Today we’re learning how to begin selling internationally! Kent Allen joins us as we dive into the beginning phases of how to sell internationally. From the monkey paw of cross border, facing the fraudsters, and the importance of having a holistic global view of the world. Listen now!
Phillip: [00:00:10] Hello and welcome to Step by Step, a podcast by Future Commerce, presented by Avalara. I'm Phillip.
Brian: [00:00:15] And I'm Brian, and this is Season 7 of Step by Step. And [00:00:20] you're listening to episode two of five, so you're just jumping in a little bit ahead of the game, potentially, you might want to go back and listen to episode one.
Phillip: [00:00:30] Always.
Brian: [00:00:32] Because this is a full five-part series, and we're talking with experts from industry leading cross-border platforms and technologies that power [00:00:40] cross-border innovation. And we're bringing that to you step by step.
Phillip: [00:00:44] Yeah, and we're trying to answer the big thorny question when is the right time for my brand to go cross-border? I like to say eCommerce today is an investment versus an asset, and an investment in a channel, especially [00:01:00] a new channel that's in an emerging market for you as a brand, how do you maximize and investment? Brian Lange, this is not investment advice. Don't take advice from us, but time in market, right?
Brian: [00:01:12] Yes.
Phillip: [00:01:12] Time in market. And so speed to market is of the utmost importance. But you don't want [00:01:20] to risk having a failed launch, and you don't want to set yourself back by doing some of the wrong things. And you can implement cross-border the wrong way. And so this season, we're going to help you think about the things that you should consider before taking your steps to grow your brand overseas. And if you've maybe taken some of those first steps or maybe performed some tests, [00:01:40] but now cross-border is a key part of that growth strategy for you, well, stay tuned because this podcast is for you.
Brian: [00:01:48] Speaking of time in market, our upcoming guest who I'm so excited about has had some time in the market of going international. [00:02:00] Kent Allen is like, OG internationalization. Like this guy is a wizard in going cross-border.
Phillip: [00:02:10] And one of the early founders of GELF, which is the Global eCommerce Leaders Forum, and a principal at the Research Trust. One of the incredible [00:02:20] things is that Kent literally wrote the book on cross-border and performed original research in the early 2000s that we all still depend on today about the right and wrong way to enter into a new market. We have put this entire series together and taken a lot of great pains to make sure that we have accurate [00:02:40] information from people who have been doing this for decades. And we are, I believe, I have been so educated and I've been in eCommerce for 20 years. I think that we are putting together one of the most definitive point in time pieces of content about cross-border that exists in our ecosystem today.
Brian: [00:02:59] Agreed [00:03:00].
Phillip: [00:03:00] But we're doing it for a purpose, and that's because brands are expanding globally right now. There isn't time to waste.
Brian: [00:03:08] There's no time to waste. The opportunity is just too high. The cost of CAC in local markets is just, it's astronomical. And so as you'll learn in this series, the opportunity to go [00:03:20] acquire new customers in different regions is really, really a great opportunity. It is a good investment if you do it right. So that's why we did this season of Step by Step in partnership with Avalara to help you understand how to get to those new regions, but do it in a way that is good for your customers [00:03:40] and good for your business. And that's not an easy feat. There's so much complexity when going cross-border. It's beyond just translating your eCommerce site. It's having to consider all these other things like taxes, duties, shipping, cultural differences, and so much more.
Phillip: [00:03:55] Yeah. So if you are an operator and you have questions about how to take those next steps, [00:04:00] or maybe you're in technology and you're curious about the kind of tech stack that you might need for an international launch, this series is for you. And why wait any further? Let's get to the good stuff. We're going to join Kent Allen, who's Principal of the Research Trust and Co-Founder of the Global eCommerce Leaders Forum. [00:04:20] As we dive into the topic and ask the questions and find out the answers that we need to successfully launch brands into new markets step by step. Today, we are joined in our second episode of this ongoing series about going cross-border, we're joined by a retail [00:04:40] eCommerce industry analyst who has been in this ecosystem, who's been leading us into this conversation around cross-border for twenty-five years. Mr. Kent Allen is the Principal of the Research Trust and Co-Founder of Global eCommerce Leaders Forum or GELF for short. Welcome [00:05:00] to the show, Kent.
Kent: [00:05:01] Hey, guys, thanks for having me.
Brian: [00:05:04] Thanks for being here. We're excited to talk to you about selling cross-border, and you have many years of experience in international commerce. Talk to us just really quickly about what GELF is [00:05:20] and the point of GELF.
Kent: [00:05:22] Yeah, sure. GELF really kind of grew out of some work we were doing literally a couple of decades ago, back when eCommerce and the store teams were still trying to get their executives quite literally on the same page and working. We were doing a symposium [00:05:40] actually at Shop.org and the question came up, "Well, you know, hey, the World Wide Web is by definition, worldwide, and we're starting to see more traffic come from international. We don't know how they're finding us. But I think we need to think about this." So that was really kind of the first heads up to us that we [00:06:00] needed to kind of start thinking less about how to get eCommerce in the US to work. But also again, how do you deal with people coming in crossing borders from all over the world? So this was probably 2007/2008 or so. And so we decided let's spend some time [00:06:20] looking at that. At the time, I was working with another GELF Co-Founder, Jim Okamura, who has been in the cross-border, cross-channel consulting world for a long time. And really kind of the output of our attempt to answer that question was really the first benchmarking study that we published at Shop [00:06:40].org, I think back in 2007/2008. And we just kind of took off from there. And interestingly enough, we thought that cross-border and investing in international would be the next big thing back then. But as it turned out, the next big thing [00:07:00] was actually the Great Recession and that hit everybody hard, including eCommerce, which was back in the 18, 19, 20 percent annual growth years. And so coming out of that, the world of the iPhone kind of dawned. And if [00:07:20] you guys remember all the money went into mobile commerce and things like that. So in a weird way, cross-border and international took a little bit of a hiatus as everybody rushed to figure out mobile commerce.
Phillip: [00:07:33] Well, and now, Kent, you just click a button in your Shopify [00:07:40] app and you're instantly cross-border, so it's been good talking to you. And no, just kidding. It's still complicated. It's not easy, right?
Kent: [00:07:49] Yeah, I mean, it's not. In fact, again, we saw the complexity out of the gate 20 years or so ago. The interesting thing was once the traffic [00:08:00] started coming in from mobile devices all around the world, people were like, "Oh, OK, we've kind of opened up this," I don't know if you'd call it a Pandora's box or not, because it was actually a world of opportunity. But yeah, you're right. I mean, fast forward to today, and even the folks like Shopify have realized [00:08:20] that, hey, it's not just about getting really functional sites up and going that focus on an in-country population. [00:08:28] We've got to realize that the very nature of digital commerce is cross-border. [00:08:34] So it's actually been really kind of refreshing to see how people [00:08:40] have embraced this idea, especially coming out of this really rough patch that we've had for two years where borders have been closed and people have kind of hunkered down. And yet obviously there's been a boom in eCommerce and we've definitely seen an eco boom in cross-border, well or an echo boom, I should say.
Phillip: [00:08:58] If you had launched cross-border [00:09:00] in 2008, the global population that was eCommerce enabled back then was much smaller than it is today, right? And we've seen a lot of leapfrogging of technology, you know, especially mobile-first. You see what's happening in Africa and what an incredible time to be launching [00:09:20]. The cross-border joke in here is back then you would have been launching de minimis and today you're launching de maximus. Thank you. I'll be here all week.
Kent: [00:09:30] All right, I'll have to use that one. But yes, from 2008 to say, 2018, obviously a lot of growth [00:09:40] in eCommerce, but to some extent, even a maturing of that growth. Then along came the pandemic. And what happened was that all the pockets of resistance, if you want to call it or the laggards, and great example, southern Europe, for instance, traditionally fairly low penetration or relatively [00:10:00] low, I should say, from an eCommerce perspective. But as we all know, Italy got hit early and really hard by the pandemic and Spain, Portugal. We saw a lot of that kind of remnant population come online. The same thing happened in Latin America, where obviously, especially [00:10:20] on the social side of things, people have been very active online, but huge bump due to the pandemic. And the question now is, OK, does this laggard population that's come online, do they stick? Do they go back to the stores? Is it a little bit of both? And I think the answer is yes, it's going to stick. Obviously, [00:10:40] stores are going to benefit, but you know, digital and stores are increasingly intertwined today. So if you're thinking cross-border eCommerce, you've also got to be thinking about the roles of stores as far as cross-border fulfillment, your DCs all over the world, it's a complex picture, for sure.
Brian: [00:11:01] It's [00:11:00] complex, but the way that it works as a consumer, I just go on someone's website and I click "order" from this really cool international brand I found. And then I pay some exorbitant shipping fee. And then like [00:11:20] six weeks later, I have a product show up at my doorstep, right, Kent? Is that how it works?
Kent: [00:11:26] You've kind of created quite... Yeah. We could probably do an entire hour just on where the shipping costs are. But yes, I mean, again, looking back, say, we'll just say 10 years or so ago. Yeah, that was always [00:11:40] one of the biggest challenges. And to be honest, one of the reasons the cross-border experience has always been kind of not what it should be, especially when you compare it to a domestic eCommerce experience, it was always super high, expensive shipping and long delays. Now you could certainly pay a lot [00:12:00] for express shipping, and you could get it there in two or three days. But what we found over the years as we did more research was, yes, there was the, call it, the wealthy expatriate who just wants what they want and they want it as soon as they can, and they're not too worried about paying whatever it takes to get it. That's a relatively small segment, but [00:12:20]to be honest, that did nurture the first generation of cross-border eCommerce. More recently, it's been, call it, the rising global middle class that has really kind of shored up the opportunity. And we do see research and continue to see that today, where in many cases people are willing to wait to get a better shipping [00:12:40] price. I'm not going to say a cheap shipping price because international is still challenging. Now again, this is all pre-pandemic. You look at what's happened with the shipping cost during the pandemic, and this impacts, you know, this is a supply chain, this is direct to consumer eCommerce. This is everything. We've seen some data where shipping just capacity [00:13:00] has quadrupled in cost. So international shipping is, unfortunately, a challenge for everybody today, whether it's eCommerce or just getting product to put on the shelves of stores.
Phillip: [00:13:12] Now the funny thing about this whole conversation is if you're a branded manufacturer or [00:13:20] even a retailer, you're used to having to deal with international shipping. You're just putting it in giant containers on freight. And that's costing six, seven times, eight times more than it used to as well. Now we're talking about consumers, so there are tons of pitfalls, I'm sure. What are some things that folks [00:13:40] just don't consider or implement poorly and have to wind up ripping and replacing later on when they start down their cross-border journey?
Kent: [00:13:47] Yeah, since we're talking about shipping and you're right, there has been a push to fill containers and put them on ships. But, you know, largely a lot of direct to consumer eCommerce that has been [00:14:00] fulfilled internationally has still really taken advantage of airfreight. So early on in the pandemic, people were relying on there being passenger jets, taking passengers around the world. And when that all shut down, guess what went away? Of course, all that air capacity. So yeah, I mean, and I don't know if I'd call it rip and replace, [00:14:20] but certainly one of the things that people have had to revisit is just this whole idea of where do we find the capacity to ship the products? And so at the same time, you've got this rise in eCommerce volume, you've got this echo boom I was talking about in cross-border, and yet the capacity was gone. So people have had [00:14:40] to do some really nimble and innovative things. And what I think you saw a lot during the past holidays was a lot of smart brands went out and secured their own capacity. They didn't really rely on their 3PL, so maybe they worked with their 3PLs. But yeah, they knew that "I've got to make sure that I can get my product where it needs to be." So that's one [00:15:00] thing. I think looking at some of the other opportunities, one thing that we've certainly seen, and I'll stick with the shipping infrastructure right now is in the early days of cross-border, for the most part, especially US retailers, they just kind of turn to their trusted domestic shipping [00:15:20] partners. And those shipping partners didn't always have the international lanes developed, say, into South Korea or into southern Europe, as we mentioned early. Or even to your point, earlier, some of the emerging markets like Nigeria and things like that. So just kind of handing off an international order to a domestic [00:15:40] shipper really drove up costs and things like that. So I think one of the things that people are really focusing on right now is really understanding how to bring in, say, kind of multi-carrier shipping solutions and understanding how better to kind of get a good price for the end consumer by doing a little bit more sophisticated brokering [00:16:00]. And sometimes that's increasingly being driven by AI and machine learning, so that would just be one thing, lots of other things we can talk about.
Phillip: [00:16:09] Yeah. Actually, one of those things could be that it's been said at least once before that when you're talking about international air, it's really people in yellow [00:16:20] or people in brown. But are there actually more options than just that? There must be? Yeah.
Kent: [00:16:27] One of the things that we've seen at some of our Global eCommerce Leader Events or GELF, as you guys mentioned in the opening is, you are getting a lot of these specialists. I know I was just talking to Singapore [00:16:40] Airlines a couple of weeks ago and they've got a parcel is what they're calling their service. And we're certainly seeing, essentially you're seeing manufacturing moving beyond China into parts of Southeast Asia, which is, of course, raising the standard of living. And there's more kind of the rising middle class [00:17:00] there. And of course, the first thing they want to do is kind of upgrade their lifestyle. So yes, they can buy locally sometimes. But in many cases, you know, they want that authentic purchase so they'll purchase cross border. So yeah, the specialists are interesting. You see that. In fact, I was even talking [00:17:20] to Russia Post not too long ago, and obviously there are issues there and there have been. I somewhat haphazardly called 2014 the year of Russian cross-border and unfortunately, they cross the border into Crimea and that kind of fell apart on me. So I don't always get my calls right. [00:17:40]
Phillip: [00:17:40] But you got it right. You just it wasn't what you meant. It's almost the monkey paw of cross-border. You have to be extremely specific when manifesting things in the eCommerce world.
Kent: [00:17:51] And you look at different parts of Asia, you look at South America. And in fact, one thing that we find that US commerce [00:18:00] leaders don't necessarily think about as much, or maybe the leaders do, and the laggards are just coming around to it. And it's really one of the justifications for cross-border in general, which is this idea that, yeah, it may not be as profitable as your domestic. In fact, more often than not, it's not as profitable. And [00:18:20] [00:18:20] that's one of the big challenges that the CFOs face is, "Why shouldn't we just keep investing in the US market? We know how to get a better return there." And I think part of the answer to that is like, "Well, yeah, if we ignore opportunities throughout Latin America, we're going to find in 10 years that the lane from [00:18:40] China into South America," which is a booming lane by the way and has been growing, "is going to pretty much shut us out of the market." So in some ways, we've always kind of pitched, if you will, cross-border eCommerce as a diversification play, as an opportunity to be relevant to your consumer, the next [00:19:00] decade consumer. And that, more likely than not, is going to be this rising middle class around the world. So there's a lot more to it than just running the numbers sometimes. [00:19:10] But yeah, the shipping lanes that we're seeing out of different parts of Asia into Latin America, for instance, should really be seen as a red flag to [00:19:20] US brands that are kind of maybe focusing a little bit too much on their domestic markets.
Phillip: [00:19:27] I'm fascinated actually at this, how US-centric my mindset can be. Most of the work I do is with domestic eCommerce brands that are looking to go out. But when you're speaking to someone [00:19:40] in Canada, they're all too used to having to deal with cross-border and DAP and all the rest, right? They're used to having a poor consumer experience on the receiving end. What I think I hear you saying is that maybe if in [00:20:00] the not too distant future, there are more markets that more brands from outside of the United States are servicing in a truly global economy, rather than just a US to the rest of the world?
Kent: [00:20:12] Yeah, absolutely. Canada, as much as you will hear China, China, China when it comes to cross-border eCommerce. [00:20:20] And obviously, China is a hugely important market. Canada is still our number one trading partner. And interestingly enough, we've certainly seen that the Canadian consumer, especially in the last five years, really kind of adapted to eCommerce. I don't know if "catch up" is the right word, but people would [00:20:40] say that. But the Canadian border is certainly not as easy as it could be. So we definitely see a lot of opportunities for both the Canadian consumer who is very used to shopping in the US and dealing with cross-border. But we're also seeing [00:21:00] an opportunity for small Canadian brands to connect with US customers, especially US consumers, who might be tired of kind of the same domestic offerings that they see at the local mall or can buy on Amazon. It's interesting we did some work for the Canadian Trade Department, [00:21:20] and I know one of the things that US consumers find very appealing about Canadian brands is that they're very sustainable, they're very egocentric. And so there are lots of opportunities like that for brands outside the US to kind of appeal to US consumers. Again, something else that US-based retail [00:21:40] eCommerce brands need to think about.
Phillip: [00:21:46] Are you considering selling to international customers? I think you are because you are listening to this season of Step by Step. We have partnered with Avalara to create a 40-page merchant's guide to cross-border commerce. This new [00:22:00] Step by Step guide will take you through all of the things that you need to consider when putting people, processes, and platforms into place to have a winning cross-border strategy. Cross-border sales are a great way to increase your customer base and drive revenue and position your brand for the future. But it's not without complexity. You have to consider the [00:22:20] customer experience. You have to have a comprehensive timeline. You have to understand compliance, custom duties, and tax requirements, and you have to work with a wealth of partners. Our eight step 40 page guide will help you to do that and create a winning cross-border strategy. Download the guide for free right now at FutureCommerce.fm/crossborder. [00:22:40]
Phillip: [00:22:58] Let's talk a little bit about how [00:23:00] things can go wrong. What are some elements of maybe bad advice that retailers or brands might get from various sources? Or maybe even some areas where they may fall prey to fraud or something that might land them in trouble?
Kent: [00:23:15] If somebody asked me, "What are the first five things I need to think about for cross-border?" [00:23:20] All those answers are going to be not so sexy and going to be very operational in order. It's going to be, "You've got to understand that there's a lot of fraudsters out there."
Phillip: [00:23:31] Sure.
Kent: [00:23:31] And it's not always fraud. Sometimes an order can look a little suspicious, but that's simply [00:23:40] because of the way that your fraud detection systems are set up, which are largely geared to kind of look for issues in the US and things like that. Oh, this is a suspicious address. Well, that's because addresses in most of the world don't look like US addresses, so definitely fine-tuning your [00:24:00]fraud detection. And you know, we've had the guys from Signifyd at our events for years and they do a great job at really kind of helping people understand that it's not just about knocking out fraud, but it's about understanding all those really good orders that may look fraudulent. So yeah, don't bite the hand that feeds you, or whatever the right thing [00:24:20] is. But yeah, you make a great point. You know, first, you've got to get your fraud screening, and the solution partners that are out there that help you with that, they understand where the fraudsters are. I remember we did this whole session on the dark web and it was just crazy some of the stories that they were able to share with you. And again, probably a [00:24:40] topic for another day. Obviously, the next second piece is payments. Payments are so important and again, something that domestic US resellers especially marketplace sellers, and things like that may not have the deep pockets that some of the bigger brands and retailers that are servicing a global market might have. You've got to understand [00:25:00] that there are so many different payments. I mean, people talk about Germany, "Oh, they like the bank transfers." The mobile wallets or something that are increasingly important, especially in Asia, where you've got WeChat Pay and you've got Alipay. So again, a topic for another day. But really, make sure that you understand what can go wrong [00:25:20] on the payment side of things. Because if you're just offering them US domestic credit card options, you're going to see a big hit to the conversion rates, for sure. So those are a couple of things that can go wrong. I think the one that you probably learned about in international marketing back in high school or college or whatever was all the cultural stuff. And [00:25:40]there's always the stories of how cars were misnamed for the market south of the border and things like that. They turned out to be called "little junkster" or something like that. But the cultural stuff is actually really huge. And a big part of that cultural piece is really just understanding that you've got to localize your content. Whether [00:26:00] it's photos or text, and especially as we see more and more kind of lifestyle selling and the power of the image, that can actually be a really good workaround for not saying the wrong thing and not putting too much time and effort into your translations, which are increasingly machine-driven. And that's got a [00:26:20] whole bevy of challenges there as well. But yeah, understanding the cultural nuances, understanding that the days that you might be celebrating holidays and your domestic market don't line up with other folks as well. So I could go on and on there, but I'll bounce it back to you guys.
Phillip: [00:26:37] There's an interesting challenge [00:26:40] when you're thinking about just the diversity of all these carriers, all these payments options. Whenever I encounter a brand that has tested the waters and they want to go to scale now, they're usually looking for the least hands to shake. [00:27:00] And it doesn't seem like there is an easy way to get around having fewer hands to shake. What kind of organizational upskilling or maturity is required on the retailer or brand side as they try to deliver into more regions?
Kent: [00:27:18] It's a great point. How many [00:27:20] cooks in the kitchen? What hands are there? And I should preface my answer by saying that one of the biggest mistakes that we've seen over the years is that very often brands think they can just kind of go global on their own. They're like, "Oh, well, you know, my domestic carrier has international, so we'll just work with them, and we will kind of figure it out [00:27:40] as it goes." And, you know, some people can make that happen. But anybody that really values their brand and understands that you're going into what could be a huge future market for you. So you really should bring in some people that know what they're doing, whether it's the cross-border platforms, the folks that are specialized [00:28:00] on international checkout and understand harmonization, taxation, all the nitty-gritty of making sure that the taxes and tariffs are paid, so there's not this unpleasant surprise when somebody who's been waiting for a week, a week and a half for this cherished item to show up only gets [00:28:20] this big extra bill at the door, which is not the way to go. But yeah, there's a lot. There's a lot. There's a lot I could unpack in that question, for sure.
Phillip: [00:28:31] As we're sort of thinking through then about how you go about choosing partners, you know, you mentioned one. [00:28:40] We're partnered with Signifyd as well. They've done some great work over the years with us and in the various brands that we've partnered with, both for domestic and for cross-border. How do you tell the difference in partners between a service provider, like a full-scale service provider, and sort of like maybe piecemealing, trying to pull together [00:29:00] your own solution by taking on the burden yourself to try to bring this in-house? And maybe at what point do you have to recognize as a brand what kind of a partner you need to go cross-border?
Kent: [00:29:14] Yeah. And I'll actually kind of finish answering your first question before I get to that one. Yeah, [00:29:20] I mean, a lot of it does come down to how you're organizing internally. So I think what we've seen over the years is that there's been this push and pull between centralization and decentralization. And by centralization, that means that most of the decisions and most of the strategy [00:29:40] and the tactics are kind of developed back at headquarters and kind of pushed out to the in-market teams, if you will. The decentralized approach, which in many cases I think works best is empowering those local, the country teams. So we [00:30:00] talked a little bit earlier about understanding cultural nuances and things like that. If you're depending on your people at HQ, you're going to stumble there. So empowering those market people. As far as the partnering part, I mean, that's a challenging one. And a lot of times it's very market-specific. So if you look [00:30:20] at Japan, for instance, Japan is always looked at as you know, well, we've got our Japan team and they're kind of separate from everything. Japan very much does operate as its own market, and in many cases, you don't have a whole lot of options other than using your in-country team there. And in fact, you'll find that [00:30:40] your partners are very, can be very Japan-centric. China is a little bit different. Absolutely you need boots on the ground there. And we've had people go back and forth between whether they've got boots on the ground or not. And, you know, sometimes it can work both ways. But what we have found works [00:31:00] really well in China is one, making sure that you've got a good, trusted partner there. I was talking to the guys over at Burton not too long ago and they've done a great job of building out their international eCommerce business. But during the pandemic, they were like, "Hey, we had to really empower our [00:31:20] Chinese partners, our trade partners, or TPs, as they're called," and it's paid off for them. So that having been said, I think it really is important to have strong leadership in your domestic market. So there's almost this balance between decentralization and centralization [00:31:40] that you really have to hit. And usually, it's kind of developing a center of excellence. There are lots of different flavors and brands of that. And again, even in your centers of excellence, there's this "OK, how much of that is outsourced to the market teams of the regional teams versus headquarters?" So it's [00:32:00] interesting. And it's a tough question to answer there, but I would say that certainly, we have seen the partnering approach work. Certainly, we've seen some of the cross-border platforms, like Global-e went public recently and just acquired Flow, the Shopaarel guys [00:32:20], or the ESW folks have done a good job in the past. And then you've got folks like Avalara who have probably have some of the most sophisticated technology where it really matters most. So I think what companies need to understand is that yes, you probably do need, call it, a general contractor type platform [00:32:40] partner, but you're going to have to be working with a lot of specialists. And again, back to the part of the discussion we had about developing trade lanes. Sometimes you're going to have to go out and build the relationships directly with those different shipping partners. If you're going into South Korea or you're going into potential parts of Eastern Europe. I mean, we're seeing some impressive [00:33:00] growth out of Poland, for instance. We talked about southern Europe and then Africa and the Middle East, you know, whole new ball game there, especially in the Middle East. Lots going on there today.
Phillip: [00:33:13] What do you think the future for mid-sized enterprise brands [00:33:20]is in sort of trying to get incremental growth via cross-border? Is there an opportunity to kind of give them some sage advice? It sounds like they're already building their own teams and capabilities. They're already partnering with external expertise. They're already building [00:33:40] relationships with technology platforms and managing all these relationships in-market. What else could there be that's next?
Kent: [00:33:48] When we did our very first benchmark study, one of our top-line conclusions was that cross-border and international expansion, the companies that are best positioned to do this [00:34:00] are the smaller specialty, maybe not smaller, but specialty retailers, if you will. And in large part, that's because of what people were looking for, and again, this was almost 15, 20 years or so ago. What they were looking for is just products that they just couldn't get locally or if they could get them locally they were way, way more [00:34:20] expensive. Even if they bought it and paid an arm and a leg to have it shipped and dealt with all the tariffs and things like that, it's still going to be cheaper. And part of the reason that we were saying that the specialty retailers have always had the best opportunity was in large part because some of the bigger brands and again when we started GELF, it was [00:34:40] mostly still retailers and things like that. So the Macy's of the world going into to China, which, you know, in the end, didn't end up being a great fit because the marketplaces in China are really kind of they are the department store if you will. They're bringing in all the brands and they're the middlemen and they're getting it out to the [00:35:00]consumer. So specialty brands have a great opportunity. I would also suggest don't think that you just have to go direct to consumer. You don't just have to work with one of these cross-border eCommerce platforms. Marketplaces [00:35:20] are a huge opportunity. In fact, whole another topic for another day probably is working with the Amazons of the world or the MercadoLibre or the Zalando or JD and Alibaba in Asia, not to mention all the different folks down in Southeast Asia. So working [00:35:40] with marketplaces is another extremely important... In fact, we've got our framework and there's really kind of three phases or three steps. One of them is understanding how to adapt your domestic operations so that you can quickly, easily fulfill international orders from your domestic [00:36:00] distribution centers or increasingly drop shipping and things like that. Again, another topic for another day. And doing so with at least a decent enough customer experience. But then you look at the marketplace channels. In many cases, marketplaces are where you want to go, so you can take your direct to consumer cross-border [00:36:20], and maybe think of that as fulfilling the demand that's coming to you, the people that are finding you. But [00:36:26] when you're ready to kind of go into new markets and you need to find customers and things like that, marketplaces are usually the best way to do it. Now there's another wrinkle too that we've seen over the last three or four years, especially for the large [00:36:40] global brands. They're finding that working with the Alibabas and the Amazons and the MercadoLibres and so forth offers them a great opportunity to offset some of the challenges that they're seeing in their traditional wholesale channel where, to your point earlier, [00:37:00] they may have just put a couple of containers on a ship and there's a distributor in Spain or Portugal, and they pretty much own the market and it's really they take the product and get it to the consumer from there. In many cases, we find that some of these master wholesale partners aren't as up to snuff on the digital side. So we've seen over the years [00:37:20] more and more brands starting to work with the marketplaces and the Amazons and things like that to do a better job of really essentially turning those marketplace platforms into a new class of master distributor, master wholesaler if you will. [00:37:35] And I think the last thing to look at too is, and this is where Shopify [00:37:40] comes in and other folks like Shopify, there are people that are going to want to buy locally, and being able to set up regional or in-country sites is hugely important. Maybe not as much in Asia, certainly not in China, where marketplaces rule. But we've had plenty of eCommerce leaders tell us, "Hey, [00:38:00] we are always going to have a direct to consumer site ready for China because you never know what's going to happen. They described it as the keeping the porch light on strategy where if there's a decision that comes out of the government, and we've certainly seen a lot of that recently out of China, they want to be able to kind of shift from some [00:38:20] constraint on a marketplace selling into going direct to consumer. So sorry, long answer there, guys.
Phillip: [00:38:26] Oh, geez, no, it's the best kind of answer because I think it really answers the question, "Well, it kind of depends." It depends on where you're going, what you're trying to do. And at the end of the day, I kind of hear in there that [00:38:40] you don't just flippantly launch cross-border as a means of incremental growth, but you need an omnichannel strategy in the region just in the same way you have an omnichannel strategy domestically. And I think that really kind of sums up the challenge of, well, [00:39:00] this isn't just an avenue to have more people buy your products, but it's an avenue for you to actually expand your business and your business operations are more than just your storefront.
Kent: [00:39:13] One of the biggest opportunities right now, and whether you want to call it omnichannel or omnicustomer [00:39:20] maybe it's a better way of looking at it. Yeah, there are going to be challenges. And again, we talked about the high cost of international shipping right now, and we're telling folks that come to our events and things like that that it's not just about shipping domestically anymore. You need to look [00:39:40] at figuring out, I mean, as one speaker put it at a recent event, the holy grail for us is just being able to drop ship from the point of creation to the point of end demand. Now there's a lot that goes into that. Obviously, distribution centers and the hub and spoke fulfillment models and [00:40:00] things like that have all been built around the realities of commerce. But yeah, ultimately what you want to be able to do is figure out a way to capture demand, whether that's investing in your social channels or your typical domestic marketing or search or whatever. It's like, capturing that demand, but then ideally fulfilling [00:40:20] that demand as closely to that consumer as you can. So yes, we've looked at omnichannel fulfillment, and that's still very, very early from a global perspective. But yeah, I mean, if you've got product in-country, you know, that's already going to get past some of the challenges, like sizing in Japan and things like that. So yes, if you could figure out [00:40:40] how to capture your order online and then just have it fulfilled by a local partner, whether that's a distribution partner or an end retailer or even, I mean, I've told the story forever. When one of my first kind of fun cross-border stories was talking to actually a small company [00:41:00] that was selling sunglasses, and they ended up shipping this urgent order to somebody in China, and as it turned out, I think the guy paid like one hundred and fifty dollars, probably for like a twenty dollar pair of sunglasses. And the end recipient of the sunglasses lived two miles from the factory in China, where it was built. So of course, they brought [00:41:20] the sunglasses all the way to the US turned around, and shipped them back to the guy who was, you know, two miles away from the factory where they were built. Maybe it was 20 miles. But yeah, kind of connecting those dots and figuring out how to get drop shipping involved and different modes of distributed order management, [00:41:40] distributed fulfillment. Those are some of the cool things that people are working on now.
Phillip: [00:41:44] I can't think of a better way for us to frame for the Future Commerce podcast and our series Step by Step to frame what the future of cross-border looks like, then by the person who literally [00:42:00] wrote the book on the future of cross-border commerce. What an incredible conversation. Any last or finals from you, Kent? Something that we can leave people with?
Kent: [00:42:12] Yeah, I think, I mean, [00:42:13] it can be really complex. It can be expensive, it can be challenging. But don't be overcome by [00:42:20] the complexities. Don't be perplexed to the point where you sit on the fence. I think that some of the companies that have benefited most from being early and visionary and extending the digital reach into international markets have been those people that aren't just sitting on the fence. You get a lot of retailers that are just going to wait and see what [00:42:40] other people do, and you're starting to see that with brands and even the innovative direct to consumer brands. So it's like, don't sit on the fence. You've got to do something and it's totally fine to take one step at a time. [00:42:52] Hey, if you want to work with your domestic fulfillment partner to start international, there's nothing wrong with that. Yeah, the experience [00:43:00] isn't going to be as great, but start where you've got traction and go from there. A lot of what we talk about at GELF events is very operational in focus. We talked earlier about fraud, payments, making sure that you can tabulate tariffs and harmonization, all the good stuff that people like Avalara help you with. [00:43:20]Then you've got the whole post order fulfillment, but that whole operational piece, that's only part of it. And largely that's because this first or second generation of cross-border have all been about fulfilling demand that comes to you, the organic stuff. There's a huge opportunity to get out there and connect with new [00:43:40] shoppers and find people that are in this rising global middle class. And that's I think where you're going to see a lot of social come into it. I know we've been working with Facebook and the Meta disruptors team, and they're doing some cool stuff with discovery commerce. So don't overlook the need to focus [00:44:00] on top of the funnel. And I guess maybe the last thing is again, [00:44:04]don't be fat and happy sitting here doing what you're doing in the US or in your own domestic market because, that's challenging, but it's easy compared to international. But if you ignore international, others aren't and you're going to lose markets in the future. [00:44:20] And that's really kind of the takeaway. You've got to have a kind of more holistic global view of the world. [00:44:25]
Phillip: [00:44:26] A more holistic global view of the world. That's what selling cross-border is all about. And I can't believe that this was only the second episode. I feel like we went on a journey. Kent, it's been amazing having you. Thank you so much for [00:44:40] sharing your wisdom.
Kent: [00:44:40] Hey, thanks, guys. And yeah, I mean, if any of your listeners are interested, we've got our next event in LA on April 21st will be in West Hollywood. And we'll be pulling together the West Coast eCommerce community. So people can reach out to me if they want to get involved.
Phillip: [00:44:57] Where can they reach out to you?
Kent: [00:44:59] You can [00:45:00] always send me an email at Kent@GlobaleCommerce.co, and we'll take it from there.
Phillip: [00:45:12] Thank you so much, Kent, and thank you all so much for listening to this second episode of the seventh season of Step [00:45:20] By Step.