US online retailers’ cautious global expansion

Zia Daniell Wigder | February 01, 2008, 10:08 AM

I’d intended to provide more detail on our Shop.org panels, but two articles in Internet Retailer and RIS this week did a good job of summing up some of the key issues we addressed.

Instead, I wanted to make a couple of comments on US retailers and their moves into global markets. I’m often asked why there aren’t more US online retailers with extensive international offerings. Amazon, for example, considered a leader in its global efforts, has just six international sites; one is in Canada.

Yet stepping back for a moment, it’s not surprising that many US retailers have focused exclusively on the domestic market. The US online retail market is set to represent $130 billion this year, roughly on par with all of the Western European markets combined. While the largest markets in Europe certainly represent a significant percentage of the total - not quite the 80/20 rule, but close - it’s still not unexpected that most US online retailers have focused on their home market. Translation and localization can be pricey propositions, and overseas expansion for online retailers comes with logistical issues (global warehousing, for example) that companies in other sectors such as online media don’t have to address.

Over the next five years, however, the US market will not remain in the same dominant position it’s in now. The percentage of the global online population that hails from the US will decline; in Asia, it will increase by several percentage points. European online retail markets will grow more quickly than the comparable market in the US; those in Asia will grow even faster.

Companies in the US have certainly been successful in tapping into international markets over the years. Over half of Interbrand’s Best Global Brands, for example, hail from the US - companies must derive at least a third of their revenues outside of their home markets to even qualify for consideration on the list.

Online retailers will move more aggressively into non-US markets going forward. Their somewhat cautious moves to date, however, are understandable.