You just tripled last year’s annual revenue and hit the $10 million mark. Business is booming.
To celebrate and prepare for the coming quarter and year, you and your partners Sam, Jennifer, and Alex go on a retreat to La Fortuna, Costa Rica. After a brief celebration, all of you are eager to get back down to business.
“How can we sustain this rate of growth?” you challenge them.
Alex recommends creating different brands. Jennifer suggests expanding into manufacturing and taking a chance on creating your own products.
“Those are all great ideas,” Sam says, reading your mind. “But I don’t think our core business has grown to its limit yet. We should double down on our core business and expand to the global ecommerce markets.”
The room is silent. You pull up your Shopify dashboard. Alex does the same.
“Well, Sam, I don’t think that makes sense,” Alex says. “Our global ecommerce markets orders generate less than 5% of our revenue right now. Why don’t we put our efforts into the 95% of people that shop with us, and sell more stuff to them through new stores and products?”
Your eyebrows crease and your nostrils flare as you inhale.
Alex and Jennifer’s bets would almost certainly put your company on the path to $30 million next year. And while next year’s goal is important, you’re not sure about the growth trajectory and speed after that.
In contrast, Sam’s bet would almost certainly not put your company on the path to $30 million. In fact, it might make the year difficult — investing heavily in infrastructure, logistics, and marketing, and betting on the global ecommerce markets.
Done right, however, moving into global ecommerce markets has a shot at reaching the same growth rates you’d experienced in the early days, or even surpassing them.
Amidst the silence, your mind wanders to the day before, when the four of you had gone surfing. You, Alex, and Jennifer had chatted waiting around for the next wave in the peaceful ocean, until you heard Sam whistle. Each of you looked up. “Holy s***,” you’d said in unison. There was another wave, and it was going to be a big one …
Should you trust Sam’s foresight? Will the investment in global ecommerce markets be worth it?
The Fourth Wave of Ecommerce
CEO and Co-Founder at HotelTonight, Sam Shank, writes in VentureBeat about the three waves of ecommerce:
- “The first wave was connecting businesses to a network in order to send them electronic transactions.”
- “The second wave, which was enabled by the Internet, allowed users to access these electronic networks to perform transactions (aka e-commerce).”
- “The third wave, brought on by the mobile era, connects users via mobile devices for real-time, on-demand transactions. … This third wave of electronic commerce will significantly alter certain categories of commerce, particularly ones where the inventory is highly perishable.”
The fourth wave of ecommerce starts in this mobile era, where users can conduct real-time on-demand transactions. However, it expands far beyond that.
The fourth wave of ecommerce involves global ecommerce markets — literally enabling anyone to buy anything, anytime, and get it delivered anywhere.
That’s a pretty simple vision, but as you can imagine, it’s surprisingly complex to execute on. It’s far from impossible though. Here are some of the larger moving pieces (amidst many smaller ones):
- As my colleague Dan highlights, it means taking your logistics and supply chain management to the next level
- It also means managing your inventory with one product information management (PIM) system
- Finding each country’s and region’s different channels, and actively expanding to them and optimizing performance is crucial
- It also requires localization, which expands far beyond language — it’s about culture, trust, and consumer behavior. No amount of resources can make up for this. For example, see Uber’s attempted expansion into China and eventual retrenchment and investment in Chinese rival Didi
There’s a story from the third wave of ecommerce, the mobile era, of two companies — Microsoft and Apple. At the time, Apple was just again becoming a healthy company, coming off the success of the iPod and iTunes. And as always, Microsoft was a behemoth.
And then, in January 2007, Steve Jobs announces the iPhone and ushers the mobile era into the mainstream. Apple and Google double down on their mobile initiatives and are now seeing the business returns, and Microsoft misses it completely. But the iPhone wasn’t Apple’s first foray into mobile — Steve Jobs saw the trend early on, in 2005, when he tried making “the iTunes Phone,” with Motorola called ROKR.
Surfing is a three-step process.
A surfer recognizes the signs and patterns of incoming waves. She positions herself in the perfect spot to catch the wave. At the last minute, she paddles vigorously to align herself with the wave and match its speed.
Most of us see the surfers ride the wave, but we miss the more subtle parts of recognizing patterns, and the rigorous positioning. It’s not off your mind — while Sam was well-positioned, and Jennifer and Alex made the wave with a bit of time to spare, you barely had time to spin and get on your feet.
You were milliseconds away from wiping out while Sam roared with excitement.
Your attention snaps back to the room, as Sam takes over the projector and pulls up this eMarketer graph projecting global ecommerce markets sales to nearly double from 2017–2020, reaching over $4 trillion.
Sam also quotes McKinsey, highlighting that flow of goods, services, and finance was $26 trillion in 2012. “McKinsey predicts that the rising prosperity and participation of the emerging world, global flows would more than double, estimating that flows would reach between $54 trillion to $85 trillion by 2025,” says Sam. “This emerging world includes the usual suspect — Forrester predicts that China alone will reach $1 trillion in total online retail spending by 2019.
Forrester also writes about markets that are second priority but show high potential. For example, “they may be at an early stage in terms of eCommerce development (e.g., India, Indonesia, Mexico), have complex domestic regulations to contend with (e.g., Brazil) or require brands to launch digital offerings in an entirely new region of the world (e.g., UAE, Saudi Arabia). They may also be very digitally advanced countries with good infrastructure but small in market size (e.g., Sweden, Switzerland).”
Image via Forrester
Sam then pulls up Dell’s, Microsoft’s, and Symantec’s websites, and points out how they’ve already sold their hardware and software in dozens of global ecommerce markets. Other industries are starting to catch up…
Sam cites a Forrester report:
“Calvin Klein, for example, started its global eCommerce expansion outside the US with sites in Europe, followed by one in Brazil; subsequent expansion in 2015 to 2016 will involve launching many new transactional sites, including a number in Asia.”
Everybody sits back, listens to the seagulls’ caw, and thinks while they browse through Costco Mexico’s site.
How to Plan for Your Expansion into Global Ecommerce Markets
After a few moments, Sam breaks the silence. “Look, I’m not saying it’s going to be a walk in the park. I think Alex’s brand expansion and Jennifer’s manufacturing opportunities are potent as well. But I know our ambitions for the company, and I think the timing is absolutely perfect for this — and it’s not going to be around forever.”
Jennifer says, “That’s true. This is probably the most time-sensitive one, whereas we could pick the others up at different times. We’ve seen companies expand into global ecommerce markets so we can learn from them, but we’re also early enough to gain a ton of market share.”
“But brand expansion and manufacturing are stable, and we know what we’ll get out of it,” Alex objects. “This seems less certain — it could be as wild as starting again. Do we really want to do that?”
A familiar glint crosses Sam’s eyes: “That depends.”
You already know the speech Sam will launch into. Beyond the reports and stats, you know the battle stories from your friends, peers and mastermind groups. For every retailer that profitably expands into global ecommerce markets, you know there are dozens that are struggling with it despite their best efforts.
“Alex is right,” Sam concedes. “The ROI on global ecommerce markets expansion isn’t certain. I think we should plan and make very conservative forecasts despite an aggressive expansion into global ecommerce markets.”
“That’s fair. ‘The biggest oak starts from an acorn,’ Jeff Bezos once said of Amazon’s experiments outside of their core businesses,” you say. “And look at them now — Amazon Web Services is a huge revenue driver.”
Jennifer nods, “That’s reasonable. I think it makes sense to expand beyond our core business as well — but we have to go all-in on this one. We can’t cheap out, or we’ll be stuck between a rock and a hard place.”
“That makes sense,” Alex says. “One of us can lead this, but where will we go first? And how do we hire? It would make the most sense to meet locals and recruit from there, right? Localization goes so far beyond currency and language — it’s about customs, design sense, and consumer behavior, to say the least.”
“Definitely,” you agree. “I don’t think we should hire any expats — and while it’s important for us to be there in-person, we need to hire teams full of locals who’ve grown up and been immersed in those places. And we’ve gotta start hiring far in advance of our actual execution.”
Sam grins: “I like the way you’re all thinking. Seems like we’re all on the same page — the timing’s right, the opportunity’s there, and these other expansions can wait. Are we all in? Or are we going to die a slow death, like all these other ecommerce companies?”
“You’re so damn dramatic,” you respond. Jennifer, Alex, and Sam laugh. Sam gets up and raises his glass.
The global flow of goods, services, and commerce is taking place and is becoming a multi-trillion dollar opportunity. It’s up to you to decide to participate or not. Similar to companies asking if they should invest in mobile in 2007, or Netflix moving from DVDs to the internet over a decade ago, it’s your turn to decide. (By the way, while the number pales in comparison to Internet subscribers, Netflix still has millions of DVD subscribers.)
And while timing is sensitive, it’s also not a black or white, now-or-never, solution.
For example, you and your partners might figure that other preparations need to be made before moving forward and that you’d execute on something else to sustain growth in the meantime. Or that you need to figure out some other method of funding.
In any case, the question still remains:
Will you go global?
The future of your company rides on it.