Retailwire: US Retailers Take Their Business Virtually all around the World
[Editor’s Note: Through a special arrangement, here is an excerpt from one of RetailWire’s online discussions, along with the results from RetailWire.com’s instant poll. US-based RetailWire.com presents the latest industry news and issues with key insights from a “BrainTrust” of retail industry experts.]
The weak dollar makes the United States a good place to shop for foreign consumers, and now those that don’t have the time or resources to jet over can buy from American retailers that are opening up their online operations to accept orders from parts around the globe.
According to The Wall Street Journal, Amazon.com, Bluefly.com, Neiman Marcus, Bergdorf Goodman, Saks Fifth Avenue, Blue Nile, Abercrombie & Fitch, Coach and Macy’s are currently shipping goods to markets outside the United States, or moving in that direction.
A survey conducted by Forrester Research last year for Shop.org found 41 per cent of retailers operate internationally. Of those without international operations, 23 per cent planned to begin in 2007 and 38 per cent planned to get started this year.
However, there are some challenges to serving customers in foreign markets, including taxes, import duties and shipping. According to the Journal, retailers sending product overseas will often calculate and collect the various levies based on the market. To offset shipping costs, some retailers are setting up distribution centres inside foreign markets.
“Everyone wants to jump on the ‘dollar-is-weak bandwagon’, but it is fraught with challenges,” Sucharita Mulpuru, a Forrester Research analyst, told the Journal.
“It looks great in a PowerPoint presentation, but the execution is not so simple,” said Lauren Freedman, president of e-tailing Group.
Discussion Questions: Will the rush to attract shoppers from foreign markets lose its lustre once the dollar rebounds, or is this strategy solid regardless of exchange rates? Most of the retailers mentioned in the Journal article are large businesses that serve luxury consumers. Is selling to foreign consumers online something that makes sense for small retailers and those that sell products aimed for the lower economic end of the market, as well?
GoingOnline to Lure Foreign Shoppers – The Wall Street Journal (sub.required)
FINANCIALS:
Comments…
As the article points out, it is difficult to know, let alone meet, all of the regulatory and tax hurdles of foreign governments. Yes, there is a desire of foreigners to shop for goods at US prices. I see this every time a foreign business associates comes to Los Angeles. Many goods in the United States are cheaper than the same goods in Europe or Japan, regardless of the weak dollar. Add in the weak dollar and many items are bargains.
Selling and shipping overseas might not be good for every retailer, but those who find an effective way to manage foreign regulations and taxes can find a lucrative market awaits them.
Max Goldberg, founding partner, The Radical Clarity Group
You have to weigh the shipping and fees associated with international shipping against the cost of the good – it’s easy for a luxury item to absorb the additional costs because it’s still small compared to the overall price of the item. But if it costs $20 to ship a $10 item, those costs will probably be too high to balance out the weaker position of the dollar – a $20-equivalent item in another country is still a better deal than a $10 one here if it costs another $20 to ship it.
That said, for retailers that want to expand internationally but have been hesitant about it, this may be a good opportunity to test the waters without having to commit anything as big as a DC on foreign soil. It gives you an opportunity to see where the demand is, and helps you prioritise which markets to open next.
Nikki Baird, managing partner, Retail Systems Research
All consumers like a bargain. And there are some bargains now available at US retailers for mostly luxury goods, for items such as designer items but not churned butter or frozen peas.
Today, the weak dollar makes the prices of American luxury goods sans shipping and other fees appear to be bargains. But time delays and transaction hassles might be counterproductive to that appeal. But if you are an overseas purchaser and want that special piece of jewellery from Tiffany’s at a special price, it might make for a good breakfast.
Gene Hoffman, president, Corporate Strategies International
The economics of exchange rates and purchasing power parity are such that no matter how weak the dollar is presently, it will be a long time before goods that are considered moderately expensive in the United States are not prohibitively expensive in the world’s fastest-growing consumer markets. That said, the middle class in these economies are becoming more and more affluent, and are demonstrating a corresponding appetite for branded goods, which represents an opportunity. Geographical factors can play a significant margin-reducing role, but retailers that are effectively able to source their products globally have a better chance here.
Of course, quality may become an issue, but several retailers have successfully leased their branding on locally sourced goods by using strict quality control guidelines.
Joy V. Joseph, director, Business & Consumer Insights, Information Resources Inc.
As I may have said (just once or twice) before, there is a significant opportunity, but there are many provisos. In addition to the retail trying to identify and adapt to international rules and regulations, taxation, method of shipping, etc., customers frequently have to pay duty when their parcel arrives. They don’t always know, expect, or plan for this.
One problem that may not be one for luxury retailers is the frequent reluctance to accept non-American credit cards. This is a significant one to overcome, but PayPal can sometimes provide a mutually acceptable solution.
Bottom-line, though – whatever the exchange rate, there will always be people living outside the United States who would like to purchase what you guys are selling.
Bernice Hurst, managing director, Fine Food Network
Creating a global presence via the Web is smart. The cost is much lower than building stores and, therefore, when the value of the dollar does come back, there will not be as much exposure to deal with. Makes cents!
Mark Hunter, president, TheSalesHunter.com
Every so often, a new profit opportunity appears on the horizon.
It’s a key measure of a retail management’s IQ: how quickly do they perceive a new opportunity and how quickly do they profit from it? Thousands of eBay sellers ship internationally. Any retailer serious about e-commerce can ship internationally without much trouble. Yes, there may be some new procedures, but if they’re labour-intensive, you can surcharge those folks. After enough volume, you can contract with foreign outsourcers for overseas facilities or build your own.
Ignoring foreign customers is a key sales prevention strategy
Mark Lilien, consultant, Retail Technology Group
US Retailers who ship US labelled branded products outside the United States need to thoroughly understand foreign labelling laws. Genetically modified organisms are pervasive in US products and, therefore, have to be labelled as containing GMO when sold in many foreign countries. Even ingredients that do not seem to contain GMO such as spices, might be sprayed with soybean oil to control dust in processing and, therefore, require a GMO warning on the label in the EU.
