- The opportunity for Australian retailers to grow their offering to international markets is ripe with the global e-commerce market set to reach USD$1285 billion by 2015.
- Retailers looking to globalise their offering need to invest in robust and agile technologies and business systems that will allow for growth.
- Paths to globalisation need not be complicated, but can be tested through alternate channels and third-party marketplaces.
Where country barriers used to represent hurdles for business, the digital age has made mockery of these boundaries – overcoming locational and time differences to open up markets and opportunities. This is particularly evident with the retail industry, which is experiencing the benefits of the dissolution of these borders.
For many Australian businesses, fighting for market share locally and still grappling with the overwhelming wave of digital commerce – globalisation and/or internationalisation is usually not given priority or consideration when developing the online retail offering. However in the long-term this may be a crucial mistake, especially for those companies looking to future-proof their business models.
From a consumer perspective, whether buying locally or internationally, the purchase process is relatively seamless and (if optimised) doesn’t register any recognition of where the transaction originates from. The ability to direct customers to a localised site, whether through language, currency, products, etc., allows savvy retailers the opportunity to capture consumers beyond borders. But it’s not just these localised experiences which are snagging Australian consumers. It’s the offer of fast and free delivery, lower prices and a better online experience that hooks them and keeps them going back.
Opportunities abound locally and internationally
Despite reports of a downturn, international heavyweights such as IKEA, TopShop, Etsy and ASOS have moved boldly into the seemingly lucrative Australian market; with the likes of Amazon, H&M, UNIQLO and ModCloth rumoured to be following.2
Illustrating the depth of the international opportunity, Amazon.com which, ‘strives to be Earth’s most customer-centric company where people can find and discover virtually anything they want to buy online’, has successfully infiltrated 241 international markets3, growing its global sales by 46.2 percent in 2011.4
This, coupled with results from UK-based fashion giant ASOS, reporting that its international sales now account for 59 percent of its total retail sales5 (with Australia being it’s second largest market) – paint a very promising picture for local retailers of what global retail opportunities await them.
Not only evidenced through the spoils of these global competitors, research by the International Data Corporation (IDC) indicates that the global e-commerce market is set to reach USD$1,285 billion by 2015 at a CAGR of 12.7%.6
In support of these findings, another global research project by WorldPay, exploring consumer attitudes towards online shopping, revealed that globally 64 percent of shoppers would consider spending more than 50 percent of their disposable income online.7
However, despite having the highest internet penetration of all of the countries surveyed, only 18 percent of the Australian sample spent their disposable income online. Whereas opportunities with higher potential for growth were revealed within developing economies such as Brazil, China and India, which all exhibited a notably high disposable income online spend (27, 31 and 36 percent respectively).
Considerations for globalising your offering
Perhaps the best examples of globalisation lie with retail counterparts in the UK and Europe that have had the luxury of proximity, plus similarity of culture and economy when growing their businesses across borders.
One such example is Swedish furniture retailer IKEA. Although not strictly an online example, the retailer has managed to take its big-box model to over 388 countries world-wide tackling the challenges of multiple languages, operating systems, processes and technology. Although implemented in the 1990’s IKEA’s accounting system is common across all of its markets, integrating with other business solutions including merchandising, freight invoicing and payroll. The solution also accommodates for multiple languages, currencies, taxes and regulations – which would undoubtedly be helpful when moving into international markets.9
Learning: It’s important to invest in robust and agile systems, which are able to offer ‘multi-everything’ support and grow with your business needs.
Another key consideration for internationalisation and seemingly a constant pain point for Australian retailers is supply chain. In the Gartner Supply Chain Top 25 for 2012 report, Apple, Amazon, McDonalds, Dell and Proctor & Gamble were named in the top five.
Awarded number one for the past three years, Gartner analysts identified Apple as having a ‘combination of operational and innovation excellence’, with ‘a zealous focus on starting with the consumer experience and working back through the design of its supply network’.10
Of Amazon, Gartner analysts said that the retailer is ‘a great example of an “orchestrator” that goes beyond simply borrowing and adapting others’ best practices and consistently defies conventional wisdom’.
In addition to the top 25 list, Gartner identified three notable trends across supply chain leaders that included a continued focus on supply chain resiliency, simplification and ‘multi-local’ operations.
Focusing particularly on ‘multi-local’ operations, the research found that supply chain leaders are shifting from a centralised global supply chain model, to a regionalised approach, where capabilities are placed locally, but architected globally. This is in response to balance the trade-off in their supply network designs between global economies of scale and the demand for local responsiveness.
Learning: Approach globalisation of supply chain operations with the customer at the fore, taking into consideration that your systems should allow for flexibility and agility as your business grows.
Closer to home book retailer, The Nile, took a different approach to entering into international markets via online marketplace eBay. This approach is similar to that adopted by UK-based department store House of Fraser.
Speaking to Power Retail about this approach, Jethro Marks, Co-Founder and Director of The Nile commented that, “It’s a very instant way to get traffic and understand whether or not your market is going to respond to what you’re offering… In the short term it works because you’re validating whether or not your business plan has got traction.”11
Learning: Investigate all possibilities to internationalise your business – it may not necessarily be the direct approach that yields the best results in the short-term.
Harnessing the power of retail globalisation
With the Australian online shopping market forecast to reach AUD$21.7 billion and the global market set to reach yield USD$1285 billion by 2015 the opportunities for Australian retailers both locally and internationally are booming.
The key to succeeding in any market is by keeping the customer at the fore, while investing in robust business systems and technology that allow agility and flexibility for growth.
Considering Australia’s reach and strong ties to Asia, the chance to expand (particularly within India and China) present especially lucrative opportunities for businesses willing to venture into these territories. Perhaps the largest challenges will come in navigating the political and cultural landscapes within these markets.
Although appearing to be behind the eight ball, the actual opportunity for Australian businesses is in taking learnings from international counterpart, then perfecting the process of globalisation via the relevant digital channels.
1 International Data Corporation (IDC), ‘IDC: More Mobile Internet Users Than Wireline Users in the U.S. by 2015 ’, 12 September 2011
2 Stafford, P., Smart Company, ‘Retail experts warns of international threat’, 22 June 2012.
3 eCommera, ‘The Trading Intelligence Quarterly, Global Commerce: The World is Not Enough’, 2012
4 Young, A., International Business Times, ‘Apple, Amazon Among Eight Retailers With Two-Year Double-Digit Sales Growth’, 2 July 2012.
5 ASOS, Press Releases, ‘ASOS plc Global Online Fashion Store Audited Final Results for the year ended 31 March 2012’, 24 May 2012.
6 International Data Corporation (IDC), ‘IDC: More Mobile Internet Users Than Wireline Users in the U.S. by 2015 ’, 12 September 2011
7 WorldPay, ‘Are you giving your customers what they really, really want?, March 2012.
8 IKEA website, Fact and Figures page (as at 3 July 2012).
9 Unit4Coda Accounting for Change Blog, ‘The Behind-the-Scenes Story of IKEA’s Multi-National Expansion’, 30 November 2011.
10 Gartner, ‘Gartner Announces Rankings of Its 2012 Supply Chain Top 25’, 22 May 2012
11 Power Retail, ‘Growing Globally Special Report’, February 2012