The following is a guest post from Jason McDonald, Director of StringCan Interactive Paris, StringCan Interactive is an American based digital strategy, design and development agency that helps European startups gain access to the US market. You can follow StringCan on twitter at @StringCanEU.
At StringCan, we believe that European companies have been presented with an e-commerce perfect storm in the US that has never been seen before. The factors of this perfect storm are a growing US economy, a strong dollar and the largest online shopping population in the world. Back in the early 2000’s, Europe saw a strong US economy and an advantageous euro to dollar ratio, but the component that was missing was the developed e-commerce economy that we have today.
In spite of this opportunity, European companies need to be strategic about their US approach. European companies have an economic as well as a brand advantage they did not have eight months ago, but companies need to remember that the US is one of the most competitive markets in the world that has a consumer base with completely different expectations than their European counterparts.
We have outlined 4 questions every CEO thinking about expanding or increasing e-commerce efforts in the US should be considering.
1) Will the dollar and the euro continue to fluctuate?
One of the questions every smart European CEO should be asking when considering increased investment in the US market is, “How long will the euro and dollar stay at these rates?” If the euro and dollar continue to fluctuate, this could definitely cause a lot of uncertainty in your business projections.
To this point, Goldman Sachs released a report in mid-March 2015 updating its projections for the euro to dollar exchange rate. Goldman is now projecting the currencies will remain at or near parity and will maintain this trend through 2017 . This news seemed all but impossible last August when the monthly high was at $1.32. This August 2015 has seen a high of $1.16 and a low of $1.08.
Analysts are debating the reasons for the major shift in currency exchange rates; regardless if it’s a weak euro, a strong dollar, or both, one fact is not being debated. This shift in currencies, if leveraged well, could dramatically change European e-commerce company’s bottom line.
2) Is the US market right for our company?
The second question many CEOs are wrestling with is “Which market should I focus on?” Yes, the US market is huge, but emerging markets like China and India continue to grow, and Europe still has a lot of opportunities. Every company should take the time and spend the resources to identify the ideal market for investments. This post is only arguing that the US market is currently uniquely appealing to EU companies.
Analyst project that e-commerce in Europe will reach €191 billion by 2017, up from €128 billion in 2013. Despite nearly a 10.5% compound annual growth rate, Europe will still lag behind the United States’ $370 billion projections. At a population of more than 320 million with a per capita purchasing power of $53,750 the US is the largest e-commerce market in the world.
What is uniquely different about the US market that Europe cannot replicate is that you can access roughly 90% of the US population with English online marketing. Also, US market trends tend to lead global trends—meaning that if you are successful in the US, you can be successful globally. Despite where you decide to focus, one thing is clear: you need to take a good hard look at the US market before you make a decision.
3) How would our sales strategy have to change to be successful in the US?
If a European company believes its product has a place in the US market, feels optimistic about the currency exchange rate, and is keen to access the largest e-commerce market, it is imperative that the company takes the time to understand the differences between the two markets. After spending more than a decade living and working between the US and Europe, I can confirm that the differences between the two markets in terms of online marketing are stark. Through inexperienced eyes, these differences may seem inconsequential—but that would be a naive conclusion.
When marketing from the Eurozone to the US, many companies have the impulse to translate their website, ad copy and campaigns into English and consider the job done. Even if your products will be sold on third party platforms, you should expect potential customers to research your product beyond the onsite reviews. Therefore, it is essential that your online presence mirror the expectations of the US consumer. European companies actively developing their sales in the US need to understand that the expectations and tools used for online marketing and ecommerce are different in the US.
Friedrich Fleischmann, the Global Director Retail World at GfK Retail and Technology GmbH summed it up well in the Global B2C E-commerce Report 2014: “As we approach our future e- commerce strategies, understanding how customer interactions with the many online touch points along the supply chain influence their ultimate purchase decisions is more important than ever.” He goes on to explain the importance of taking a local approach: “The true evaluation of the market potential that e-commerce businesses can realize will only be found through a blended understanding of local customer desires and retail insights.”
What Fleischmann explains here is the fact that you have to think locally when using e-commerce abroad. Your marketing team needs to have a strong understanding of the US market and how to present and sell your product in this market.
4) How should we attack the US market?
At StringCan Europe we heed the Pareto principle, or more commonly the 80/20 rule, “which states that 80 percent of consequences stem from 20 percent of causes.” We advise our clients looking to enter the US market to spend up to 20% of their 12 month potential US marketing budget on understanding their industry segment in the US market, their ideal American clientele, and using this data to develop a US-focused brand strategy, messaging approach and marketing strategy.
During this process, a company may decide that the US market is too competitive or there is not a customer base large enough to validate expansion. Therefore they spent 20% or less of their potential US marketing budget to save 80% because they made the decision to test the market before expansion. The company in this scenario was able to save their company money and time with this approach.
On the other hand, if the data shows there is opportunity in the US, the company will now be able to leverage the data and strategy to use the remaining 80% of the budget much more effectively to bring in greater ROI over a 12-month period as well as the years to come.
The Golden Age of E-commerce in the US
StringCan Europe is clearly bullish about the opportunities for European companies in the US. We have put our money where our mouth is by investing in the creation of a Paris-based European branch office completely focused on supporting European companies seeking US development.
The American economy is rebounding and as the European economy continues to show weak growth, the euro continues to drop in value and more and more Americans shop online. As a result of these trends, any serious European company should be reviewing their US e-commerce strategy. We are at the gates of the golden age of e-commerce in the US for European companies – is your company going to take advantage of it?
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