What Western retailers need to do to go Global
Hugh Fletcher, recently spoke with Nick Eason who was writing a Raconteur report titled "Going Global" in association with The Times. The Report looks at how the waves of technological advances in automation ripple through global trade markets and how brands born in the digital age are prospering while those resistant to change struggle. The special report delves into the proliferation of online retailers pushing digital frontiers in Asia, lessons to be learnt from the rising middle classes of Africa and the havoc terrorism wreaks on economies. Also featured are expert opinions on businesses navigating possible post-Brexit trade rules, the increasing threat of automation to jobs in South Asia and some troubling insights into so-called trademark squatting in China.
Hugh's comments can be found on page 12 of the report within the section "Western e-tailers push frontiers South and East.
Here are Hugh's full thoughts on the questions posed by Nick:
1) Which are the markets being most disrupted beyond the US/UK/European sphere, when it comes to e-commerce, and why?
The best example of a market being disrupted beyond the US, UK and Europe is, of course, China - driven by the online behemoth that is Alibaba. The drive of Alibaba to expand out of the world’s biggest ecommerce market (China) is also clear, and as its impact starts to extend further into south-east Asia, we start to see that the epicentre of the ecommerce war is likely to be waged somewhere between the Indian Ocean and the Pacific.
Alibaba has already taken a large percentage stake in Lazada, the Singapore based ecommerce company, and this was quickly followed by Amazon’s entry into Singapore with its Amazon Prime offering in July 2017. Singapore marks the test-bed for both of these giant’s global expansion aims, and pits them head to head for the first time. Singapore also acts as an interesting market – a melting pot of nationalities, cultures and businesses – where lessons can be learnt fast and the impact of mistakes can be minimised.
The region also allows these retail innovators to apply their ecommerce templates to a region which has marked difference to where they both learnt their trade. These learnings will then help them to inform further global expansion.
2) Have UK-US-European companies historically been misguided that their e-commerce strategies will translate successfully into new markets?
No – but it’s worth remembering that while the growth of ecommerce means it now an integral retail channel, most organisations are still learning the ecommerce ropes, be it their C-level understanding, their organisational makeup, logistics infrastructure, or simply strategic questions about marketplaces, retail enablement or direct to consumer (D2C). There is a distinct difference in experience between the major ecommerce market place players, and organisations establishing their ecommerce ambitions.
For most organisations, almost all of the learning has happened in local markets where risks can be confined and consumers behaviour deeply understood. Therefore, it would be unfair to say that UK-US-European companies have been misguided. Instead, global ecommerce expansion has been limited due to the fear of the myriad factors that need to be considered – everything from the timezone management to data regulations, to delivery, to customs laws, and of course politics.
However, with Amazon and Alibaba’s international push, more and more organisations are realising that their ecommerce (and therefore their business) expansion, lies in offering global ecommerce solutions. The risks are high, but the rewards will be plenty for those who get it right. Key to success is understanding the customer.
Salmon’s own research indicates that 39% of all online spend in the UK is through Amazon, while this figure is 57% in the US. However, if Western companies believe that Amazon’s Western ecommerce template can be applied to the rest of the world, they are misguided. For instance, while India has long been touted as an area for huge ecommerce boom, indications are that FlipKart and Amazon India are still waiting for consumption and demand to increase to fulfil its potential. Whilst in South America, more concentration on price as opposed to service, is in contrast to what is driving success in the US, UK and Europe; service.
3) What can we learn from the vast growth of other economies’ e-commerce markets?
Customers crave innovation – in fact, Salmon’s research indicates that globally, 60% of customers would be more likely to buy with a retailer that they consider to be digitally innovative. But these figures need to be taken with a pinch of salt; in reality, customers crave innovations that make life quicker, easier, and more convenient to them. In the West, this is the Amazon Prime effect. This also marks a shift away from loyalty to Brand, and shows us a future of loyalty to service. In other words, the ecommerce fight for customers will take place over who can offer the best service – be that search, experience, or delivery, and in some cases price too.
That’s why Western retailers need to take note of the rise of organisations offering multiple services through their platforms. Notably in China, innovation has been based on the combining of services – social, ecommerce, messaging, payment – under the roof of single providers. WeChat being a great example. This is both beneficial to the user, but also beneficial to the organisation who owns the platform. Why? Because it reduces the reasons for a user to leave and establishes the ecommerce provider as the default partner for all a user’s needs. We call this “interface imperialism”. And what we know about this approach is that it is key to owning the customers. After all, if you own the interface, you own the customer. If you own the customer, you own the data, and if you own the data, you own the future. This is why so much investment is currently going into the next generation of interfaces – be that voice, gestures, or the brain with the brain-computer interface (BCI).
However, in the West, the personal digital real estate is still fragmented. While online shoppers might predominantly shop with Amazon online, our grocery shopping is normally with another provider, our messaging with another, our provision of music with another, and our payment too. Why, because although the Western consumer likes to consider themselves advanced, in reality, the linear growth of retail has burdened them with historic brand affiliations, and in many cases nostalgia. The adoption of technology also takes a more gradual, linear path, resulting in fewer revolutionary changes in shopping habits. And when it comes to infrastructure, there is more delay in changing and improving due to administration, bureaucracy and legacy. In essence, the digital revolution is slowed by…
The Eastern customer, along with those in emerging markets such as Brazil and India, is more technologically free – we like to call them traditionally futuristic. Their digital adoption is non-linear, hence the proliferation of mobile, but at the same time, their purchase habits can be traditional – preferring direct relationships with vendors, and payments like cash on demand.
So what can we learn? We can learn that understanding customers is key, and that making their lives better – through price, ease and convenience – is the route to success, provided it is based on understanding which of these elements to dial up in which region
4) Can some of the disruptive models of ecommerce we are seeing in emerging markets turn other new markets upside down? (For instance China’s Ant Financial with AliPay moving into India)
There are certainly learnings that can be taken, but the reality is that there is not one winning template for ecommerce globally. Sure, some of the basics like range, speed, delivery are all applicable, but there are also distinct differences. Although we like to consider ourselves a global community, differences exist. They may be geographical, infrastructural, religious, cultural…
Integration and ease of payment will be a universal requirement (albeit the methods of payment may differ). The consolidation of services and products, as is already happening in China, is likely to be seen elsewhere too.
But perhaps the greatest disruption we are likely to see, is the overlap of digital and physical. We are already seeing this in the US with Amazon, and in China with Alibaba. Both of these organisations have realised that the future of commerce in general lies in integrated omni-channel experience. In other words, the pureplays will no longer be playing purely online. Based on data, their deep-rooted understanding of buying patterns will help them to revolutionise the physical store experience by influencing stock (driven by online data), by linking together the online and offline and experiences, and by using their CRM programmes like Prime as the glue to mesh together what happens in the physical and digital worlds. One only needs to visit the Amazon Bookstore to understand how its purchase of Wholefoods can change grocery shopping, and Alibaba’s purchase of the Intime Retail department store has the same aim.
5) What is different about the models and modes of success we are seeing elsewhere?
Although it sounds obvious, the models of success that we are seeing are those that work alongside what the consumer wants. Perhaps the greatest driver of success for the ecommerce innovators has been their ability to deliver customers the products wrapped in the services that they need. Although most organisations claim to be customer centric, most decision making is not driven by customer data.
That means that understanding your customer is key. In China, it might be about offering products via ecommerce interfaces that guarantee authenticity. In the West, it might be about getting the product as quickly as possible. In Brazil, it might be about appealing to the price-sensitive nature of the online audience.
While the principals of range, ease, convenience and speed are all applicable, it is the nuances of the market and the local customer that will define the success of the ecommerce offering, and how successful it is. A global ecommerce company that understands and can tailor its offering according to the local customer nuances is a global ecommerce company that will succeed.
6) How can they impact what’s happening closer to home?
If by closer to home we mean the UK, then the key learnings that we will start to see are:
- The development of one-stop shops for all ecommerce, social and payment needs.
- The overlap of the digital and physical stores into data-driven shops – be they online or offline with customer data as its glue.
- The usage of physical stores as mini-distribution centres leading to consolidated shopping experiences.
- The fight back from the Brands through D2C to try to regain control of their customers and their relationships.
- Further partnerships and acquisitions from the digital innovators across a variety of verticals.
- Investment and introduction of new interface technologies – such as voice, gesture and brain – to own the interface with the customer.
7) Internationalisation, scaling-up and multi-market strategies are vital for e-commerce businesses to be successful. What strategies, ideas, opportunities and disruptive models from emerging markets are worth studying?
- Payment – applying a Western view of what constitutes good payment will not be successful globally. Incorporating more traditional payment methods will open up more markets.
- Investment in logistics and delivery will be key. But delivery will need to be approached differently in different markets. Take Grab in Malaysia as an example – they identified the key role of mopeds in transportation, so built this into their ride-hailing offering.
- Consolidation of services – offering ecommerce, social and payments functionalities under one interface.
- Merging of online and offline – how the pureplays will no longer stick to being pure plays but will use their data to revolutionise physical retail.
Salmon works with leading companies to keep them ahead in an increasingly digital-first world. We'd be delighted to discuss how we can support you with your global ecommerce expansion.