With the booming parcel delivery market now seeing a quarter of all parcels being sent outside the UK (IMRG), we decided to investigate the cross-border options available to retailers.
What is the most common way for SME’s (Small and Medium Enterprises) to grow their sales overseas?
It tends to work in stages. People who are small and just want to test the waters generally use one of the marketplaces. There are pretty efficient marketplaces everywhere now. People say they’re expensive but they’re easy to use, many of them provide a whole suite of services such as security, marketing, payments, logistics and storage. It enables people to move into or take orders from territories that they just otherwise couldn’t do. Later on when people find the flow of borders reaches a tipping point it can be worth setting up your own business in that country, going direct or taking some of the alternative routes – maybe with a partner brand. Often people work with people in the same space or in a non-competitive space and piggy back with them. The more successful brands are becoming marketplaces themselves – the classic example of that is ASOS which is a platform in a very serious way – and is just setting up its own operations in China.
What frequently asked questions do companies ask before launching into a new market?
What we find is that people start receiving orders from hither and thither, very often they don’t set out to trade internationally – they just get a bunch of orders arriving. So then the decision is ‘do we service them or not?’ Servicing orders from overseas can raise a whole hill of issues such as security checks because if you haven’t got the right security in place you can become very exposed. Criminals are smart. You might get ten orders from a customer, you think you know them, they have a good track record with you and they’re proven to be good and then there’s another order in and they don’t pay and your stock disappears. Another important issue is address verification. We’re used to a very good addressing system in the UK as our postcode system is very effective and efficient and covers most of the country. That is not universally available. In Southern Ireland for example where they don’t have the postcode system the address may be ‘At the end of the lane past the three trees and past the white shed’ and very often the forms that people provide on their website to accept an address may not be big enough. If you send things off and haven’t validated the address, before you send it the order may be bound for oblivion because it never had any chance of reaching the address in the first place. Postcode Anywhere is a company that helps with this and provides this service.
What’s the most popular e-commerce platform that retailers are using? Is mainland Europe seeing a growth surge or is it mainly Japan and China?
It’s growing everywhere. Ali Baba and its siblings are totally dominating the market in China by 80% or more. In Japan it’s Rakuten. There is growth particularly to Germany as the domestic German merchants have been pretty slow in getting on board with e-commerce but now you’ve got fashion retailer Zalando making huge steps and are trading all over Europe now. The southern part of Europe is growing quite strongly because the local suppliers either aren’t there or aren’t very good in Spain, Portugal, Greece and Italy. There are many benefits for British merchants because we’re good at it and the Royal Mail and the other carriers are both there and have good services and are building up a critical mass of volume. It’s much cheaper for British merchants to ship outbound then it is for most other countries to ship here for example. If it costs £1 to ship a product from UK to Greece then shipping the product the other way would cost £10 because of a lack of scale.