Internationalisation is a way of improving returns and gaining new customers away from saturated home markets. Even smaller shops can tag along if they have a good outsourcing strategy: a make or buy schedule for expansion.
Opening up in a foreign market with an online shop requires localisation, marketing, fulfilment, returns management, customer service and much more besides - which is really not so simple to do in a country where you probably don’t reside, your company has no offices and you aren’t exactly fluent in the local language.
So an online shop operator quickly has to contend with the following problem, which processes and services they will themselves provide and which they would like to outsource. What is the cost of keeping services in-house? What’s best handed over to a competent local partner? There’s also no simple solution to the classic make or buy dilemma in the field of e-commerce.
In the first instance, even in foreign markets, many retailers automatically feel that they’d like to do everything themselves. Work on localising the website is quickly begun and customer service can for the time being be provided remotely - you’re sure to find a couple of native speakers. However, what may at first glance seem uncomplicated is - a question of the correct assessment of order quantities, turnover, customer contact and logistical challenges - if you want to do it well and if it’s to be worth it.
At Salesupply we’ve learnt that over half of our customers initially wanted to expand on their own. The decision in favour of outsourcing services was only made after realising that support and local know-how in a foreign market could be very advantageous.
Global or local?
The buy strategy, namely, the outsourcing of services to an external service provider, requires less capital expenditure, frees up internal resources and is often flexible when demand is not static. In spite of this, many retailers worry about the loss of control regarding quality and their brand image - after all with outsourcing those often entrusted with important parts of the project aren’t employees of your company.
If one decides in favour of the make strategy, one must appeal to the internally available capacity and lay out the necessary capital, to ensure a good localisation of the online shop, which should also include customer service in the national language, the most popular payment methods and the desired know-how about the target market.
Example of a centralised approach: Zalando
Large retailers with lots of capital like the pure player, Zalando often decide in favour of a centralised location and get the necessary staff to come there. Doing so raises the employee’s loyalty to the firm and helps maintain integrated supervision on all company activities. However one is thereby distanced from the local market as there’s no direct contact with it in day-to-day business.
Example of a decentralised approach: Conrad
The example of the firm Conrad Electronic on the other hand shows a decentralised strategy: in every target market they also open a subsidiary; both of these are, on the one hand, time-consuming and labour intensive, and on the other, very costly. The Japanese online giant Rakuten is a little off-kilter, but ultimately buying up and rebranding local retailers in the end also translates as: in-house internationalisation. For many smaller retailers none of these options is even under consideration.
Questions of trust: payment methods and contact information
Once you’ve decided on a market, this then means wooing and keeping customers. The first (but surely not the only) step is a localised website. This should clearly be focused on the local customers and in no case look like a poor imitation of the German site. Offering locally preferred payment methods is part and parcel of this step. To this end, you often need to have a local bank account. Even your address and telephone number should be country specific. And if, like the majority of online retailers, you don’t have an office at this location, this can be difficult: without an address, it’s often impossible to get a telephone number or a bank account. Here it is often advantageous to work with a service provider that can take care of everything. In this way, you can spare yourself the painful search for solutions or even just the work of engaging with several different providers.
Customer service: tailored solutions, not mass produced goods
Whilst payment methods and an address are simply placed on the website, there are also still more important moments, in which your new foreign customers get in direct contact with you. And nothing is then more important than that your customer feels understood and has the feeling that they’re being helped. The key here is offering customer service in the local language. Naturally the following question is raised: how can a company fulfil these requirements?
Taking on personnel locally is costly and from a distance it is often very complicated. In Germany the market for qualified native speakers is occasionally flat. If one outsources the customer service, one is parting with an important element of customer contact. The expertise in the products, the brand and the strategic links to the rest of the company are seen by many retailers as decisive factors, in keeping customer service in-house. Ultimately every entrepreneur will have to evaluate this for themselves, whether their company is financially and organisationally sound enough to be able to conduct customer service operations in a foreign market to a sufficient standard. If this is not the case, co-operation with an internationalisation partner can also provide relief here. Here one should take care that the customer service provided is not a ‘mass produced product’, but instead that the service provider really delivers a customised product and that they understand the identity and the image of your company and can also deliver on this message.
For online customers it is important to know that they can trust the retailer. This also goes hand in hand with the customer knowing how they can send back an unwanted order and how to obtain a refund. If something goes wrong, it will be difficult to keep the customers. Returns are an important element in creating trust. Always offer your customers a local returns address. Ask yourself the question: how would you like to complete returns management? How quickly can you process returns abroad and how much convenience can you offer your customers? Can you keep up with local providers?
Scalability: make or buy? That is the question
Retailers decide in favour of ‘making’, because they feel that they have sufficient capacity and resources in-house; and they decide in favour of ‘buying’ because they don’t want to invest in difficult to assess market developments. This often works out ok, but in 10 % of the cases in which the decision was incorrect, this often has long-term consequences. Online retailers often feel that they can enter a foreign market with half the manpower. What happens, if demand soars rapidly? Then you’ll need more personnel. If the market worsens, these employees will again have to be made redundant. Such uncertainties speak in favour of a ‘buy’ strategy. A service provider that can offer you flexibility, allows you to invest in the expansion, only what the (expected) returns also really allow. Scalability is accordingly an important topic for internationalising online shops.
Ultimately it needs a thorough analysis of the capacity of your own organisation, so that you can decide, whether one ventures into foreign markets on one’s own or with a service provider. Although it often seems that a service provider is costly, one should assess - which costs await the company if demand should increase and how flexibly one can react to the market. However you decide, don’t forget: first impressions count. If you disappoint your new customers in a new market, it’s difficult to win back their trust.
This article has previously been published in the iBusiness magazine in Germany.