By Adrien Nussenbaum, US CEO and Co-Founder of Mirakl
International expansion for smaller retailer: how marketplaces can help you test the water on new markets
UK online retail exports are set to reach £60bn by 2018, according to a recent report by the IORMA Global Consumer Commerce Knowledge Centre. This means that for smaller retailers, there is a wealth of new opportunities and growth potential and a real chance to boost profits.
The internet means that selling your products abroad has never been easier. But successful exporting does depend on an understanding of the market you are selling in, knowing where the best opportunities are and how to make the most of those opportunities. That’s why many smaller retailers are turning to online marketplaces as a way of testing the water for their products and selling in another country.
The rise of the marketplace
A recent royal mail survey of smaller retailers revealed that one in four plan to start using online marketplaces to increase sales in 2015. That’s no surprise, as an online marketplace can be a lucrative e-commerce channel for a small retailer, enabling them to reach an audience they couldn’t do by themselves.
There many options for a smaller seller to consider too: the big boys – Amazon Marketplace (which now accounts for more than half of products sold on Amazon) and eBay; the specialists, such as notonthehighstreet.com and Etsy; and any number of high street retailers that have launched their own marketplaces.
But online marketplaces are also a fantastic way of reaching customers in other countries, either by selling via a local marketplace in a particular territory or one with an international reach. They allow a small retailer to establish an international presence without the cost and commitment of physical premises and without much of the red tape that can come with selling direct. This is what to look out for as you begin to sell your products internationally.
Choose your first new market carefully
Many sellers are tempted by both the proximity and size of France and Germany and see those countries as an obvious first place to sell. They may indeed be the right market for your products but equally, there is a chance that they might not. They undoubtedly have vast potential, but if there are a number of other online retailers selling similar products to you, then it could mean your efforts will be wasted.
That’s why finding the right marketplace to sell your products on can be so important. If you are selling direct and do not have the benefit of speaking the language of your intended new market, then carrying out the necessary research and due diligence can be a challenge. But using a marketplace takes much of that strain from you. There should be an obvious product category for yours to fit within and you can easily assess what else is sold on that marketplace and whether your products would be complementary to that.
A more secure option
Selling products to consumers in another country is not as logistically difficult as it used to be, especially within the EU. One of the most frequent questions to HMRC from smaller retailer concerns the charging of VAT. Essentially, you charge VAT to EU consumers (if your goods are VATable of course) but for those not in the EU, you don’t. It’s that simple.
Card providers and / or PayPal will manage the exchange rate automatically, so the seller will receive sterling and the customer gets charged in their local currency. This means there are no backend changes needed to your store, although a smaller retailer might to consider showing equivalent prices in Sterling, Euros and the local currency, if different from that.
But one of the biggest risks when selling internationally is fraud. It is much easier to get away with placing an order fraudulently from another country, as few police forces are interested in spending much time on such relatively small-scale crime. Although credit cards come with fraud prevention systems like address checking, not all of them work with overseas addresses.
This is where selling via a marketplace can offer a small retailer much better protection when selling abroad than selling direct. People are less likely to attempt fraud when buying via an established brand, even if they are buying via an online seller in a marketplace. There is an assumption that security is much tighter, and that assumption is correct. A good marketplace will protect both buyer and seller, providing a private messaging system that prevents fraud and keeps the transaction firmly within the marketplace.
Choose your marketplace carefully
If you’ve decided to sell internationally via a marketplace, then the same due diligence is required as you would when doing so in the UK. There are so many choices for a small retailer looking to sell via an online marketplace, and it can be tempting to use several of these – perhaps Amazon to reach a more general audience and a country-specific marketplace that serves a particular sector.
Whichever strategy you take, a platform with an established community and buyers interested in your product type will always be an asset. A seller should also always pick a marketplace with a strong technical platform and the right tools to ease catalogue integration and listings management. If these are unwieldy then potential customers in your new market might not even be able to find your product.
If in doubt, ask
Selling internationally can be daunting for a small retailer, but using an online marketplace is an ideal way to begin trading abroad. The main thing to remember is that help is at hand. A good marketplace will provide its sellers with an account manager, so don’t be afraid to ask as many questions as you need. Also, UK Trade & Investment’s (UKTI) e-Exporting Programme is a good resource help UK companies and brands sell products overseas through online channels.