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e-dition 2013
A Study on the Internationalisation of Britain’s ecommerce Businesses
BRITAIN’S RETAIL E-MPIRE
• Retail is transforming itself from a local, national industry into one which is fundamentally about competing globally in international markets. This will have a profound impact on what it takes to succeed as a retailer in 2020
• However, this imperative for retailers to internationalise, remains a poorly examined topic
• In order to understand how big the scale of opportunity from internationalisation could be and what it takes to succeed, Google UK partnered with OC&C Strategy Consultants to produce this independent study
• The study draws on some of Google’s proprietary data and has been discussed with Google executives, but OC&C is responsible for the analysis and conclusions
• Google UK and OC&C are delighted to launch ‘Britain’s Retail e-mpire’, a study that aims to put the spotlight on the internationalisation of ecommerce, one of the most material opportunities facing British retailers
Background to the study
1
ecommerce is accelerating the internationalisation of Retail
Source: Datastream, Press search, Retailer websites, OC&C analysis
1. Market Capitalisation based on constant 2012 exchange rate, excludes unquoted retailers, market values on: 25 Apr 2013 2. International revenue as % of total revenue. Where not available, international sales as % of total stores 3. Time from founding to first international presence (store or website)
Internationalisation of Top 10 Global Retailers by Market Capitalisation Years, %, $bn
47
82
69
257
41
4745
50
109
122
10
0
70 0
50
10
100
15
90
20 25 30 35 60 75 80
80
70
60
65
40
30
20
5
Time to Internationalise (Years)3
Lowe’s Woolworth
Costco Tesco
H&M
eBay
Inditex
Shar
e o
f In
tern
atio
nal (
%)2
Home Depot
Amazon.com
Walmart
Bubble Size Indicates Market Capitalisation1
Amongst the top 10 retailers by market capitalisation globally, online
retailers have had an accelerated international trajectory – years,
rather than decades
2
Consumers increasingly search cross-border to meet their needs
3 Source: Google, OC&C analysis
Share of International Searches for UK Brands, 2012 %
15.9%
Entertainment & Electricals Sports
28.2%
62.5%
Luxury Fashion1 Clothing (Mainstream)
39.2%
28.9%
Beauty
1. Clothing, Footwear, Jewellery & Accessories
UK retailers are gaining traction internationally
Source: Google, StatCounter, Civic Consulting Survey (2011) for EU DG Health & Consumers, OC&C analysis
5579
106
22
34
4619
28
21
13
13
6
7
4
12
+46%
Europe +39%
North America +44%
Asia +49%
Oceania +83%
Other +63%
2012
212
2011
152
2010
100
International Searches for UK Retail Brands1
Indexed – Rebased to 2010 EU Consumers Purchasing from UK eRetailers – 2011 %
29%
29%
33%
34%
34%
35%
39%
40%
41%
41%
48%
49%
74%
74%
93%
Estonia
Lithuania
Finland
Portugal
Bulgaria
Denmark
Greece
Cyprus
Ireland
Malta
Italy
France
Latvia
Slovenia
Sweden
CAGR 2010-12
2x growth rate of
searches by UK consumers
4
International capability is already the ‘norm’ for UK retailers
Retailers Delivering Outside the UK % Retailers
Languages other than English Offered by Retailers % Offering Languages,% Retailers Offering Specific Language
21%
21%
22%
10%
26%
>100 Countries
40-100 Countries
5-40 Countries
< 5 Countries
Not Offered
19%
5%
10%
13%
53%
More than 10
7 to 10
4 to 6
1 to 3
None
17%
18%
22%
24%
31%
40%
43%
Chinese
Russian
Japanese
Portuguese
Spanish
French
German
47%
74%
eg Sports Direct
eg Mothercare, Wiggle
eg House of Fraser, Dorothy Perkins eg Chain Reaction, Next
Source: OC&C Website Checks, December 2012, ComScore ,OC&C analysis
Top 100 UK Retail Websites
5
Proportion of International Searches by Company Size
% of Searches from Outside the UK
The ‘small’ are embracing international faster than the ‘large’
47%
30%
13%
Small Retailers Mid-size Retailers Large Retailers
Source: Google, BvD, Comscore, OC&C analysis
1. Online and offline revenue 2. Visitors to UK site over 12 months, from Comscore – some manual adjustments made where sense-checks showed large retailers with low site traffic
Annual Turnover1
UK Traffic2
OR
£250m + £25m-£250m <£25m
26m+ visits 3m – 26m visits < 3m visits
6
Internationalisation Index: Top 50 Indexed Scores Based on Consumer Searches1
The jewels of Britain’s Retail e-mpire
Source: Google Search Data, OC&C analysis 7
1. Does not use advertiser data, e.g. clickthrough, bid values etc and is purely based on consumer queries 2. International Share / Volume of queries both based on 2012 3. Volume of International Queries on logarithmic scale 4. Growth in queries coming from outside the UK – 2010-12
Total Score (100)
Indexed Share of International
Queries (100)
Indexed Volume of International
Queries (100)
Indexed Growth Rate of
International Queries
(100)
1 ASOS 100 58 100 46
2 Farfetch 99 92 45 66
3 Book Depository 98 96 63 41
4 Burberry 96 100 83 12
5 Boohoo 93 26 64 100
6 Net a Porter / The Outnet 89 75 78 30
7 Beauty Bay 86 60 21 94
8 Photobox 83 72 72 24
9 Jimmy Choo 81 88 64 13
10 Chain Reaction Cycles 76 65 65 25
11 Topshop / Topman 72 35 88 24
12 Pro-Direct Soccer 72 68 60 18
13 Wiggle 72 55 62 29
14 Agent Provocateur 71 75 52 18
15 Clarks 70 51 73 19
16 Superdry 69 40 61 41
17 Endclothing 68 47 31 60
18 Mulberry 63 54 58 17
19 Ted Baker 62 33 53 40
20 FeelUnique 61 41 43 41
21 Charles Tyrwhitt 61 56 43 26
22 Karen Millen 60 43 57 22
23 Dorothy Perkins 60 18 62 41
24 Harrods 58 42 58 18
25 River Island 58 17 72 28
Total Score (100)
Indexed Share of International
Queries (100)
Indexed Volume of International
Queries (100)
Indexed Growth Rate of
International Queries
(100)
26 Specsavers 57 39 54 24
27 JP Boden & Co 57 35 60 22
28 SimplyElectronics 56 55 26 33
29 Mothercare 52 20 60 26
30 AllSaints 52 50 37 20
31 The Savile Row Company 49 56 23 20
32 Matches Fashion 49 48 20 32
33 Kitbag 48 51 34 13
34 Watchshop 47 26 14 56
35 Cath Kidston 45 23 47 22
36 Mamas & Papas 44 20 45 25
37 Monsoon UK 44 22 55 12
38 Overclockers 44 32 36 21
39 Surfdome 43 20 22 45
40 Reiss 43 22 40 25
41 Hobbs 39 18 36 26
42 TM Lewin 39 30 32 16
43 Sweaty Betty 31 18 12 34
44 Links of London 30 25 34 3
45 Holland & Barrett 28 23 6 29
46 Corsets UK 27 26 1 29
47 Aspinal of London 25 20 5 26
48 Isabella Oliver 22 31 12 1
49 Sofa.com 21 18 1 25
50 DV 247 19 25 13 0
International ecommerce set to grow seven-fold to £28bn
Sales from UK eRetailers1, UK & International £bn, % Total, % CAGR
Source: IMRG, Euromonitor, Forrester, Google Queries, OC&C analysis
63
39
(61%)
24
(39%)
2018
56
37 (65%)
20 (35%)
2017
50
34 (68%)
16 (32%)
2016
45
33 (72%)
13 (28%)
2015
40
31 (76%)
10 (24%)
2014
36
28 (79%)
8 (21%)
2013
International
UK
+12%
2020
69
41 (60%)
28
(40%)
2019
32
27 (83%)
5 (17%)
2012
28
24 (86%)
4 (14%)
1. Excludes grocery, 2man fulfilled and click and collect orders
CAGR 2013-20
Forecast
26%
6%
8
Europe and Asia will be the engines of growth
1.9
North America
2.0
Asia
4.1
Central / Eastern Europe
6.5
Western Europe
8.3
2012
Other 36%
1.5 0.4
0.4 0.8
0.5
0.2
2020
9.8
27.9
Oceania 25%
North America 20%
6.9
4.5
2.7
2.4
1.5
3.8
Other1
1.3
Oceania
Asia 39%
C/E Europe 49%
W. Europe 31%
UK ecommerce International Sales Growth by Region, 2012-20 £bn, % CAGR
Source: IMRG, Euromonitor, Forrester, OC&C analysis
CAGR 2012-20
Ireland, France, Spain & Germany drive 35% of growth in Western Europe
Poland and Slovenia drive 17% of growth in Eastern Europe
China, Singapore, Hong Kong, Philippines to grow by £2bn
Australia is largest single growth market at £1.32bn
1. “Other” includes South America , Middle East & Africa
9
US is key driver of growth at £1.1bn
When prioritising expansion, market ‘readiness’ matters
• ‘Operational Readiness’ reflects the level of friction faced by retailers attempting to capture sales in that country
• Factors considered to identify potential pain points
– English proficiency
– Credit / Debit card penetration
– Delivery cost
– Import tariffs
• ‘Strategic Readiness’ evaluates the market opportunity for both size and competitive intensity
• Evaluation factors are
– Market size 2012
– Absolute growth to 2020
– Share of leading online retailers
– Online share of total retail
Market Readiness
Operational Readiness
Strategic Readiness
10
Saudi Arabia
Nigeria
Lithuania
Israel
Chile
Ukraine
Argentina
Hong Kong
New Zealand
South Africa
Slovakia
Romania
Greece Singapore
Taiwan
Portugal
Ireland
Hungary
Turkey
India
Norway
Mexico
Switzerland
Czech Republic
Austria
Sweden
Belgium
Spain
Finland
Canada
Denmark
Brazil Russia
Italy
Poland
Netherlands
South Korea
Australia
Japan
France
Germany
China
USA
Uzbekistan
Bosnia-Herzegovina
Azerbaijan
Morocco
Uruguay
Peru
Georgia
Indonesia Ecuador
Latvia
Kazakhstan
Estonia
Macedonia Egypt
Colombia
Croatia
UAE
Philippines
Venezuela
Slovenia
Malaysia Serbia
Market Readiness Framework Forecast £bn 2020
Source: Euromonitor, Forrester, Mintel, World Bank, WTO, Crystal 2003, Parcel Force, OC&C analysis
1. Excludes 2man and grocery
Major Markets £180bn
Big But Challenging £175bn
Accessible Anglophones £30bn
Nascent Neighbours £20bn
A number of markets are ‘ready’
Increasing Strategic Readiness
Incr
easi
ng
Op
erat
ion
al R
ead
ines
s
11
Canada Poland Russia Netherlands China Spain Italy
Mainstream Footwear
Sports
Mainstream Clothing
General Merchandise
USA
Luxury Fashion
Jewellery & Accessories
Electricals
Home & DIY
Entertainment
Beauty
France Ireland Australia Germany
Clear winners (eg Fashion, Luxury) and white spaces
Higher Reach Countries
Hig
her
Rea
ch C
ate
go
ries
Brand Searches for UK Retailers – Countries & Retail Segments, 2012
Average Searches for UK Retail Brands
Source: Google, OC&C analysis
Most successful country-category
combinations
12
The rules of Retail internationalisation have changed
International typically a response to maturing presence in home
market though a carefully planned multi-year approach
International expansion pursued simultaneously with growing share in home market – with serendipity and a dynamic planning approach
playing a role
Speed
Proximity and cultural similarity as key elements of expansion logic
Traction with customers and scale of opportunity drive the decisions
around markets to ‘go deep’ or ‘skim’
Sequence
Capital and resource intense approach to build presence and
infrastructure
Lower capital and resource intensity, also enabled by the
ability to rapidly test and iterate Risk
Was Now
13
International ecommerce requires new capabilities
Engaging Local Customers & Competing Effectively
Dynamic and Data Driven
Decision Making
Operating Geographically
Diverse Multi-Channel
Footprint Managing Rights and Protecting
Brand Image
Risk and Foreign
Exchange Management
International Regulatory &
Tax Compliance
14
We believe winning retailers will share 5 traits
No substitute for a great proposition (range, price, service advantage)
Ability to spot and respond fast to evolving demand
Cost effective routes to build awareness and customer volumes
‘Selective’ and resource-light localisation
Mastery of the order economics and mechanics to create profitable customer behaviour
Traits of Winners
15
• Patrick Wall and all at Metapack
• Andrew Starkey at the IMRG
• Eric Fergusson at eCommera
• All the dynamic entrepreneurs and business leaders amongst our international super-league who generously shared their successes and challenges, enabling us to test our theories against their practical experiences
Acknowledgements – we would like to thank:
16
For more details, please contact
BOSTON DUSSELDORF HAMBURG HONG KONG LONDON MUMBAI NEW DELHI PARIS SÃO PAULO ROTTERDAM SHANGHAI WARSAW
Anita Balchandani
Alex Mathers
John Franklin
17