In 2024, retail sales worldwide are expected to reach $30.6 trillion, a 4.3% increase over 2023 and the first time global retail sales are expected to surpass the $30 trillion mark. These growth rates present big opportunities for brands, especially those that want to reach digitally savvy consumers in new markets.
Younger consumers are especially open to buying from brands beyond their own borders. In fact, research from ESW found that 54% of Gen Zers and 56% of millennials believe it’s “irrelevant” whether an online retailer is located overseas or not. Moreover, these younger consumers shop across borders twice as often as Gen X and three times as often as Boomers.
There are many potential upsides to cross-border commerce, including increased brand awareness and product adoption. But before brands take the leap into global marketplaces or invest in making their ecommerce sites more global-friendly, they need to ask the following five questions:
1. Will the Changes Needed to Sell to Foreign Consumers Negatively Affect Your Brand Image?
Executive leaders need to understand the value of their brand and whether marketing on a more mass scale will impact brand integrity or credibility.
“Business insights that worked in a home market might not apply to the same extent in the new market, so there are likely tweaks or adaptations required to make the concept or product resonate,” said Hunter Williams, Partner in the Retail and Consumer Goods Practice at Oliver Wyman in an interview with Retail TouchPoints. “That can be expensive, and it can also dilute the consistency of the brand story you’re trying to tell. If you’re telling different stories in different geographies, one can undermine the other.”
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2. Is Your Brand Strong Enough to Command a Premium Price?
Supply chain and fulfillment costs rise as brands enter new markets, whether or not companies handle tasks like clearing customs themselves or work with importers, distributors or local retailers.
“Those additional layers mean new markets can often be margin-diluted, unless you’re able to command a price premium sufficient to offset that,” said Williams. “In some cases, being an international, imported brand that’s known for super high quality is enough to create that premium to offset those additional costs.”
3. Do the Market’s Consumers Understand Your Products and Services?
Every brand has one (or several) differentiators that set them apart from competitors — local and global. But executive teams need to gauge how much time, and how many recourses, will be required to educate consumers in new markets about those differentiators and get them fully immersed in the core brand offerings.
“Brands may need to rethink operations or educate these new consumers,” Michelle Evans, Global Lead of Retail and Digital Consumer Insights at Euromonitor International, told Retail TouchPoints. “For example, as McDonald’s expanded globally, it also had to teach consumers in new markets about the drive-thru concept that is commonplace in America.”
4. Are You Prepared to Deal with Local Product Requirements and Languages?
Entering new markets means understanding local regulations as well as consumer tastes — another source of complexity. Adapting to local customs and preferences can take a toll on the entire value chain, from product development to packaging, marketing and ecommerce experience.
“There are sometimes different standards to meet, or you need packaging with different languages on it,” said Williams. “If that’s the case, you’ll have shorter production runs on your packaging lines, which is less efficient. And then you need another slot in your warehouse where these specific products can be held. All of that adds up.”
5. Is Your Current Business Organization Robust Enough to Manage New Challenges?
As brands consider global growth opportunities, they need to determine whether they have the infrastructure to support expansion. Have they hired for the right roles and built the right teams to drive growth? Do they have the technology infrastructure and product development process to keep pace? These are all critical questions to ask.
“International markets can be market-dilutive and a distraction, especially if there’s a lot of headroom for growth at home,” said Williams. “If you’re [already] selling faster than you can produce and struggling to keep up with demand, the complexity of introducing sales in other markets is the wrong move. If, however, global expansion means incremental sales increases and better capacity utilization of manufacturing and warehousing functions, the ROI is likely to be higher.”
Once you ask and answer these questions, you’re ready to begin your journey toward global growth. Download the complete report to get tips and best practices from some of the industry’s top global analysts and commerce experts!
