Can Big Brands Compete Overseas with International Marketplaces?

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Gap recently made headlines with its sudden closure of the brand’s physical stores and ecommerce site in Spain, about three years after expanding into the market. Gap’s experience in Spain echoes that of some other major North American brands such as Best Buy, which exited the Mexican market at the end of 2020, after more than a decade in the country. What causes well-established brands to struggle outside their home markets? While Gap didn’t communicate much publicly about its departure from Spain, Best Buy cited the pandemic as its reason for leaving Mexico. However, analysts also suggested at the time that the electronics retailer didn’t establish a strong enough brand in the market.

Meanwhile, marketplace ecommerce is going strong in Spain, in Latin America, and elsewhere around the world. In fact, Gap continues to sell through El Corte Inglés, a Spanish retailer with an online marketplace and strong online presence on the Iberian Peninsula.

Where consumers worldwide search online for products. Source: U.S. International Trade Administration.

Online marketplaces are where 31% of shoppers started their product searches in 2023, compared to just 12% who start at retail websites. So how can big brands compete in foreign countries where international marketplaces have a stronger local presence? Two areas that can have an impact are addressing fraud-related friction and cultivating local trust in the retailer.

Fraud management challenges

There’s no one-size-fits-all set of rules for fighting fraud in any single market, let alone across multiple markets. It’s understandable that brands moving into countries with historically higher rates of ecommerce fraud might want to apply stricter and more rigid rules abroad than in their home market. However, this approach often fails to prevent fraud and also offends a large portion of customers in the new market who are willing to give the brand a try.

For example, fraud rules that flag or automatically decline orders from shoppers whose email addresses are new or whose online purchase histories are thin will by default rule out many new online shoppers in fast-growing markets like Mexico, Colombia and Argentina. The data from ClearSale’s most recent consumer attitudes survey on ecommerce, fraud, and CX seems to bear that out: 33% of shoppers in those markets experienced at least one ecommerce decline in the past 12 months, nearly twice the 18% decline rate reported by U.S. and Canadian consumers. Among the LATAM survey participants, 46% said they would never shop again at a site that declined their order, and 40% will complain about the brand online, making it even harder for the company to attract cautious new customers.

Fraud concerns and payment preferences can also intersect in different ways in overseas markets. In many markets outside the US, consumers are much less likely to pay for online purchases with major credit cards, which means they don’t have some of the purchase protections that card brands offer. For example, most European consumers don’t use credit cards as much as U.S. consumers, and in Mexico store cards are preferred by many shoppers. Chargeback requests are possible if there’s a problem, but for debit card purchases, the consumer is putting their money more directly at risk when taking a chance on a new seller, especially one that’s based outside their country.

That said, offering the payment methods that in-country shoppers prefer can make them more likely to buy from a new site, because they know what to expect in terms of consumer protection if something goes wrong. At least one option should be a digital wallet that local consumers use and that shields their payment data from the retailer. More than 80% of online shoppers surveyed in Mexico, Colombia, and Argentina said that digital wallet payment options make them feel more secure.

Cultivating customer trust

Where are the customers that international brands decline making their purchases? In all likelihood they’re going back to the ecommerce marketplaces they trust, where they know their orders will be approved. In Spain, that includes Amazon.es, eBay.es, and El Corte Inglés. In LATAM, Mercado Libre earned high levels of trust from 87% of shoppers in the consumer attitudes survey. Amazon ranked second with high trust among 66%. After that, the trust rankings fell off dramatically: 45% for Facebook Marketplace, 36% for AliExpress, and 28% for Shein—all marketplaces based outside the LATAM region.

The disparity in trust among marketplaces highlights another issue: Many consumers are simply more likely to trust local sites and brands. For example, among adult online shoppers in Mexico, Argentina, and Colombia, 54% say they prefer to shop online with stores based in their own country, and just 7% say they prefer international sites based elsewhere. Among those who prefer local sites, 47% say their preference for ordering from local sites increased over the past 12 months. Brands planning to enter these markets might consider leveraging this trust by establishing a presence on local marketplaces first to build trust and fine-tune fraud screening policies, and then perhaps add their own retail site and stores.

A balanced approach

There are no guarantees when it comes to expanding into new markets, and there are many factors that influence whether a brand’s expansion succeeds. However, taking a balanced approach can make success in a new market more likely. What does that mean?

Find a balance between strict fraud rules and declines. False declines costs brand much more over the long run than fraud does, because of the lost customer acquisition spend, customer lifetime value and brand reputation. Balance out the payment methods that are most cost effective for the retailer with those that are preferred by the customer for security and convenience. And build trust with local shoppers by working with the marketplaces where they already place their confidence and spend their money. Using those platforms as a lab to understand in-country customer behavior can make it easier to scale up successfully.

With the right balance, your brand can demonstrate to new audiences that you recognize them as good customers, that you want their business, and that you are willing to meet their customer experience expectations–keys for success in any market.

Rick Sunzeri
Rick Sunzeri serves as the Director of Enterprise Accounts at ClearSale and is an experienced sales professional with a background in SaaS and complex network solutions. Rick specializes in enterprise-class sales with experience selling business applications to senior business and technical executives.

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