Richard Moore, head of international at mobile accessories company, Mobile Fun, on the dos and don’ts for successful online international expansion
With online retailing still a growing sector in the UK, competition between retailers can be fierce – especially with the threat of a double dip recession. Many UK consumers simply aren’t spending as much as they used to so, for online retailers, a major opportunity for growth is cross border e-commerce. However, there are pitfalls when expanding internationally as, no matter how much experience an online retailer may have in the UK, entry into Europe can be a much tougher proposition.
Retailers who solely rely on the UK economy are missing a huge potential customer base across Europe and further afield and, with the exchange rate in our favour, now is a great time for ambitious brands to expand internationally. Additionally, in the online retail space, the European e-commerce market is less mature than the UK, and this is a potential competitive advantage for established UK online retailers.
We believe pure-play online retailers such as Mobile Fun have an edge over competitors as our focus is engaging customers online rather than splitting efforts between online and high street activities. Rolling out successful and mature UK SEO and online marketing to international websites has helped us to not only engage new buyers but encourage their loyalty.
Mobile Fun recently launched two new European websites, in the Netherlands and Spain, to add to our existing portfolio of websites in the UK, Germany and France. We now occupy five of the largest EU countries for online retail and international sales currently account for 25% of total orders.
From our experience of setting up four additional European websites over the last three years, we have developed a successful campaign of expanding internationally. While there are significant hurdles, these can be successfully navigated if tackled systematically. Taking into consideration everything from foreign bureaucracy, financial and legal eventualities to common sense factors such as language and cultural differences ensures an online retailer is prepared.
Mobile Fun has accepted euros on the UK website (mobilefun.co.uk) since 2006 and this has given us the ability to increase sales to Ireland and the EU. Start-up costs for our German website, which was launched in late 2008, were around £60,000-£70,000 but this site became profitable after just 12 months, despite coinciding with the start of the recession. We believe the pressures on the UK economy allowed us to invest more of our time in getting the new site up and running.
Localisation is key
One of the main challenges in setting up abroad is deciding whether to run European sites from an existing UK base. The alternative involves increased financial risk of setting up brand new offices locally, as well as employing staff on the ground to manage the new websites. To decide on these factors, we set clear objectives beforehand that enabled us to achieve success. For example, before the launch of our German website, we created cash flow forecasts and decided how best to use existing capabilities.
Selecting a suitable location, recruiting a local team and working on establishing a good reputation from day one are all equally important. So, when selecting a European country for a new website, it is important to conduct background research. Do that country’s residents shop online and, if they do, what do they expect from their online shopping experience, how do they prefer to pay for items and what are their expected delivery times?
While it is possible to enter the online retail market without people on the ground, localisation is critical to operating successfully. Finding and retaining the right people and partners is key. Strong relationships with courier companies will ensure quick delivery and enable online retailers to service customers on a larger international scale.
At Mobile Fun, we use a blended model of teams on the ground in established markets and nationals from new territories (Spain and the Netherlands) working from our UK offices to set up our new websites. Using this model, our new international teams provide localised customer service while learning best practice from our core UK team, reducing costly factors such as travel and office rental.
Having international staff at our UK headquarters also allows our new international teams to communicate closely with senior management to implement and have active input into new processes and strategies.
Another major part of expanding internationally is the regulatory and legal compliance issues of the country an online retailer is setting up in. Don’t underestimate the extent of administration and financial bureaucracy involved when expanding internationally. Foreign currency can be a thorny issue, for instance, as when Mobile Fun launched in Germany, sterling had fallen quite dramatically against the euro. However, our business was already exposed to the euro so we worked with our bank to confirm currency options. Our business model is about moving stock quickly and we already buy from Europe so if there are fluctuations in the euro, our costs can follow that currency market.
We already ship to over 50 countries and have found the EU benefits from being a free trade area negating the need to charge different VAT rates until certain thresholds are hit. This means an online retailer can use the same pricing converted directly into euros.
As internet use increases, online retailers are working to improve the online shopping experience with marketing initiatives such as online video, higher quality images and customer reviews. Embracing and adapting these marketing activities across multiple territories also supports successful expansion. Mobile Fun has over 26,000+ product reviews of mobile related products on the UK website and this provides customers with confidence to purchase. Our newer territories encourage customers to do the same.
With a population of over 800m consumers, Europe represents a lucrative market on the UK’s doorstep. The five main areas for success in international expansion are to recruit local staff who speak the native language and English, set out clear objectives and build contingency plans into them, adapt to lessons learned en route and ask for professional help when required.
While these factors may seem daunting, if tackled one by one, practical solutions are available that will help an online retailer learn quickly and create a hub and spoke model, which can be replicated in the future when adding more territories. There are also a number of professional organisations, from accountants to bodies such as UKTI, Chamber of Commerce and local investment organisations that can lend expertise to support your international ambitions.