During my year at an international eCommerce B2B SaaS app company, I had the privilege of tapping into centuries’ worth of international eCommerce expertise. Our mission was clear: establish a Pro Services organization capable of assisting businesses in selling their products globally. It was my responsibility to build and lead the team that guided various eCommerce stores on expanding their reach across borders.
From high-grade sushi to influencer merchandise, luxury candles to personalized dog blankets, and nostalgic BBQ from Memphis, the product niches we encountered were diverse and fascinating. However, a common thread emerged, defining the three essential pillars for cross-border eCommerce success.
Remove one of these pillars or tackle them out of order, and the whole thing comes tumbling down. I wrote this article to serve as a beacon for business owners deciding if they should go international.
Pillar #1: Strategy
Spoiler Alert: It’s not for most. But very lucrative for some 😉
Like in all businesses, beware distractions. Selling in more countries merely for the sake of expansion is a fallacy.
Much like the iconic scene in “The Matrix” with the woman in the red dress, there’s a risk of becoming distracted and losing focus on your core business. Business owners would see a trickle of international orders and hoped they could easily unlock sales from the international market. However…
HOPE IS NOT A STRATEGY.
Tapping into international markets isn’t as simple as flipping a switch. It’s certainly doable, but it also comes with a prerequisite level of effort. Here are just some of the challenges eCommerce business owners will face in going international:
- Managing complex logistics (and reverse logistics)
- Changing compliance regulations + Duties & Taxes
- Navigating customs delays
- Localizing your offer
- website, copy, units of measurement, clothes sizes, cultural differences, support and returns in foreign languages, hosting your website in another region… and more!
- Building brand and awareness from scratch with a new audience
- Distributed manufacturing with variations in quality
As you’d imagine, these translate to operational costs and frictions, impacts to margin, and focus away from your core business–making a killer product.
Before going international, ask yourself crucial questions:
- Why are you expanding?
- Is it for revenue?
- If so, have you tapped out your domestic market?
- Why is going international better than doubling down
- Are your products competitive or unique enough to make up for the international overhead?
- Would your resources be better spent improving and expanding at home?
- How much demand currently exists? And how do you plan to increase that demand?
- What is your budget for launching a brand in another country (with potentially different languages, buying habits, and cultural differences)?
In short, would the time and attention required yield a greater return on investment if you just doubled down and put that same time and effort into making your product better, doubling your marketing at home, or even launching a new product line/brand at home and reusing your current infrastructure/platform?
I hope that sobered someone up from saying yes to international when they could have benefited more from putting that same energy in domestic. If you have line-of-sight to ROI from international sales, awesome.
But from pure dollars and cents, would you see a better return from doubling down on your product at home?
|Thought experiment: if you had a hot dog stand with awful hot dogs and hardly any customers, would it make sense to expand to another city before you fix your hot dogs at home? Probably not, right?|
Bottom line: consider doing what you’re already doing better and more before new.
So Who Benefits from International Expansion?
Imagine eCommerce as the world’s largest digital mall, with countless floors, languages, products, and consumers. There’s so many stores and products that you literally don’t have enough time to see them all. Imagine trying to find parking!
If “international sales” are the stores on the farthest end of this mega digi-mall, then you can picture customers walking past the stores nearest to them to make it to your store. Why would they keep walking and not buy locally from known, trusted, people who speak their language?
I hope that illustrates how important it is to have a unique and high-demand product to the right customer in international sales.
Your brand and product distinctiveness directly influence your international success. For instance, influencers tend to thrive because they are unique by being themselves. In contrast, commodity products, like plain white t-shirts, struggle because they compete primarily on price and convenience, areas where local markets excel.
If you offer a unique special-sauce type of product (maybe you literally sell sauces), you have a significant advantage, much like specialty car parts that excel due to their high value and low availability.
What Would It Look Like to Double Your Revenue Overnight?
One ladies’ fashion store out of the UK had 66% of their website traffic coming from the US, but 90% of their sales came from the UK. And this was all just organic traffic. ZERO ad spend.
Let’s look at the facts:
- USD was relatively strong compared to GBP (at that time). This made it a higher value product for US buyers.
- 62% of their web traffic was from the US.
- US converted to <10% of total sales
- 33% of their web traffic was from the UK
- 90% of their sales came from the UK.
In other words, they had a massive amount of traffic from the US that was converting at 82% less efficiency than the UK buyer. But why?
So we looked at their conversion funnel (CRO):
- Land on homepage – solid
- Browse products – pretty good
- Add to cart – looking OK
- Cart to checkout – NOPE! ← there’s your problem.
- Purchase – very few.
The US buyers went as far as the checkout page, but they wouldn’t purchase. They had a “pinch” in their funnel.
Back to the digi-mall analogy, imagine 62% of shoppers walking around your store, picking out a bunch of items, trying them on, putthem in the cart/basket and then walking up to the counter and deciding “you know what, I don’t want to buy this.” That’s what they were seeing.
The reason why became obvious when we saw the checkout page through the lens of an American buyer:
1. UK clothes sizing
2. Prices in GBP not USD
3. Shipping option for US read “3+ weeks (expect delays)”
4. A notice read “customer responsible for duties and taxes” with no further explanation of this tax “boogey man”
It’s easy to see why they weren’t buying!
In this example, the effort to convert was worth the international expansion since they had originally developed so much demand. Their likelihood of success was nearly assured.
Conservatively, revenue could double by just solving the checkout problem (and figuring out operations, pillar #3).
This is where a brand partner and ecommerce agency comes in CLUTCH. They are your shortcut to staying on top of changes like these on your website and messaging to keep you focused on what you love–making and selling your products. Not updating websites and ecommerce platforms. They can help with CRO and demand to get you converting sooner.
Pro Tip: I use SimilarWeb.com to identify the traffic and source of traffic heading to eCommerce sites–it’s free. It’s a great browser add-in. They didn’t pay me to say this.
Another example, one vendor had a black swan event… they had a Grammy award-winning artist reach out and say “Hey I love your product. I want to promote it on my tour. The catch is that you must make it available in all the countries on my tour.” Sounds made up– but it’s a true story.
In this case, the clout and brand from the artist was hijacked by the eCommerce store and they expanded to 22 countries overnight. It took just 6 of those countries to double their bottom line. The rest was gravy.
The lesson? Good unique products and strong brand recognition translate to demand. Demand can make international sales very lucrative.
An exception to this rule: Your company may have a strategic initiative to expand for other reasons. For example, it’s a globally-focused brand from day one. Or perhaps this is being done as a loss-leader as part of a greater overarching strategy. And that’s OK. Just don’t use hope as a strategy.
Pillar #2: Compliance
I don’t want to give regulators a bad name. Every regulatory and tax compliance expert I have ever worked with makes their goal to protect people and to keep business flowing.
Having said that, it is an additional check box that you’ll need to comply with. There’s a chance the cost of complying is too high which is why it’s #2. It must be considered before you operationalize international sales (Pillar #3).
Let’s begin with Duty & Tax compliance.
Generally, understand Incoterms. Specifically, DDP vs. DDU.
Or: Deliver Duties Paid (DDP) and Deliver Duties Unpaid (DDU).
Imagine if you sold a sweet surfboard to someone in another country. The buyer saved up all their money and spent $2500 on it. But then upon delivery the carrier contacts the buyer and says “hello it’ll be an extra $250” for you to receive your delivery.
That’s DDU. I like to think of the “U” as UNEXPECTED.
The buyer gets blindsided by the unexpected fee. That decimates your ability to sell cross-border:
- It introduces risk of the buyer rejecting the delivery of the product and requesting a refund
- It breaks trust due to the poor customer experience of having to pay a 2nd time
- It slows down the logistics as customs/carriers coordinate on getting the duties paid
To make matters more complex, the thresholds for charging vary per country. That’s called De Minimis.
De Minimis is the minimum value of goods below which no duty or tax is charged, and clearance procedures are minimal. This threshold varies by country and can significantly impact profitability.
This can make it complex to charge at the point of sale unless you have a solution, integrated into your ecommerce platform, that can estimate the cost of these duties at the point of sale so that they can be displayed to your buyer at checkout. Doing so enables transparency in the sale. However, See section 1: Strategy. If there’s no demand, then there’s no point in setting this up on your website until you have demand.
Look at it from the buyer’s perspective. Why would they buy again after that lousy experience?
So DDU makes Customer LifeTime Value (CLTV) plummet.
And yes, DDP has a higher upfront cost. But it also has the best overall experience for the buyer and increases your chances of repeat business (CLTV increase).
So paying for the duties and taxes up front (Delivering duties paid, or “DDP”) can be a massive improvement to your customer’s purchasing experience–plus you can “eat” the cost as the vendor and not make it your buyer’s problem at all–that’s a strategic decision you need to make.
Oh and curious what happens to that sweet surfboard? Well either it’s held, or returned across the world–at the seller’s expense. Or worse. Simply destroyed. Lose-lose.
That’s just one form of compliance. There’s all sorts of regulations that can apply to your product.
Generally speaking, if products go on your skin or you consume them, expect extra questions.
Here are some regulatory hurdles you may face:
- If you label your product “organic” does it meet the organic standard of this other country?
- Are there package labeling requirements for nutritional info?
- Are there special rules about the handling of the chemicals?
- Are you shipping Li-Po batteries? Do those require special logistics rules?
- Who is responsible for paying the duties and taxes?
- Does this country charge taxes once you exceed a threshold for low value taxable goods?
My recommendation is to find a compliance expert to identify a means of compliance and cost of compliance and you should analyze that to make sure it still makes sense financially for you to break into other market(s).
Pillar # 3: Operational Challenges
So if you read this far, you are looking good on strategy and compliance doesn’t seem insurmountable.
Next, let’s make sure that you can also solve for scale and operating friction in this whole new playing field.
You’ll have to consider factors such as:
- Who will deliver your products?
- How will you handle reverse logistics (returns)?
- Do you need to integrate any software to operationalize international sales?
- Who will support the returns – can your team offer an on-brand level of support in other languages?
In other words, connect the fulfillment pipeline and then look for ways to reduce friction and increase efficiency and experience. You must get a sense of what this costs before you dive in so that you don’t create a cost center instead of a profit center.
For products in some markets, it may not make financial sense due to the operation costs involved.
Don’t be Penny Wise, Pound Foolish
It’s often tempting to save money by trying to figure out things on your own. But a misstep, especially in areas like compliance and operations, can cost far more than what you might have spent hiring an expert. It could also tarnish your brand’s reputation in a new market, which is a much more significant loss than just money.
I can’t overstate how important it is to seek help. I firmly believe that “everything is Googleable and ChatGPT-able. But do you want to get into the business of solving international compliance, localization, and logistics, or do you want to build a brand and sell your product?
If you are confident in your strategy, trust experts to get you there sooner and with less headaches.
That includes compliance experts, eCommerce agencies (like Trellis), and global brand studios.
Think of it as you’re either paying in time or money.
And the longer you take, the higher the cost of staying the same. Figuring out these one time challenges takes focus from your business and product.
My recommendation? Ask yourself:
- Will I solve this problem over and over?
- And does it compound in my business’s favor to figure it out? Or is this a one-off problem?
- Would I get a greater return by putting the equivalent time back into my business with the help from an agency?
Launching into a new market from the ground up is complex. By working with specialized agencies you can accelerate your international success story.
Is International e-Commerce Right for You?
✔️ Yes, if there’s clear demand and uniqueness to your brand.
❌ No, for generic commodity products.
🤷 Maybe, for regulated industries with a solid strategy.
If you’re considering going international, remember the three pillars: Strategy, Compliance, and Operations. Nail these, and you’re well on your way.
With over 15 years in Tech & B2B SaaS, Diego embarked on a journey with UnlockTheROI™ in 2023. The objective? To launch Pro Services at 1,000 SaaS startups that are making the world a better place.
Unlock the ROI launches dedicated Pro Services teams like the one from the company above that helped eCommerce companies sell anything anywhere. They address real customer challenges with or without software.
This shortcuts customers to value and eliminates churn which maximizes profits. The method might seem simple, but the outcomes speak for themselves. If you’d like to find out if Pro Services are right for your startup, visit www.unlocktheroi.com. Check out the DIY Playbook for more information.