Where has the all the recent interest come from?
Over the past decade the internationalization of trade has seen a significant shift in the way businesses sell overseas and nowhere has benefitted to a greater level than the BRICS, MENA and MINT markets. More recently, with the rapid emergence of Cross Border Trade (CBT) in the retail sector – which is increasingly blurring the lines between the traditional offline and online channels (in the form of Omni or Consumer-Commerce) – the upshot has been that retail (above and beyond almost any other sector) has witnessed one of the most marked change in goods that are now travelling along new global (digitally inspired) trade routes.
Why the rise of Digital marketplaces?
Retailers have always been eager to embrace change, whether through the invention, and reinvention of seasonal fashion trends or by developing new store and brand concepts. Consequently it is hard not to agree with the fact that the rise of e-commerce, and in particular the 100s of marketplace platforms that now operate the world over, has been the preeminent driver of change for the global retail trade. These borderless ‘digital malls’ have been instrumental in breaking down the barriers that have historically thwarted international retail trade. Early adopters to these opportunities have reaped rewards, but this is soon to become a much more pan-industry trend as more and more organisations understand that it is just as easy to sell to a customer in Norwich, as it is to customers in Nice, Nigeria or Nepal.
Another reason for the shifting of these trade routes is that fact that it has become much easier and cheaper to ship goods internationally and hence this is a major reason as to why marketplaces have quickly emerged as the go-to solution for retailer growth and new market, digital-entry. It is for this reason that retail industry is embracing this risk-averse strategy into markets such as the Middle East, South America, Australasia, China, Europe and Africa, to name a few.
Why these markets – they seem very far away?
Although it might not seem like it, all of these regions are very similar. They nearly all have a dynamically young, digitally connected population of brand-aware consumers. They also share a common thread, in the fact that many of these countries are keen to demonstrate to the world that they have pent-up demand for overseas brands and goods – especially in China where they have a Govt sanctioned move towards a consumerist society, regardless of the recent Stock Market jitters. The Middle East is another classic example of a move towards a consumer-led demand; it’s staggering figures that support this demand are a shot across the bows globally, proving that they not only have the wealth but also the consumer desire to shop.
More to the point, the Middle East also has internet penetration growth rates in excess of 1500% over the past decade and population growth rates exceeding virtually all others globally (forecast to reach 50m this year in the GCC). Coupled with high levels of household discretionary income, and a huge number of connected devices, this is a region primed for China-esque growth rates in eCommerce & Consumer spending. Add to that the fact that there exists some of the highest per capita usage levels of Social Media in the world, it’s not difficult to see that within the region that the ‘e-commerce stars’ are beginning to align.
But the Middle East is not a lone-beacon for Global consumer-led demand; many rapidly emerging and some mature economies with vast populations are witnessing similar patterns of growth and more importantly strong demand for UK brands and retailers via digital channels. South Korea, Australia, the US, Europe, Turkey and with the recent lifting of sanctions Iran (to name a few) all offer large, brand-aware populations, with high levels of smart-phone penetration and social media usage.
But why use a marketplace or 3rd-party eCommerce platform?
The main advantages of selling through marketplace platforms is the ability to explore new markets and consumers via low-cost store and/or product listings. Typically retailers and brands don’t have to pay to offer a broad width and depth of product – meaning that brands have the opportunity to offer a full and diverse seasonal product selection. Additionally, with a varied mix of product readily available across category pages, the homepage, as well as promotional banners and department listings, retailers have multiple opportunities to promote their brand(s) within the marketplace ecosystem, in addition to being able to cross-sell and up-sell their merchandise and brands.
More to the point, marketplaces are typically open to all types of retail partner irrespective of whether they are a Wholesaler, Franchise Partner, Distributor, Entrepreneur or local retail SME. There is often the ability to choose a multi-language offering which also means that retailers and brands have an easy solution to localisation, something that is perceived as a huge barrier to entry in new markets. With free or subsidised local delivery and with retailers fulfilling orders within 2-3 days, it also provides an extremely efficient and cost-effective method for brands around the word to reach many new customers simply by tapping into an existing digital infrastructure.
A recent report from OC&C, PayPal & Google suggest that Germany, UK, US and China are the 4 leading e-Commerce shopping powerhouses, but while they clearly offer some great opportunities, there are plenty of other options around the world, via these new trade routes. In most mature retail markets, growth is beginning to plateau and where this is the case there is usually fierce competition, both with regards to pricing and brand co-existence, resulting in downward pressure on margins and less long-term opportunity. Exploring a low-cost, digital-first internationalisation strategy via marketplace or pure-play eCommerce platforms offers retailers the prospect of embracing new-market CBT and quickly become established in territories it might previously have taken decades to go into.
New territories are can be entered without the need to find a local franchise partner or waiting for expensive real estate to become available. Retailer successes via marketplaces therefore lies in the brands ability to fully control the shopping cycle and very often with in-house or at least in-market Logistics, Customer Care Centre, Marketing, Operations and localised Payment Gateways, as well as Fraud Management tools, there are very few hurdles for retailers wishing to grow globally in a measured and easy to control way.