E-Exports: Marketplace, what are the specific risks you may face?

The marketplace strategy is generally the first strategy that comes to mind when considering e-exports. However, expanding globally through marketplaces is not as simple as it may seem. Let’s take a look at the factors that must be considered before implementing this model. 

Marketplaces reflect wide differences from country to country when it comes to target segment, functionality and required entry conditions. Moreover, each marketplace has different bidding and marketing strategies. For example, many marketplaces in Russia do not allow entry if the brand / supplier does not have a warehouse in the country. Therefore it is important to create a benchmark analysis to unlock and understand which marketplace is suitable for your brand.

The benchmarking analysis should include many different dimensions such as; product portfolio fit, analysis of competitor brands within the same marketplace, pricing analysis, entry conditions, marketplace specific risks, and risk management strategies. 

Examples of marketplace specific risks that a brand may face include the following: 

  • Brand Image: A brand’s image can be negatively affected if marketplace partners are not carefully selected and managed. 
  • Price Control: A clear pricing policy must be defined. This policy must be developed with accordance to  other sales channels. Moreover, it is important to be aware of the flexibility that a marketplace offers with regards to promotions and price changes. 
  • Marketing Investment: Optimising your brand’s marketplace presence can require intensive marketing efforts and investment, to secure popular search keywords. Therefore, ROI must be closely monitored in order to optimise such efforts. 
  • Hidden Costs: Marketplaces can involve hidden costs, therefore it is important to ensure that all costs/fees are clearly set out. 
  • Logistics: An important point is to be able to effectively manage shipping, returns and customer service. Such operations are more challenging in global markets due to factors such as legal requirements. It can be helpful to work with a partner that manages your marketplace presence.

If these risks are taken into consideration and the right strategies and partnerships are developed when implementing this strategy, marketplaces can be very advantageous. Inveon’s GrowthLab department offers e-export services to its customers by implementing not only the marketplace entry model but also franchise and direct exporting strategies. 

In our next article we will discuss the risks of e-exporting through a franchise model, tune in!

Unlocking E-Export Potential

Just like the line between online and offline shopping, the line between borders are also blurring. Now that consumers have access to a wide choice of brands from abroad, it is a necessity for retail companies today to exhibit their products to global markets.

Currently, there are more than 2 billion online shoppers in the world, generating almost $3 trillion in global e-commerce volume. According to a Forrester report, cross-border e-commerce sales will reach $627 billion by 2022. This increase is expected to account for 20% of e-commerce sales as a whole generated throughout that year.

According to the IPC, the volume of e-export is increasing by 25% a year – almost twice the growth speed of domestic e-commerce. Even now, retailers who start their cross-border sales have 10 to 15% annual increase in their sales. Moreover, 1 in every 5 international shopping basket size totals more than $200 in value. Even in Europe, which is a highly saturated market, cross-border e-commerce share has increased to 13.2% in 2018, reaching an amount of €137 billion.

All of these exciting facts show that e-export presents many opportunities for retailers. With the development of digital commerce technologies, launching an international selling channel is easier than ever. However, many companies attempt to cease the advantages of e-export without being fully aware of the issues they might face leading to failure in a short period of time.  

Inveon’s GrowthLab team, who helps many companies export their products online, argues there are two essential factors to achieve e-export success: choosing the right market and the right portfolio.

Choosing the right market

Any company can export its products worldwide today through online channels, but when it comes to a continuous exporting operation, the right markets to operate in must be carefully chosen.

To make the right decision, retailers should define the market first, in terms of demography, location and culture, affecting the needs and wants of consumers. After that, a detailed market analysis should be performed to provide retailers with a bigger picture, helping them see their potential positioning in the market.

An in-depth market analysis has many dimensions such as recent retail trends, potential competitors, growth rate of online sales and average basket size, as well as forecasted demand and potential barriers to entry. It also includes information about the most sold products in a certain market, customer habits and customer perceived value. All of these multidimensional market data is then used for choosing the right portfolio. Inveon’s GrowthLab department takes a look at all these metrics whilst keeping in mind operational excellence when preparing a market analysis.

Graph 1 represents an example of two of the metrics, online consumers and average annual spending, that GrowthLab uses in order to conduct a market analysis:

Choosing the right portfolio

The data provided by the market analysis will be used as a valuable tool in understanding the customers, which is one of the key factors impacting cross-border success. With the customer data, customer personas are created to help companies understand what products and services will be attractive to which customer group. It also helps companies forecast future demand and plan their potential scale. In the meantime, the gap between the customers’ needs and the current market offerings provides a great market opportunity.

GrowthLab performed a market analysis for a client operating in the home textile industry who wants to enter the EMEA region. By taking the market data into account, the team created customer personas and how they will perceive each product in the portfolio. The results show that because home textile is culturally a social status indicator, the more affordable products such as basic linens were not preferred by the customers and therefore sales did not reach its full potential. Moreover, the results indicated that the prices should have been doubled, while the products should have complied with the latest trends.

Graph 2 represents a forecast of the market share of different home textile products in the EMEA region. This is an example of one of the many market features that GrowthLab analyses when looking at market data.

Conclusion

There is no one-fits-all solution to e-export plans. Success of each action depends on the company’s unique internal and external factors. In order to minimize the potential risks, a comprehensive market analysis backed by solid data is the key.

GrowthLab performs the market analysis for companies and helps them define their market entry strategy in terms of entry model, product portfolio, pricing, inventory and 3rd party management. With its analytical approach backed by data of more than 40 million users from 90 countries, it minimizes the risks of entering a new market.