I saw a great quote at the airport today while returning from an e-commerce conference. It was from HSBC and said, "One day there won't be any emerging markets." It got me thinking about global expansion and how brands go about it.
Everybody wants to expand globally, and usually a company has a good feel (and good information) on where to go second or third after its primary market, but it tends to get cloudy after that.
Sometimes there is a huge grey market for the goods and it is blatantly obvious the brand should be present: think Nike or Levi Strauss. Other times, it seems like a massively risky guess; the Fresh and Easy expansion in the U.S. comes to mind.
The conversations generating the most buzz these days around globalization in my arena, fashion and apparel, is e-commerce. Amazon is doing a good job of proving there is just one big market and, as Thomas Friedman said, the world is flat. However most companies aren't Amazon and simply shipping globally from a domestic warehouse is not the "solve all" solution that everyone wants it to be.
To succeed in a market, I believe you must execute that market as well as (or better than) you would a domestic market. That means customer service, translation, payment methods and an overall level of service that simply will not be achieved merely by shipping product from the U.S. to overseas markets. You may be able to squeeze out a few more percentage points of growth this way but you will never be a true local player in that market.
Vertical players, i.e. brands, seemed to have grasped this concept already. A good portion of major brands are either in or out of running a country and don't tend to run a "ship it from the U.S." type business.
Horizontal retailers such as high-end department stores still seem to be pursuing the "ship it from the U.S." option with a high degree of effort and focus. This is most likely due to the high barrier to entry costs for a horizontal retailer such as Saks Fifth Ave or Neiman Marcus. Segregating inventory and international distribution agreements that manufacturers have in place both are fairly arduous concerns. And on the flipside, the "ship it from the U.S." model actually can work because for these high-end horizontal retailers because AOV (average order value) and margin dollars are very high.
Where do we open our next online store?
So as a brand, if you are going to expand globally with e-commerce, how do you determine where to go? Revenue from global distributors is one indicator, but you may have underperforming distributors in some very lucrative markets.
I believe in two strong leading indicators to determine where you should focus when it comes to international expansion: social and analytics.
I was working with a company that had a very strong Facebook presence relative to other brands in its space, in the 90th to 10th percentile without question. Yet when it came to revenue in its space, it was a lot closer to the 40th percentile than the 90th. The difference? International "likes" from, in this case, Brazil. The Brazilian fan base was disproportionately high, much higher than some very successful markets where the company was operating such as the UK, Australia and Germany. Good stuff, right? But as everyone knows , Facebook likes do not necessarily translate into revenue.
Next up is Google Analytics. For those of you not familiar with the immense power of Google Analytics, have your digital marketing or e-commerce head show it to you. You'll see more information about your customer than you have ever seen from a retail store. Ever.
Google Analytics tells you where your visitors are coming from, down to the city level, how long they are staying , what device they are using (mobile, PC, Mac, etc). Google will tell you who is visiting your site. Which, from my experience, is usually a pretty good indicator of the potential to get them to convert from an e-commerce perspective.
"But wait!" says another hypothetical company. "What about our distributors? Our analytics state the same as the example above but we know Brazil stinks outside of Rio. Our distributor in Brazil does all his business in the cities, and it isn't even that much!"
Which brings me to the point of this story.
I don't believe that simply examining revenue from global distributors is a good way to measure the potential of a market anymore.
With a distributor you are measuring how well they have done their job from a wholesale, and usually a brick-and-mortar, perspective. Can it be an additional indicator? Sure. But a strong fan base and large number of visitors from a country with low wholesale revenue numbers scream untapped potential to me. In many markets, the lack of distribution outside the major cities is a perfect match for an e-commerce initiative.
How much business you have done in the past, and some ancillary opinions from locals are not the only indicators anymore. Leveraging your analytics and social insights can provide new growth opportunities that had previously been shrouded from view.
John Hazen is vice president of global e-commerce for Fox Head, an action sports lifestyle apparel brand.