What an unbelievable time to be in eCommerce and take part in the ever-growing global market. As Bill Gates once said: “the internet is becoming the town square for the global village of tomorrow”. Online sellers are privileged to take advantage of these opportunities and use data to make informed decisions on where to sell and the associated profits.
Taking your local business global isn’t always easy, calculated or profitable. With years of industry experience we have seen many companies take the leap across borders. The truly successful companies have been those that use data to help them navigate the untapped demand on the other side of the world. We’ve identified 3 steps that the successful companies have followed.
1. Identify demand for your products (in different countries and markets);
2. Understand your expected expenses breakdown 2;
3. Know your margins.
If your research is comprehensive and accurate, you will find the answers to various questions, such as: How much inventory should you buy? What is the expected margin after taking into consideration costs related to selling your products? And many more.
At the end of the day, success in new markets will boil down to better sourcing, choosing the right market and most important, whether the cost of going global makes financial sense.
To illustrate the point, meet John, who sells motor sport products. Winter is coming, and John just received a price quote from one of his suppliers, offering him dozens of products by a brand he has never heard of, Mechanix, which specializes in gloves.
Let’s see how John walks through the 3 steps to International success.
1. Identify demand
There are a few ways to identify demand. We’ll demonstrate using a few main channels and solutions:
Identifying demand on Google
Understanding the demand level in a specific region will allow you to evaluate which products will sell and which ones won’t. Google Trends can show you the interest level over time for a specific search term and you can filter the results by a geographic location or a specific language. John can check the general trends by searching “Motorcycle Gloves”. When he does a search over a 5-year period, he can easily see that there is a cyclical peak season in the winter in the US. Now that John knows there is a cyclical demand for Motorcycle gloves, he can analyze the brand to understand if it follows the same trend.
If John would like to sell in countries other than the US, he should run this search for each different country he’s considering.
Another data point that can help in analyzing demand is Google Keyword Planner. This tool is great for estimating the monthly search volume for this brand and the average CPC (Cost Per Click) for each keyword.
John can understand that there is a reasonable number of people searching for this brand on a monthly basis and the suggested Cost Per Click for advertising in the US is $1.83 (The same can be done for different countries in order to evaluate demand fluctuations).
Amazon provides a few great signals on an item level. First, there are over 1,000 reviews for this product and the overall score is 4.4/5 – so it’s a good start. If we assume that 20% of people rank a product they buy on Amazon, this means that over 5,000 people bought this product and are happy with it. We can also see there are over 40 answered questions, which shows curiosity and engagement with the product. The product is distributed from Amazon’s Fulfillment Center (FBA), which often indicates a high demand level. Finally, we can see that there are over 50 sellers competing to sell the same product. Furthermore, John can scroll down to the bottom of the page and get Amazon’s Best Sellers Rank.
The rank is a score from 1 to over a Million per product category, where 1 means the highest demand level and a product that is scored 100,000 is also selling several units a day on Amazon, if the product category is popular.
This item has a fairly good ranking in Amazon’s catalogue. Although he can’t estimate how many units are sold each month with this information, there are solutions out there that can assist him with this estimation. We will suggest a few later in this article.
Another data point John should consider looking at is eBay’s monthly sales volume per item, which gives a great indication about the product sales volume in a specific eBay market. This information is not accessible on eBay but can be provided by a few SaaS online providers.
To summarize, John collected 4 data points from 4 different sources in order to identify the demand level:
1. Google Trends (US);
2. Google Adwords (US);
3. Amazon (US);
4. eBay (US).
To make a real data-driven decision, John should collect dozens of data points, and if he wishes to expand his business internationally – he should do it for each country he would like to sell in and every channel. A great way to show a demand differentiation would be to check the same product on Amazon UK and determine how the demand varies by region. By knowing the demand level in each country and each marketing channel, John can calculate the expected sales related costs in every channel.
2. Understand your expenses
First, find the market price in various marketplaces
Now that John knows what products have high demand, he can explore the real expected sale prices in different countries and channels. When you’re looking to find your product price on different marketplaces, it’s best to use product identifiers (UPC, EAN, MPN or even ASIN) to ensure you get the right products and compare apples with apples.
When searching on marketplaces like eBay, you should always look for high performing merchants who have high feedback scores. This is what buyers are looking for, and the prices of these merchants should be your reference price
If you sell on a 3rd party marketplace (such as eBay or Amazon), there will be some additional fees (i.e. “Final Value Fees” or “FVF”). Each marketplace has different FVF, and even in the same marketplace, different categories have different fee structures.
John discovered that the real sale price on Amazon US is $19.86, so the FVF would be $2.98 (15% of the sale price). However, if John were to sell the same product on Amazon UK, the price would leap to £23.91, which is ~$30 USD (a higher price than Amazon US). Amazon’s UK final fee would be £2.87 (12% of the sale price).
This is a great example of how the same marketplace (Amazon), offering the same product in two different countries (US and UK), shows different demand levels, different prices and different marketplace fees (15% in US / 12% in UK).
Clearance costs. i.e.: PayPal fees.
There are some marketplaces (such as eBay or Etsy) that accept payment through a 3rd party clearance supplier, like PayPal. In this case, additional expenses are applied. These include marketplace and clearance fees, import tax, VAT, shipping and more.
Shipping cost is another key factor to take into consideration: Large, fragile or heavy items (i.e. a refrigerator or TV) can be very costly to ship to customers. Various sites deal with shipping expenses differently; some add it on top of the selling price and others charge it directly to the customers.
Calculating shipping involves taking into consideration the following:
1. Seller origin
2. Buyer origin
3. The product dimensions
4. The product weight
Taxes can have a huge impact, with every country having varying levels of tax implications. Be sure to check the tax rates and import laws to fully understand the impact ahead of time.
3. Know your expected margins
Now, after John has identified the demand and understands his anticipated expenses, he knows what his margin is going to be.
Going through this process can often be time consuming and monotonous, leaving room for error or worse yet, not discovering opportunities in remote markets and operating a low margin business. What if John wants to sell thousands of products in various markets? How would you examine a price quote from a new supplier? For exactly these problems, we have developed Algopix, an end-to-end product/ market analysis platform for eCommerce Sellers.
Algopix helps sellers make faster and more educated business decisions around product sourcing and sales related costs, and enables sellers to conduct multi-product/multi-market analysis to get real-time results across marketplaces they might not have even considered.
Bottom line? The ability to conduct this research quickly and accurately allows you to identify global opportunities while minimizing risks such as overstocking.
Dani Avitz and Ori Greenberg of Algopix share the 3 crucial steps to achieve international success. Algopix is a product market analysis platform for eCommerce sellers. Algopix provides data-driven recommendations that save time, decrease risk and optimize sales.
This article appears in E-Commerce Solutions magazine. Want more tips to grow your e-commerce business? Download the magazine now for expert advice, case studies, and more!