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Ten Questions to Consider Before Entering an Emerging Market

by John Yunker | August 8, 2013 | No Comments

For companies in search of global growth, emerging markets are hard to resist. But like the California gold fields of the 1850s, the promise of riches doesn’t always result in riches. That’s not to say you shouldn’t have an emerging market strategy — you absolutely should. But set your expectations accordingly.

Begin by understanding that “emerging market” can apply to diverse range of countries, cultures, governments, and growth rates. China, for example, is considered an emerging market even though its economy is more than ten times the size of Turkey — another emerging market.

And China, despite its massive size, may for some companies be a more challenging market to succeed in than other markets. For example, a number of American multinationals, most notably Facebook and Google, have been humbled by China’s “great firewall,” which has often left their websites blocked to hundreds of millions of Internet users. Meanwhile, Facebook has been surprisingly successful in Indonesia — another emerging market that often gets overlooked by companies rushing headfirst into China.

So as you begin crafting an emerging market strategy, keep your eyes open to all emerging markets, and not just the BRICs (Brazil, Russia, India, China). And consider the following ten questions.

 

1. Who has succeeded (and failed) in the market?

It’s often hard to ignore those companies that have succeeded in an emerging market, as they received the most media attention. But also study those companies that have failed and try to find out why. Don’t be afraid to reach out to these companies (provided you aren’t competitors) to learn more. You can’t ask enough questions when preparing to enter a new market. There are so many variables to consider, from infrastructure (Internet connectivity, power, water, roads) to culture and commerce (credit cards versus debit cards versus PayPal). So ask plenty of questions of anyone who already has experience in the market. The best mistakes to learn from are those made by others.

 

2. Who are your customers, and how will you reach them?

Just as there is not one American consumer, there is not one Brazilian or Turkish consumer. Every country has many different cultural and demographic groups. You need to understand exactly who your customers are, their buying power, and how you plan to communicate with them. Ideally, you will have already begun developing a database of customer leads in the target market from a newsletter — something that gives you a better idea of the potential demand in that market. If you don’t have any concrete leads, take a look at your visitor logs to get an understanding of what countries your web traffic originates from. Better yet, you will have already localized a portion of your website to begin measuring demand in selected markets.

 

3. Have you localized your website for emerging markets?

The most cost-effective way to determine demand for your products in emerging markets is to build “micro-sites” targeted at selected markets. These micro-sites are localized for the market and provide a subset of products and information for the market. The sites may also be used to generate sales leads and newsletter subscribers. The goal is to use these sites as benchmarks for measuring relative demand across prospective markets. Look at web traffic and leads to build the case for localizing a country site much further — adding functionality and the localization of more content.

 

4. Do you need to localize your products for the market?

McAloo

It’s deceptively easy to assume that because a product or service is successful in one country that it will be equally successful in all countries. Every country should be viewed as an entirely new market with new challenges, new competitors, and new cultures. McDonald’s famously localizes its menu for each country it does business in — such as the McAloo Tikki, a vegetarian sandwich specific to India. And how did Procter & Gamble approach selling disposable diapers in India, a market that overwhelmingly still uses cloth diapers? It created a new line of low-priced diapers specifically for the market.

Emerging markets often force Western companies to focus on smaller product sizes at lower price points, to better align with buying habits and buying power. Also be open to the fact that your product may be best sold under a new brand name — or you may find opportunities for entirely new products.

 

5. Will your products be competitively priced?

In retail, pricing is fundamental to success. When shipping internationally, the actual cost to customers may effectively price you out of the market. So devote resources to understanding what your products will actually cost in the local market and how they will compare with competitive products. And make sure your customers are aware of the total (landed) cost before they click the checkout button.

 

6. How quickly will your products get there?

When people shop internationally, they will often be comfortable waiting for a week or longer if it means keeping shipping costs low. But how long is too long in the eyes of your customer? And what shipping price points are acceptable? And will packages arrive in good shape? You may need to use stronger packaging to account for the distance and the fact that customs officials are opening them along the way.

 

7. How will you mitigate fraud?

Emerging markets are notorious for credit card fraud and “stolen” deliveries. Fortunately, merchant processors have gotten very sophisticated in the use of geolocation to help ensure that customers are located where they say they are and are not using stolen cards. You might also set purchase limits for first-time customers and build your level of trust gradually. The more “emerging” the market, the more risks you take on as a seller, so budget appropriately.

 

8. Can you provide truly local customer support?

If a customer wants support for a purchased product, whom do they call? And will you support their language and their time zone? If you can’t (yet) provide real-time phone support, you should let users know on your website and at least provide email support in the local language. You can then work with translation agencies to facilitate the translation of customer support email.

You may also consider relying on social platforms, such as Twitter, to enable customer support. But be sure to create country-specific Twitter accounts (such as @ACME_BR for your Brazil) — and rely on local-language experts to manage them.

If you haven’t yet considered how to handle returns, rest assured that your customers will — long before they make a purchase. Zappos shot to success because they guaranteed unlimited returns — and noted that this was a major reason why the company ultimately closed its Canadian operation.

 

9. Are you compliant with local laws?

Many emerging markets have laws designed specifically to protect entrenched business and industries. You need to be mindful of these regulations, and be aware that they may even apply to your website. For example, to host a website in China you need a license number, which must be displayed at the bottom of your website. Shown here is the ICP number on the Disney home page.

disney_ICP

Without this license, you must host your website outside of the country, which many companies do today. However, hosting your website outside of China usually results in slower-loading web pages.

 

10. Are you in it for the long haul?

Most companies have spent more than a decade developing and optimizing their ecommerce websites for their home markets. So you shouldn’t assume that your newly localized website and emerging market strategy will succeed in a few months. Have a long-term strategy and a budget to support such a strategy. Set realistic goals so that your business will emerge in step with the market.

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Pitney Bowes enables operational excellence in global ecommerce by eliminating “border friction”, and connecting you to the a global consumer base. If you’re a US retailer looking for more information on cross-border parcel shipping, subscribe to this blog for weekly updates, and contact us for more information.

For more information on checkout, payments, fraud risk management, or logistics visit www.gringrowth.com and connect with experts in the global ecommerce industry.

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