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In the past, international expansion from a brick-and-mortar perspective has generally been viewed as an opportunity for only a few of the largest retailers (e.g., Walmart, Home Depot) or global brands (e.g., Nike, Louis Vuitton). Yet, international expansion via e-commerce enables multiple options that changes how and where a consumer is able to shop for their products and services:

  • There has been significant leaps in the number of retailers that are exploring their competitiveness on an international stage. Even the smallest e-commerce retailer can sell internationally, and many are.

  • “The thin wedge” – e-commerce as a leading indicator of the brand’s equity that enables lower cost/lower risk in terms of a brand’s potential in a new market. The testing phase can be followed by a stage of investment if early indicators validate the potential for more costly physical store commitments or accelerated investment in direct retail channels (e.g., e-commerce, catalog or mobile channels).

  • “Multi-channel approach” – an aggressive, heavily capitalized strategy that com- bines store openings, joint ventures or licensing partnerships, e-commerce and possibly catalog or mobile channels. This full-scale expansion strategy leverages the ability of globally recognized brands to create demand. Not only that, it engen- ders both more efficient back-end operations and economies of scale (e.g., supply chain, finance, customer service, etc.). However, the cost of entry and risk is higher due to increased market commitments.

The Canadian e-commerce market has many attractive characteristics, but also many challenges. The net result is vast aggregate potential, with forecasts of above-average growth for many years to come. Yet, in large part, this potential has yet to be realized by both domestic incumbents and by foreign entrants. Why is that? The causes of this unfulfilled potential are typically the same for domestic and foreign retailers alike. These include the following:

  • Unrealistic expectations for quick profitability and under-resourcing (i.e., “build it and they will come”). In our experience, the Canadian e-commerce effort by both domestic and cross-border retailers has typically not achieved maximum potential. In most cases, the limited resources devoted to marketing did not allow the busi- ness to acquire the reach to drive sufficient traffic to the website.

  • The lack of resources includes dedicated interactive and direct marketing staff, especially with localized Canadian experience. The result has too often been self- fulfilling (i.e., modest results to match the modest investment). As the market continues to grow, market potential analysis may reveal greater financial potential, which builds a stronger case for the appropriate level of resources.

Visa e-commerce cross-border handbook for U.S. retailers

Copyright 2010 Visa. All rights reserved.


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