Ahead of a Demandware webinar on December 4 discussing how cloud-based commerce technology can help a business expand to global operations, Robert Fort writes about why global expansion is such a good idea.
Globalisation has radically transformed the retail world. Consumer online global spend has fuelled much of this change with 2013 sales expected to reach $1.3 trillion, a growth rate of 18.3 percent over 2012. While global expansion presents great opportunities for most brick-and-mortar and pure-play retailers, it is an unknown territory for many. This paper provides reasons for global expansion, key geographies to target and a best-practice global commerce framework to ensure faster and more efficient growth.
Retailers are engaging in global commerce expansion, particularly online, for several reasons:
- Global markets fuel new revenue and growth. Online retail growth rates
are growing at a double-digit revenue increase pace worldwide, particularly in emerging markets, such as China, Turkey and Russia, all of which expect to
grow at 30 percent or more in 2012 and beyond. Consequently, retailers use expansion abroad as a key lever for growth. Success is predicated on the ability to rapidly launch and scale new sites for new brands in target countries by leveraging existing investments in technology, partnerships and integrations.
- Online expansion provides a cost-effective approach to test and expand. Online entry offers some retailers the ability to complement existing physical locations, while for others it’s a way to test brand strength in a new market before investing in brick-and-mortar stores. The fixed cost to establish a virtual presence is small compared to a physical presence. The retailer can sell its products, market its brand, build customer relationships and interact with consumers without significant risk and capital outlay.
- Global expansion is easier than ever before. In The World is Flat, Thomas Friedman described how the world has become a level playing field in terms of commerce, where all competitors have an equal opportunity. Historical barriers that once hindered global expansion—such as technical limitations, regulatory hurdles and fulfilment processes—are now falling. Leading retailers have taken advantage of this easier path to gain a competitive foothold in global markets.
Historically, many retailers have taken a North America or Europe- centric approach to global expansion—and for good reason. Of the $1.3 trillion in online spending worldwide expected in 2013, about 61 percent is expected to come from North America and Europe. Yet other regions of the world, particularly Asia-Pacific (APAC), are growing at a faster rate than North America or Europe. The trend is shifting expansion towards the emerging regions.
Retailers should consider each region, but more specifically look at individual countries, in terms of both online growth and online maturity level since each country will differ.
- North America and Europe continue to present prime opportunities for expansion. Ecommerce continues to grow
at a strong pace in North America and Europe, including an expected average annual growth rate of 14 percent from 2011 to
2017 in the US and 10.5 percent from 2010 to 2015
in Western Europe. The UK, Germany, France, Spain and Italy are experiencing the highest growth rate among Western European countries. Growth opportunities also exist in Eastern Europe. Russia leads the way touting a market size of $10.3 billion in 2012—the largest in Eastern Europe and the fifth-largest market in all of Europe.
- Asia-Pacific has quickly become the new engine for worldwide growth. With an expected 33 percent annual average growth rate expected between 2010-15, APAC is the fastest growing ecommerce market in the world and a must place for many retailers. In the past, Japan fueled the majority of that growth. While Japan remains important,
China, with its expected 94 percent annual average growth rate from 2010 to 2015, is now top of mind for many retailers. Other countries, such as South Korea and Australia are also attractive APAC markets.
- Latin America is growing in importance. Latin America, with its expected annual average growth rate of 24 percent between 2010-
15, increasingly is on the radar for expansion for many retailers. Brazil may be the first country targeted due to its $21.7 billion ecommerce market size forecast for 2013. Mexico and Argentina are other regional powerhouses that often make it to the top of the list for anticipated expansion.
- The Middle East and Africa are potential areas of opportunity. Not to be forgotten, the Middle East and Africa present potential areas of opportunity for global expansion, particularly countries such as the United Arab Emirates, Qatar, Israel and South Africa. Certain verticals, such as luxury and apparel companies, thrive in these markets. However, many retailers have opted not to enter the region largely due to small market sizes, complications in site navigation due to right-to-left languages (such as Arabic), as well as infrastructure challenges. Over time, as the market matures, more brands will target expansion in the region.
Robert Fort is a Computerworld Premier 100 IT Leader with over 30 years of Information Technology development, innovation, and Senior/C-level management experience. He has championed and implemented some of the earliest and most successful ERP, real-time business intelligence, retail kiosk, voice-over-IP (VoIP), system management, and eCommerce/omni-channel implementations. Robert has experience in the entertainment, consumer package goods, hospitality, and most recently, retail industries, where he was the CIO for Virgin Megastores, Divisional CIO for Guitar Center, and Interim CIO for Wet Seal. He currently consults with a variety of retailers and systems providers.
For more insight into exactly how you can expand into these markets, be sure to sign up for Demandware’s upcoming webinar, Leveraging Cloud To Effectively Engage Online Customers, taking place on December 4, hosted by Robert Fort and Demandware Strategy and Business Insights VP Rob Graf.