Growing internationally is a great goal for retailers. When the entire world is out there, why wouldn’t you try and get a bigger piece of the pie by simply increasing your market size? But pushing into an international market comes with its challenges, many of which brands tend not to consider before making the leap.Growing internationally is a great goal for retailers. When the entire world is out there, why wouldn’t you try and get a bigger piece of the pie by simply increasing your market size? But pushing into an international market comes with its challenges, many of which brands tend not to consider before making the leap.
Here are some key considerations to work through before deciding if launching into international markets is right for your business.
Shipping & returns
Do we have the logistics in place to get your products from New Zealand to the other side of the world within a reasonable timeframe (and at a reasonable cost)? Then, once the customer receives the product and they want to send it back, do you have something in place to allow them to easily return it to you?
Australia isn’t really an issue here as it’s easy to ship there, and receive returns back. But when you start looking at the US, UK and Asia, things get a bit more difficult.
Customers in these markets have the expectation of speed. They are used to receiving their online purchases within 24 hours or less. It’s very hard for us to ship something to the other side of the world that quickly, without it costing a fortune. A fortune that the customer most likely won’t want to pay as they aren’t familiar with shipping charges that high, and something the brand doesn’t necessarily want to cover unless they’ve factored it nicely into their margin already.
There are a few solutions. The easiest is around setting the expectations of the customer. Asos does a great job of this. I can buy something with standard shipping that might take two weeks to get to me at no cost, or pay an extra $40 for expedited shipping. Now I (being the customer) am the one making the decision around how quickly I want to receive the package, and how much I’m willing to spend to get it to me. Returns are still a bit annoying in this situation, because it still tends to be at my cost unless it’s faulty.
The next, more advanced solution requires a lot more infrastructure in place. If you were looking to push into the US, you could look to get a local third-party logistics (3PL) company to help you out. They would hold your stock, ship out your local US orders, and act as a return point for any customers who change their mind. Naturally, this requires you to ship your product up there in the first place, but does give you the benefit of speed and ease for the customer.
Customer Service for many brands is their key differentiation point. Retailers are renowned for going over and above for customers, and brands are trying to do the same, offering a highly personalised level of service. With this comes things like live chat, follow up phone calls and personalised e-mail communications, all of which are hard to do if everyone in your team is in bed while your international customers are shopping.
Customer service isn’t a reason to not expand internationally, and likely won’t be a big consideration to start. But as your brand continues to grow into new markets, this will become an increasingly more important problem to solve.
Seasonality is an interesting consideration when it comes to international expansion. When we’re in the heat of summer, it’s the middle of winter for the northern hemisphere. The last thing they’re thinking of is buying a summer outfit, and are probably looking for a nice thick coat. All your thick coats are either long gone, or are at a heavily reduced price, reducing your margin dramatically for international purchases (and once shipping is factored in, it could actually lose you money). How brands tackle seasonality is a tricky one.
Some brands will create microsites or localised websites that have different stock online, with different pricing. In this situation, you would be able to have all your summer stock online, with winter on sale for New Zealand, and the opposite for the US or northern hemisphere market. This requires planning and resource to manage but is the most effective solution. Alternatively, some brands ensure they always have a good product mix that works across multiple seasons.
There are two considerations around currency. The first is the currency presented and billed, and the second is RRP vs converted.
In New Zealand, we’re used to paying for purchases in AUD, USD or GBP and we all have a rough calculation in our head. People in the UK and US are not familiar with paying for purchases in NZD. So when we present all our pricing in NZD and bill them in NZD, they don’t really have a strong frame of reference for how much that’s going to cost. It also might make them consider their purchase more as they’re now thinking about how long it might take to get their order, what happens if they want to return or will anyone answer the phone if they call.
Selling in the local currency is a great way to introduce an element of comfort for the customer and ensure he or she can run through the purchase process without too much thought.
RRP vs converted is another key consideration. This concern tends to only affect brands that have stockists in those international markets who are selling at an RRP. If your online store is converting prices based off your NZD price, and it happens to be a good day currency-wise, you’ll be undercutting your local stockists in that market. They tend not to be happy about that.
If you set your international prices at RRP you’ll have control over what prices are presented (no one wants to see things for sale for $114.47 USD), but you’ll also keep you local stockists happy as you’re not seen to be undercutting them.