and prices are guaranteed at checkout. When the consumer checks out the applicable shipping, duty and tax amounts appear.
The retailers’ 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.”
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