5th Spectrum & Ardent eCommerce Leadership Dinner, September 2015
Spectrum’s 5th eCommerce Leadership Dinner took place on 28 September in London in association with Ardent Advisors, the corporate finance firm.
The discussion began by considering the 2015 European Commission’s Consumer ScoreBoard which suggests that cross-border eCommerce is still an under-developed market.
The Commission seeks a Digital Single Market in the EU, but their research reports that 61% of consumers feel more confident buying online from their own country. Lack of trust, territorial restrictions, price discrimination, delivery, and product conformity were all cited as barriers to cross-border eCommerce.
By the end of this year, The Commission plans to put forward a proposal on EU-wide rules on contracts and consumer protection for online purchases.
What did our group of 17 think about the dynamics of international eCommerce? The group also briefly considered the subscription business model in eCommerce.
The most notable discussion points were:
- The natural instinct of ‘if it works here it should work elsewhere’ needs to be curbed.
- Being international might ‘look good on paper’, but the UK still offers a lot of opportunity to domestic eCommerce players.
- Only go international when it costs too much to win domestic business.
- Utilise existing infrastructure as much as humanly possible when going global.
- When seeking new overseas customers keep the product and the channel absolutely the same – don’t change more than one dimension, and that dimension is the customer when entering new markets.
- Overseas market entry could be tested with a third party like Amazon, but it was agreed that this represents a relatively expensive approach. Who owns the customer interface is an important consideration.
- General consensus was that emerging markets are easier to penetrate than developed markets.
- Europe is difficult. The US offers a big, consistent market. Australia and New Zealand are attractive.
- China was also mentioned and parallels were drawn involving the attractiveness of Bicester Village to Chinese visitors to the UK.
- The logistical challenges of selling abroad make it difficult.
- The variety of payment methods was also identified as a practical barrier to cross-border eCommerce.
- Customer expectations vary massively by country, and change quickly.
- Relatively small features can become a massive ‘turn off’ – ZIP codes being the primary example for UK customers.
- Going international can involve huge costs as well as management time. When local teams are hired, it can result in those joining the business that don’t really understand it.
- The rules are different for start-ups who can build their infrastructure from scratch with a global market in mind, as Starling Bank is currently doing.
- Companies think about international too late; keep it simple and don’t worry about translation (although its SEO benefits were acknowledged). Being international is more important than being multi language. The example of M&S – which cut all translation – was referenced.
- It was noted that ASOS derives 70% of its revenues from outside the UK and that it follows exactly the same approach in each overseas market. Rocket Internet’s approach of internationalising its portfolio as fast as possible was also referenced.
- Real life interaction with the brand really matters. Retail stores increase the brand’s credentials overseas. Brand identity may need to vary by country.
- The investor perspective: go where there is low penetration – health & beauty was given as an example – and help focus management on ‘one country at a time’ expansion.
The discussion ended with a look at the subscription model in eCommerce:
- One Dollar Shave was cited as a fabulous subscription model example of a billion-dollar revenue start-up.
- The beauty of the subscription model is that the supply chain is plannable in advance; procurement is empowered which of course delivers significant benefits on margin.
- It also satisfies the need to deliver convenience to the consumer, and addresses their inertia.
- Pact Coffee was cited as a subscription business that could take its model into other product lines.
To review key findings from previous eCommerce Leadership Dinners, please click here.
The Spectrum & Ardent eCommerce Leadership Dinners are a quarterly invitation-only forum for peer-level strategic discussion and relationship building.
Founded in 2001, Spectrum is a specialist London-headquartered leadership consultancy that partners long-term with ambitious European technology organisations to help them grow: by advising on, and subsequently appointing Board members, executive management, and interim executives.
Ardent is a boutique corporate finance house with a specific focus on the eCommerce arena. Advising growth companies on financing and arranging exits/ trade sales, clients include online retailers, brands and publishers as wells as technology and service providers, both in the UK and across Europe.