Professional Documents
Culture Documents
Issue 4
The Trading Intelligence Quarterly. Global commerce: The world is not enough
Contents
10 Ps of international ecommerce How much? A brief guide to international pricing Fraud rules 04-10 11-15 16-18 19-22
The megatrends of ecommerce 23-24 Amazon: the world is not enough 25-26
eCommera is a specialist retail-focused commerce product and services business. We deliver robust and flexible technology to enable you to trade online, combined with insight to help you focus on protable action. Its our blueprint for your success. We call it trading intelligence.
To nd out how we can help enable and grow your ecommerce business contact us at trader@ecommera.com Or call us on +44(0)20 7291 5800 Or visit www.ecommera.com
eCommera
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In Fraud rules we interviewed Paul Simms, founder of The 3rd Man, a merchant-focussed fraud specialist to get his advice on minimising the risks of international fraud. Simms, while quick to caution that some fraud losses are inevitable, stressed that for most retailers the risk can be worth the reward when properly managed. Simms takes us through the process of preparing an organisation to be fraud-resilient. In Death and taxes and regulation, we delve into the ne print of international retail. This includes a close look at market-specic trading rules, privacy rules, promotional restrictions and taxation. In The megatrends of ecommerce Doug Gurr, former executive director of Asda, boldly predicts six deep, inevitable movements in retail. With Gurrs insight into the future, retailers can keep one step ahead of their competitors. Our regular spotlight on the ecommerce giant Amazon looks at its continuous expansion of range and its launch of localised sites to increase customer retention and acquisition. We hope that this issue answers some of your questions about internationalisation and prompts some new ones as well. We would welcome the opportunity to discuss how eCommera can help you position, plan and develop your ecommerce business.
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The inhabitant of London could order by telephone, sipping his morning tea in bed, the various products of the whole earth, in such quantity as he might see t, and reasonably expect their early delivery upon his doorstep.
John Maynard Keynes, 1919 International retail is not new. However, both physical and online retailers have struggled with the challenge of how to transpose their businesses across countries. History is littered with huge, prot draining investments and failed international ventures: In physical retailing: Walmarts exit from Germany and South Korea; Marks and Spencers failure in Europe and Canada; and Tescos launch in the US (now projected at $800m+ to get to prot). In online retailing: ebags exit from the UK; gleaves exit from the US; and Zappos never even got round to launching its international business despite a large investment in planning it.
How hard can it be online? In theory, online international success should be relatively easy. Unlike physical retail there is no catchment constraint. The Internet allows every site to be accessed from anywhere in the world (dictatorships excepted). The challenges and reasons for failure are complex: Economics. It is easy to get the economics wrong to expect that a domestic model will easily map to a new market. Market. Consumers have different expectations in each market. Execution. The sheer operational complexity of international expansion can become a mineeld of time and cost. Lawyers. The bullet proof approach is often eye-wateringly expensive. The 10 Ps of international expansion The 10 Ps is a checklist for building an ecommerce business. Here we have adapted it to a roadmap for any online retailer considering international expansion.
The Trading Intelligence Quarterly. Global commerce: The world is not enough
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Vision
Enablers
Delivery
1 3
Place
The online store: customer journeys, wireframes, usability, functionality and hygiene Acquisition and retention: managing channels, acquiring customers and CRM
Proposition
6
Promotion
The consumer offer: product, price, availability, content, service and experience
Trading
7
Planogram
4
Platform
2 8
Promise
Plan
Operations
5
People
Team and organisation: the internal and external skills required
Process
How things get done: the daily, weekly and monthly processes
10 10 Performance
How performance is managed: frequency, granularity and visibility
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The Trading Intelligence Quarterly. Global commerce: The world is not enough
International vision
1. Proposition. What is it: The consumer proposition is the mix of product, price, availability, content, service and customer experience. Successful online retailers can all point to one or more distinctive elements of their proposition. For example: Ocados delivery proposition; Net-a-porters combination of product, editorial and service; and Zappos range and service experience. International: Adapt your proposition to each new market, based on what matters to consumers there. Understand local competition and consumers expectations around price, service and experience. A proposition that makes sense in a domestic market may not travel well. Critical questions to ask when dening a proposition for a new market include: How well known is my brand? Do I want to appear to be a local or an international player? What is absolutely critical to the proposition and what can be flexible? In some markets, delivery is critical: Net-a-porter has same day delivery in London and New York, a core part of its proposition. Other markets are driven purely by price: one electronics retailer had early success in France which turned out to be purely exchange rate arbitrage once the euro moved, so did customers. Price, as a central proposition, can be difcult to execute and maintain on a global scale, especially when competing with the buying power of Amazon and Walmart. 2. Plan. What is it: Plans must be based on understanding customer acquisition and retention the fundamental drivers of growth. Retailers need to set realistic online goals to avoid over investment by separately modelling customers, categories and channels. Too many retailers still plan based on simplistic outcomes such as average order value, trafc and conversion which are easy to model but generally dont materialise. International: Plan growth and investment overseas by modelling relevant local market data, rather than assuming similarities to domestic data. Successful domestic multichannel retailers are used to getting a base level of online sales for free, driven by channel shifting, incremental sales to loyal customers and sales to customers who are not near a store. Often, these players enter international markets with little brand awareness and need to think more like a start-up. gleaves launch in the US was salutary. The market was more competitive, so there were lower conversion rates, higher customer acquisition costs and lower repeat purchase rates. The US represented a good business but required much more investment than expected.
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International enablers
3. Place. What is it: The place the online shop t is the customer-facing website. It is the combination of functionality (what it does) and usability (its ease of use). International: Websites should reflect subtle local differences. The challenge is to get the right balance of simplicity versus optimisation. A single global template is cheaper and ensures a consistent look and feel. However, there are many local and cultural differences that need to be considered as trade-offs: Is personalisation expected or is a lack of privacy off-putting? Should promotional messages be subtle or aggressive? Should fashion models be local or international? (picking up copies of Vogue from around the world provides insight into the accepted style norms). Is broadband ubiquitous? Will consumers browse on mobiles or PCs? 4. Platform. What is it: The platform is the ecosystem of technology found in all mature ecommerce sites. This technology includes the webstore, web analytics, order management, image management, fraud, payment and product data management. International: Decide on a platform strategy worry about the detail. Post traumatic platform selection stress is a common ailment for retailers who think they have bought a fully international web platform, only to nd that they havent. Unfortunately, the devil is in the detail of the detail. One retailer realised too late that its platform could be international only if it had the same products and promotions in all markets. Understanding what combinations of currency, language and content are manageable is hugely complex. www.ecommera.com There is no right way to localise a website. For some retailers, internationalisation is often a catalyst to re-platform. Other retailers will create a second platform to handle international markets. Having decided your overall platform strategy, consider the detail of how each element of the technology stack gets internationalised. How will you handle aspects such as payment, fraud, analytics and translation? It is easy to make incorrect assumptions about payment preferences in different countries, and critical to work out what is a barrier to purchase versus a simple preference. One retailer confounded common wisdom that you cant launch in Germany without ELV1 by accepting only credit cards, and learnt that ELV was just a preference and not a barrier. It is also important to ensure that the technology will support the organisational evolution from a centralised to localised operation (for more details read the next section on People). 5. People. What is it: Getting the right people and organisational structure is more difcult than it sounds. There is a dearth of talent and good people are expensive, particularly in immature ecommerce markets. Moreover, it is imperative to get the ecommerce organisation to scale as revenue grows there is a delicate balance between the expense of building an organisation ahead of sales versus growing incrementally and playing constant catchup. Retailers also need to balance which functions are managed in-house, which to outsource, and how that will change over time. International: Carefully balance the need for local insight while avoiding unnecessary duplication of effort. The rst people challenge lies in deciding what activities should be done once globally, and what needs to be done locally by market. It is critical to avoid duplication that wastes time and money.
1 Elektronisches Lastschriftverfahren (also known as Lastschrift, Bankeinzug or simply ELV) is a form of direct debit transaction that is popular in Germany.
The Trading Intelligence Quarterly. Global commerce: The world is not enough
The second challenge is whether to physically locate people in each market, or manage everything from a central base. Local outposts are great for being close to a market. Their downside is they can be subscale and good local people often want to hire local teams to fully optimise the opportunity, rather than relying on a central resource. The right answer is that the organisation will need to evolve, and planning for flexibility is the key to success.
International: Get local insight. Be creative about building brand awareness using local events and PR. Traditional domestic focus on closing channels such as paid search, afliates and shopping engines will not build sufcient brand awareness in a new country. Although capturing latent demand is important, and the joy of Google is that local insight is free (see gure 2), the trick is to get the balance right. Keyword-driven marketing campaigns alone will not be sufcient. ASOS, which has presided over a number of wildly successful international launches, launched in the US with a brand building fashion show on Bleecker Street. Being aware of local events, culture and language is critical to maximising the opportunity. Missing the Queens birthday in the Netherlands, or promoting Christmas in the US will quickly identify you as a foreigner!
International delivery
6. Promotion. What is it: Promotion is how to acquire and retain customers. Customer acquisition is achieved by building brand awareness and capturing transactions through the wide range of online channels. These include paid search, afliates, social media and retargeting.
Searches per 1000 feet 39.96 59.77 28.61 31.95 7.99 26.20 34.24 42.04 5.93 4.96 3.01 0.28 1.37 5.49 0.15 1.68 1.04 0.42 0.35
5,000,000
10,000,000
15,000,000
20,000,000
25,000,000
The Trading Intelligence Quarterly. Global commerce: The world is not enough
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7. Planogram. What is it: The planogram is the discipline of managing site navigation to unite customers with SKU, through the sites taxonomy, facets, sort orders and product recommendations. International: Develop a set of global rules, and then localise where necessary. The international challenge is again one of balancing global simplicity with local optimisation. The extent of global variations affecting customers, such as the seasons, the weather, and the optimal timing of sales requires a localised planogram. One size will not t all. 8. Promise. 9. Processes. What is it: Taking an order online necessitates making a promise to customers on when they should expect to receive their goods. Delivering on that promise requires managing fraud screening, payment, picking, packing, shipping and customer service. International: Fullling customer promises in different countries requires considered trade-offs. Delivering on promise internationally is even more difcult because the issues involved are magnied: a) Managing fraud. Many markets do not have online address les, so new approaches become critical. The extent of the issue is huge one major UK retailer reported that approximately 50 per cent of transactions in Europe were attempted fraud. That said, and despite some of the horror stories reported by retailers entering into new markets, international fraud can be managed. (Read more in the article Fraud rules). What is it: There are over a hundred processes required to make online retailing work well. While the processes of retail are well recognised, the core processes of ecommerce are still being evolved and few online retailers have either codied or embedded them in their organisation. International: New processes are needed to make global ecommerce work. Going international necessitates an even higher degree of process rigour to make it successful. Online retailers will need to consider and implement new processes from translation to local fraud to make their global business work. b) Offering the optimal international delivery. This is a delicate trade-off between fast, tracked and expensive versus slow, untracked and cheap. There are also critical decisions about when and where to site local warehouses (if at all). Local stock is typically a trade-off of delivery time and cost versus the simplicity and efciency of having all stock in a single location. Deciding when and if to have a local returns address also needs to be considered. c) Picking the right customer service model. There are myriad choices from which languages to use, what time zones to cover and whether to offer a telephone service.
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The Trading Intelligence Quarterly. Global commerce: The world is not enough
International performance
10. Performance. What is it: ecommerce is data-rich but often information-poor. It is paramount to track protcentric outcomes, with a wide range of input measures that drive action. International: The performance of each market should be assessed separately. The dynamics of international markets are so different that setting the right benchmarks and evaluating success is difcult. International averages are some of the most meaningless numbers you will nd in an ecommerce business! *** There is no question that ecommerce is entering a period of globalisation. There are huge opportunities and challenges to overcome. There will be big winners, but also big losers who either dont internationalise or do it poorly. Unfortunately, domestic success will be no guarantor of international triumph. The ecommerce rollercoaster continues
How much?
A brief guide to international pricing
Michael Ross co-founder and Director, eCommera
1011
The challenge for retailers is their new global competition; the challenge for brand owners is distribution and price positioning. Navigating this landscape will require rethinking some sacred pricing cows.
Pricing has always been a delicate business. Online retailing is fundamentally changing the pricing decisions of retailers and brand owners by bringing international price transparency and comparison. Coupled with cheaper and easier international delivery, consumers trade-offs on range, price, convenience and service have dramatically altered.
3) Mass brands (e.g., Sony) with one or more wholesalers/distributors, where prices are set individually by retailers as a ne trade-off between range, service and location. Think Best Buy versus Walmart. The supermarkets march into non-food products such as books, DVDs and electronics has driven down retail prices. Amazon has made sub 10 per cent gross margins the norm in many categories. Market-by-market pricing Pricing not only varies by the retailer paradigm, it also varies widely between countries. Brands have selected different pricing strategies by market because: Local costs of rent, staff, taxes and duties were different. Local competitors and prior entrants created a different competitive environment. Consequently, brand owners could decide to have differential positioning by market. For example, Calvin Klein boxer shorts are basic in the US and premium in Europe. They could make more money! These models were sustainable given that there was no real international arbitrage consumers needed to visit the US to buy cheap Levis and CDs. The only real impact on the world was an incentive to holiday in countries where products were cheaper and some angry articles in the Daily Mail on the unfairness of it all.
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The Trading Intelligence Quarterly. Global commerce: The world is not enough
50
100
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Product cost
Shipping
Import duty
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The brand owners challenge: an example Premium brand owners prices have evolved by market. Once prices are set in a local market, the relative international price varies as currency fluctuates. Pre-Internet, the only impact to the brand owner was a margin exposure where products are wholesaled in local currencies. However, in todays market, the spread of prices is a huge challenge for local retailers, and brand owners trying to manage distribution. Some markets are clearly more attractive than others. A quick glance at the local price of MAC Viva Glam lipstick (gure 2) shows why Australia has become the boom market for ecommerce businesses such as ASOS and Wiggle.
Australia does not charge any import/sales tax on online purchases under $1000 (c. 643), the Australian dollar is currently strong and local retail prices are traditionally high. Even within Europe, theres a 20 per cent difference between the UK and Denmark more than enough for consumers to shop internationally.
Figure 2: Retail price of MAC Viva Glam Lipstick (prices converted to GBP, 15 May 2011)
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The Trading Intelligence Quarterly. Global commerce: The world is not enough
Price measurement indexes Quantifying the scale and evolution of these pricing spreads is an important input to the strategic challenge. Since 1986, the Economist has published a Big Mac index to show the prices of a Big Mac around the world1. eCommera is now introducing an alternative (little) MAC index to highlight the spread of MAC lipstick prices around the world. The Economist Big Mac Index Figure 3 is from October 2010 and highlights China as a cheap place to buy a Big Mac, and Switzerland as an expensive one. From the Economists perspective the Swiss Franc is overvalued compared to the dollar, and the Yuan undervalued.
This is denitely interesting for currency speculators but, even as ecommerce delivery improves, the immediacy of the need for a Big Mac makes the opportunities for burger arbitrage academic. eCommera (Little) MAC Index The eCommera MAC index measures the price spread of MAC Viva Glam Lipstick in our global basket of 10 countries. The eCommera MAC index is dened as the (highest lowest)*100/average price. Our index today stands at 92, showing that there is a +/-46 per cent difference in prices around the world plenty of scope for customers to hunt around for a cheaper price.
Figure 3: Economist Big Mac index October 2010 Bunght: Big Mac index, local-currency under (-)/ over (+) valuation against the dollar, %
Bunfight
Big Mac index, local-currency under(-)/over(+) valuation against the dollar, %
Lowest (US)
Average*
Highest (Australia)
8.94
15.74
23.45
40 20 - 0 + 20 40 60 80 100 Switzerland Brazil Euro area Canada Japan United States Britain Singapore South Korea South Africa Mexico Thailand Russia Malaysia China
Sources: McDonalds; The Economist 6.78 5.26 4.79* 4.18 3.91
-43%
49%
nil
2.18
*Weighted average of member countries Average of four cities At market exchange rate (Oct 13th) Average of two cities
1 Burgernomics is based on the theory of Purchasing-Power Parity (PPP), the notion that a dollar should buy the same amount in all countries. Thus in the long run, the exchange rate between two countries should move towards the rate that equalises the prices of an identical basket of goods and services in each country. Our basket is a McDonalds Big Mac, which is produced in about 120 countries. The Big Mac PPP is the exchange rate that would mean hamburgers cost the same in America as abroad. Comparing actual exchange rates with PPPs indicates whether a currency is under or overvalued.
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As a result, physical shops become showrooms for international online shoppers. This is challenging for retailers who nd they dont have a business, and for brand owners who nd they dont have local distributors. Moreover, vertically integrated retailers need to rethink their local economics a showroom for international sales might be the right business strategy but is challenging if the store manager has a prot target. Obvious solutions are not good, and good solutions are not obvious: Some retailers attempt to stop customers shopping from international sites by removing delivery countries. An example is TopShop which no longer ships to the US from its UK site. This will work in the short term (until aggregators step-in) but is potentially damaging to the brand, giving the message we know were gouging you but we dont care. Changing retail prices every few days or weeks is equally unsustainable. It may work in the world of nancial trading, but retail customers will not accept it so easily.
Unfortunately, there is no perfect solution and the situation will get worse. Brand owners need to take a global and holistic view, accepting that prot by market will fluctuate as customers shop globally. *** The Internet started with discount-led value propositions dominating the landscape. The decimation of physical book, music and electronics retailers is testament to its destructive power. Retailers challenge now is to create propositions that are not all about price. For brand owners the challenge is to make sure they still have retailers to supply, or to manage the transition to direct distribution.
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Fraud rules
How to cross the border without losing your shirt
Paul Simms Founder, The Third Man
Retailers are nervous about expanding overseas as the early movers were hit badly and theyve retrenched. But retailers should not use a fear of fraud as the reason not to expand internationally.
This article is based on an interview with Paul Simms, founder of The 3rd Man, a merchantfocussed fraud specialist. The appeal of becoming an international player to most online retailers is obvious; but the fear of fraud holds many of them back. While it is
inevitable that retailers will need to assess all of the potential fraud risks and budget accordingly, retailers need to recognise that the benets far outweigh the risks. Paul Simms has a reassuring message: Retailers are nervous about expanding overseas as the early movers were hit badly and theyve retrenched. But retailers should not use a fear of fraud as the reason not to expand internationally. Indeed, he believes the overly cautious international approach taken by many UK retailers is potentially losing them the head start they gained over their European counterparts from early online trading.
Fraudster favourites
Know your neighbour: In this tried and tested scam, fraudsters gain an understanding of the verication checks that both the merchant and the banks make to process a purchase. On the merchant side, the house number and post code associated to the buyers card will be veried. On the bank side the CV2 number as well as the address will be veried. With this knowledge and a virtual pile of stolen credit cards, fraudsters are able to make transactions with relative ease. Buy low, buy often: In this scam fraudsters target merchants who rely on high volume, low value sales where merchants are often less diligent in fraud screening. Items like DVDs, which are easy to resell, are ideal. Take a short break: Using stolen details, the fraudster will go online and purchase a two week stay in a hotel. Shortly after arriving at the hotel, the fraudster will report a family emergency to the hotel staff and check out receiving a refund on remaining nights. Most hotels do not require the funds be returned using the card of purchase; the fraudster is able to accept the refund into an account they can access. Find a wife and a drop house: Charming fraudsters deceive single women into believing that they are the object of their affections. Once trust has been won, fraudsters convince the women to accept deliveries at their home on behalf of the charity they are running. Unwittingly, these women nd themselves running drop houses for items purchased using stolen details.
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It is crucial to weigh up the cost of potential fraud with the opportunity presented by overseas trade. Many retailers traditionally only accepted cards issued by UK banks for transactions on their websites. Reasons are sound when looked at in isolation UK-issued cards typically have a 0.6 per cent rate of fraudulent transactions compared to 4 per cent for US cards and other high risk areas such as Algeria and Ghana. However, Simms argues a retailer needs only modest prot margins to keep fraud under control before tapping into overseas markets becomes nancially worthwhile.
As the level of knowledge in a market grows and the rules engines gain more accuracy with careful tuning, the next step for retailers is to use this insight to re-legitimise customers from previous screenings. 2) Manually review transactions Automated screening is not enough. When entering new countries it is important to manually review proportionally more transactions than in the UK to build up knowledge of the prole, history and behavioural aspects of the new market. In the UK a retailer will typically review 2-3 per cent of transactions (although this may be as much as 10 per cent for the electrical goods and mobile phone categories), whereas this should be nearer 10 per cent in overseas markets. Employing local review teams is essential to make this process cost effective. Manual intervention is also important for assessing anomalies and exceptions in the data. The key is flexibility: Every retailer has an incident where a senior directors wife has tried to buy online and been rejected. If you use blanket rules then youll lose money and upset legitimate customers. For example, it is possible that ve expensive cameras purchased on a Russian-issued card in the name of Ambramovich may well be genuine, and not the suspicious order it looks at rst.
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The Trading Intelligence Quarterly. Global commerce: The world is not enough
3) Understand who owns the liability Retailers need to understand the whole validation process and the concerns of the various players along the chain. Retailers cant rely solely on the banks for protecting them from fraud. Merchants need to control their own destiny, warns Simms. Banks are primarily concerned with liability and unsurprisingly protecting their own interests. This perspective is very different to that of the merchants who are much more customercentric and willing to make trade-offs between minimising fraud and upsetting legitimate customers. Simms recommends that merchants use available online fraud tools like Veried by Visa and MasterCard SecureCode which can be introduced to online checkout steps and provide an extra level of protection. However, he warns that it is relatively easy for the passwords to be changed by the legitimate cardholder and therefore by fraudsters. Merchants should understand the limitations of such online tools and incorporate processes as part of their manual review to flag suspicious transactions. *** Despite the risks, Simms remains broadly bullish about the prospects for retailers tapping into overseas markets: With a bit of thought, planning, and working with the right fraud specialists, retailers can expand and grow dramatically.
1819
In this world nothing can be said to be certain, except death and taxes. Benjamin Franklin.
The lure of international ecommerce is often offset by the fear that cross-border trade subjects a retailer to a wide array of new and unfamiliar trading rules. These rules could be related to: The website: The rules related to cookies and privacy. Marketing: When, and what types of, offers are allowed. VAT and tax: Paying the right tax. Labelling and quotas: Import restrictions and how to get the product into a country. This can create a terrifying conundrum for businesses do you opt for a bullet proof approach which is expensive to get right, employing a raft of lawyers and accountants, or do you take an opportunistic approach and hope for the best. For large, often risk averse, businesses with relatively small international opportunities, deciding whether it is worth the risk is even more of a challenge.
The good news is there are lots of legitimate business approaches for those who are creative and determined that can make the whole international expedition much less painful. And a lot less expensive. Here we have selected our top ve tips for avoiding barriers to trade.
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The Trading Intelligence Quarterly. Global commerce: The world is not enough
With Jersey and Guernsey not in the EU2, a number of businesses which have bases there, like Play.com, have a signicant margin advantage over comparable UK-based retailers. It is also worth considering whether to dene the value as retail or wholesale price. Intrinsic value is poorly dened in customs law but there do not appear to be any legal precedents to clarify its denition. A brave retailer who opts for the wholesale interpretation could open the doors to selling a much greater range than just CDs and DVDs.
2 The islands are not part of the European Union, but are part of the Customs Territory of the European Community, by virtue of Protocol Three to the Treaty on European Union 3 http://www.hmrc.gov.uk/vat/managing/charging/vat-invoices.htm 4 http://www.faqs.org/rulings/rulings2004HQ115779.html
The Trading Intelligence Quarterly. Global commerce: The world is not enough
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4. VAT registrations
Whats the regulation? For each market in Europe, there is a distance selling threshold. Above this level, retailers have to register and remit local VAT. The thresholds vary by market as below5: Paying local VAT can create an enormous overhead for often relatively small prot. For example, in Greece, the threshold is 35,000. And of course, all the VAT forms are in Greek. It would not be difcult to spend more on compliance that you generate in margin. Our tip: Contract with your customers to keep the sale within your domestic market. This in no way avoids VAT, but it does ensure that all orders are deemed to be local sales. A number of retailers are doing this now, and it can be done by simply inserting some text into your terms and conditions. The core idea is that two contracts are formed: one between retailer and customer and the other between customer and carrier. Example Terms and Conditions All ownership, title and risk in goods will pass to you immediately at the point and time at which such goods are placed at your disposal at our premises in the [UK]. You acknowledge and agree that it is your responsibility to arrange for a courier to deliver the goods to you, or alternatively to collect the goods yourself from our premises. [retailer] is willing on your invitation and as your agent to instruct [courier] to deliver the relevant goods on your behalf for the prices set out below.
Threshold for application of the special scheme for distance selling Member state Belgium Bulgaria Czech Republic Denmark Germany Estonia Ireland Greece Spain France Italy Cyprus Latvia Lithuania Luxembourg Hungary Malta Netherlands Austria Poland Portugal Romania Slovenia Slovakia Finland Sweden UK National Currency 35,000 70,000 BGN 1,140,000 CZK 280,000 DKK 100,000 35,151 35,000 35,000 35,000 100,000 100,000 35,000 24,000 LVL 125,000 LTL 100,000 8,800,000 HUF 35,000 100,000 35,000 160,000 PLN 35,000 118,000 RON 35,000 35,000 35,000 320,000 SEK 70,000 GBP
5 http://ec.europa.eu/taxation_customs/resources/documents/taxation/vat/ traders/vat_community/vat_in_ec_annexi.pdf
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The Trading Intelligence Quarterly. Global commerce: The world is not enough
5. Legal jurisdiction
Whats the regulation? There are lots of abstruse local trading laws across Europe: Germany has restrictions on promotions, selling below cost and lifetime guarantees; and France is very particular over when you can discount product (it is the spiritual home of private sales that neatly bypass that law). Our tip: The terms and conditions determine when the contract is formed, with whom and under what jurisdiction. Amazon as ever is a few steps ahead. Whether for regulatory arbitrage or tax reasons, the contracting party for most sales on the Amazon.co.uk website is with Amazon EU Srl in you guessed it, Luxembourg!6 Amazon terms and conditions extract These conditions are governed by and construed in accordance with the laws of the Grand Duchy of Luxembourg, and the application of the United Nations Convention on Contracts for the International Sale of Goods is expressly excluded. You agree, as we do, to submit to the non-exclusive jurisdiction of the courts of the district of Luxembourg City. The tangle of international regulation is set to continue. Article 22a of the new Consumer Rights Directive obliges all retailers to ship to all countries in the EU. This is clearly absurd and unenforceable. As anyone who has ever shipped anything to Romania can attest, its more of a lottery of payment and delivery than a retail sale. Moreover, given that a retailers website is only ever an invitation to treat and physical retailers are not legally obliged to sell anything, its hard to imagine why this should be different online. *** Great businesses can be built on obscure loopholes. Sky television originally launched on the Astra satellites taking advantage of Astras Luxembourg domicility to avoid some annoying UK regulations. Lets hope that when the history of international ecommerce is written, its not just the lawyers and accountants who made any money.
DISCLAIMER: WHILST THE TIPS ABOVE ARE BASED ON EXPERIENCES ACROSS A WIDE RANGE OF RETAILERS, WE WOULD RECOMMEND YOU SEEK INDEPENDENT PROFESSIONAL ADVICE BEFORE IMPLEMENTING THEM.
6 http://www.amazon.co.uk/gp/help/customer/display.html?nodeId=1040616
2223
Predicting the future is famously hard to do. Think of the genius quants of Wall Street whose models missed the basic risks in the system; the experts who for over 200 years have consistently underestimated the pace of change of technology; or the millions each week who scribble down their lottery numbers. The sad reality is that most of us get it wrong most of the time.
The challenge for ecommerce leaders is that we have to keep trying. The rewards of success and the penalties of failure are so great that we have to keep placing the big uncertain bets: technology, customer trends, multichannel, and international the focus of this edition. So as an ecommerce leader, looking to place some big bets, is there anything you can do to improve the odds of success? One possible answer is through the study of megatrends deep inevitable movements driven by fundamental underlying forces of human or market behaviour, and often enabled by technological development. You still cant predict the future, but some argue you can tease out the megatrends, sketch the leading edge and make an informed speculation about what happens next.
So with that caveat, here are six (more or less) condent predictions about the future of ecommerce: 1) Price: Its going to matter more. As transparency increases (think mobile device with QR, bar code, voice and image recognition) there will be fewer and fewer places to hide. This doesnt mean cheapest will always win (although it helps!) but anyone who charges a premium will have to think very hard about how to justify that premium to their customers. 2) Transparency: Its here to stay. Truth will out as Shakespeare put it, but never more inevitably than now. As our politicians have discovered, business processes, practices and ethics that might have been hidden in the past have now become open to customer and public scrutiny. So act as if there really is a webcam in the boardroom, because for all practical purposes there is! 3) Pace: Its getting faster. In ecommerce we are proud of our speed, but the growth of the web as a social communication vehicle is raising the bar again. Social media has two crucial characteristics everything connects to everything and digital communications last forever. So news (good and bad) travels faster than you can imagine and never goes away. Stopping bad news before it starts is your best bet.
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The Trading Intelligence Quarterly. Global commerce: The world is not enough
4) Co-creation: Customers need to be involved. They increasingly want a say in telling us what to make and what to sell. Its a long time since Henry Ford (If Id asked my customers what they wanted, theyd have said faster horses), but this is one trend thats gathering pace very quickly and could further separate winners from losers. 5) Trust: Customers trust each other more than they trust us. Given a free choice, customers have demonstrated time and again that they would rather take advice from other customers than from a retailer or a manufacturer. And now they can. You can ght against the tide, or embrace it as many have, and accept (with grace) that winning ecommerce players may have to swallow a bit of pride and let our customers be the heroes. 6) Le crunch: Physical shops will start to disappear. Total sales of non-food through physical outlets have fallen over the past 5 years, and yet we continue to lay down new space just as we always have done. Something will have to give So there you have it: megatrends. They wont help you win the lottery, but they just might make your ecommerce strategy. Enjoy the ride!
2425
Amazon has a deep understanding of what drives the economics of an ecommerce business. To sustain its extraordinary growth ($9.7b sales were added across the US and international in 2010 alone) continuous expansion is required to capture an ever-greater share of wallet from an evergrowing customer base. At the heart of its strategy is the focus on widening the customer acquisition net and driving repeat purchase frequency hence its relentless range expansion and launching of new international sites. These sites allow Amazon to offer a localised experience in terms of range, price, fullment, language and service.
Product categories Physical media Electronics Toys Baby Tools & hardware Home & garden Apparel & accessories Sports & outdoor Jewelry & watches Health & personal care Beauty & fragrance Shoes Dry goods Auto parts & accessories Digital media Office supplies Fabric Motorcycle & ATV parts and accessories Electronics trade-in program
US 95 99 99 99 99 00 03 03 03 04 05 06 06 07 07 08 08 08 11
UK 98 01 01 07 04 04 08 07 07 08 08 07
Germany 98 01 04 07 04 04 08 06 07 07 08 07 08
France 00 05 07 07 07
Japan 00 03 04 07 03 07 05
China 04 04 04 06
Canada 02 08
Italy 10 10 10
09 06 06 06 06 10
10
07 09 09 09
07 06 08 07
10
09 09
08 09
09 09
Source: Tom Szkutak, presentation at the Credit Suisse Convergence Conference, June 10 2009. eCommera analysis
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The Trading Intelligence Quarterly. Global commerce: The world is not enough
However, it is the extent of its international delivery that fully differentiates Amazon from competitors. Amazon ships everywhereand I do mean everywhere. By truly covering the world, Amazon both builds its customer base and can test the economics for a dedicated local site. Figure 1 illustrates the 241 shipping destinations from the Amazon.com website. A careful reader may spot some interesting albeit niche opportunities. Amazon does not ship to Kosovo, Somaliland, Abkhazia or South Ossetia. It serves The Holy See but not Vatican City. And nally, Amazon ships to Bouvet Island, an uninhabitable icy knoll home to a large number of penguins. Pingu?
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eCommera 2011
The Trading Intelligence Quarterly. Global commerce: The world is not enough eCommera is a pioneering provider of intelligent ecommerce trading solutions, enabling brand owners and retailers to sell efciently and intelligently across multiple channels. A selection of our clients includes Asda Direct, Hamleys, House of Fraser, Magasin Du Nord, Horze, the ofcial London 2012 store, T.M. Lewin and USC.
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