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Did you know Red Bull is based in Austria?
The energy drink brand grew a global presence by tapping into the culture of the places where it expands, whether that’s extreme sports, F1, music or fashion.
It’s a lesson in how a brand can be everywhere, while maintaining an identity that's place-specifc.
“You want to think of a global brand but how [you] apply it locally, and can make sure you’re still tapping into the nuances of the culture,” said Katie Thomas, head of the Kearney Consumer Institute.
It was among the insights shared for brands expanding internationally during a panel at the Retail Innovation Conference and Expo 2022 in Chicago.
Brands have long worked to build an international presence, with "global brand" being a status symbol long synonymous with success. With ecommerce, there's room for more brands under this umbrella. There are opportunities to grow a presence on an international stage without going through a retail store. A package can ship down the street, just as the same as it can to another continent.
Increased ecommerce adoption only made shoppers more comfortable with this mode. The choice and pricing that’s found through ecommerce brings more willingness to order across borders. With visits to physical stores ticking back up following the lifting of pandemic restrictions, shoppers are still turning to digital marketplaces and visiting brand websites. They want to be able to shop in any setting, so brands should focus on being able to deliver for shoppers across those different channels, said Abhishek Ahluwalia, global ecommerce director at multinational snack food company Mondelēz International.
In this environment, it’s important to ensure that a presence in the different retail settings can work together. A shopper might want to purchase an item in an ecommerce marketplace. When it comes to returning it, they may be more likely to opt for an in-store setting when they are going to the mall.
“If you have stores, you have an ecommerce business and you have a marketplace, they all need to work together,” said Fareeha Ali, director of market intelligence at ecommerce software company Mirakl.
At the same time, global expansion made available by ecommerce is leading shoppers to seek out products that are made in other countries. The country where it's from can be a selling point in and of itself. Yet the old fundamentals still apply. A product must fulfill a need for the shopper that isn’t currently being met, Thomas said.
L to R: Abhishek Ahluwalia, Katie Thomas, Fareeha Ali and Sonya Gill. (Photo by Stephen Babcock)
Brands see opportunity to move into new markets. But it’s unlikely that a one-size-fits-all approach will work. After all, ecommerce made borders easier to cross, but it didn't erase them.
An international expansion strategy requires local-level preparation. Brands should take take the time to understand the marketplaces and effective approaches for reaching consumers in the countries where they want to expand, panelists said.
When delivering a brand message, take the time to learn the language of retail in another culture, rather than just plugging a phrase into Google Translate, Ali said.
Likewise, take time to understand shopping norms in a culture. If a culture tends to have high expectations for customer service in a store, that will likely carry over to ecommerce, as well, said Sonya Gill, founder and CEO of The LNK, a marketplace that connects global audiences with South Asian retailers.
Understand the norms that will influence operational decisions, as well. Delivery plans may have to be adjusted in a European city where packages must be left outside, while payments may be more likely to be made via mobile wallets in Africa.
Equally, different products may have to be tweaked across markets. Ahluwalia pointed out that zero-sugar Oreos are popular in China, in line with taste preferences that favor cocoa. At the same time, Western products have taken hold in the market, as well. Working directly with marketplaces to pilot and incubate new products can help brands to figure out what is successful.
Start with a broad product concept, but remember, "the consumer, essentially, is the heart of making the decision of what they want," Ahluwalia said.
What starts in one country might soon expand to another. Livestream shopping rose in China and has since spread to Southeast Asia. Now the west is adopting the approach as well.
It’s a lot to consider, and often there’s no playbook. No matter what the functional area, it’s likely that testing, learning and making adjustments will be the path to figuring out what works.
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The company is pulling back after breakneck pandemic expansion. Will it sacrifice the shopping experience along the way?
Amazon is in a period of rebalancing.
The company has long scaled at a relentless pace as it sought to not only provide a marketplace for commerce, but the infrastructure that enabled it, as well. Amazon found another level of overdrive over the last two years, as demand spiked to unseen heights during the pandemic and the company tried to build to keep up.
This wasn’t necessarily a period that saw the kind of invention that Jeff Bezos made an existential tenet of the company, but it nonetheless seems to be shaking out as a cycle that included risk and fallout.
In this case, the risk was not a new device like a smartphone or a move to bend the future to Amazon's will like drone delivery. Rather, it was an expansion that took its already-vast operations to new heights.
Nowhere was this more evident than the company’s logistics network. As CEO Andy Jassy described it to analysts Thursday on an earnings call, the company doubled the size of a fulfillment network it took a quarter-century to build in two years. It also built out a last-mile delivery network that was the size of UPS, which is one of the top two carriers in the U.S.
In 2022, all of that expansion ran into 40-year-high inflation, war in Ukraine and a pullback in demand for goods amid reopening. The company first admitted the problem: It had overbuilt.
But the solution is not to tear down. It had to keep expanding as only Amazon does, while still cutting back in a period of “belt-tightening,” as executives have put it.
That’s evident in watching developments out of the logistics network alone. Amazon pulled out of some areas, and canceled plans to expand into some new warehouses. Yet, as Business Insider reported, it still added 79 million square feet – a footprint that is equal to half of next-closest competitor Walmart’s entire distribution network. It is also expanding Buy with Prime, a new program that will allow direct-to-consumer brands to offer Prime benefits, and, by extension, access to Amazon’s logistics network. Another service, called Amazon Warehousing and Delivery, is designed for upstream storage, necessitating more space to be made available in the network.
At the same time, it will seek to keep doing more for consumers.
Jassy indicated as much when he was prompted to outline his priority areas. Beyond cost-cutting, he said speed is the second highest priority for Amazon. As if to conform this, he said later in the call that one-day shipping is getting off the ground in North America.
Selection is another priority area. At Amazon, that phrase translates to a few things, but top of mind is “expanding the third-party seller marketplace.” Third-party sellers accounted for 59% of sales in Q4. Beyond sales, Amazon’s work with the sellers who post their products on the marketplace is also lucrative for the company. Amazon allows these sellers to tap its logistics network to offer Prime through the Fulfillment by Amazon program. Its business segment called third-party seller services grew 20% year-over-year in the fourth quarter, right in line with the massively profitable cloud computing division Amazon Web Services.
Price, Jassy said, is another area of importance, especially with the consumer pullback on discretionary purchases being observed amid inflation.
“I think pricing being sharp is always important,” Jassy said. “But particularly in this type of uncertain economy, where customers are very conscious about how much they're spending, having the millions of deals that we put together with our selling partners in the fourth quarter was an important part of the demand that you saw.”
Finally, Jassy cited a priority of improving the customer experience. He said Buy with Prime would give subscribers the ability to use their benefits across the web, and noted that virtual try-on for shoes brings change to the shopping experience.
But it’s in this area that the tradeoffs that may be happening under the surface may rear their head again. GlobalData Managing Director Neil Saunders noted that online shopping generally is becoming “more difficult" on Amazon.
“While the Amazon marketplace is far from a terrible place to shop, it has become more complex and cluttered with a multitude of products, delivery options, and prices levels for shoppers to sift through,” Saunders wrote in note released at the time of the earnings call. “The result is that impulse buying has dropped and that more people are migrating away to other retailers. This is not yet a serious problem as erosion has only happened at the margins, but it is something Amazon will need to address and arrest to prevent further decline.”
Taking a rhetorical step further, the journalist John Hermann wrote this week that a “junkification” of Amazon is taking place, while arguing that “everything is going according to plan" for the company.
He placed the growth of the third-party seller marketplace at the center of this trend. But it also comes as Amazon grows its advertising business, with many taking note of a growing number of ads on the platform. The company also wants to keep growing Prime, and is now using content such as Lord of the Rings and NFL’s Thursday Night Football as key acquisition channels. Both had “record” signups of new Prime members, CFO Brian Olsavsky said.
“We see a direct link between that type of engagement and higher purchases of everyday products on our Amazon website,” he said.
It will have to do each of these things at once, while entering a period that will require it to be “more targeted with its growth ambitions,” as Saunders put it.
"Since its inception, Amazon has had a culture of throwing dollars at many different things to see where they led and what they could learn," Saunders said. "That approach worked well for a younger, fast-growth business. It works far less successfully for a more mature entity. In our view, management deserves credit for recognizing this and quickly responding. However, the shift requires a lot of care because Amazon needs to find a new balance between being ambitious and innovative and being more frugal with its spending – which will be very challenging."
Jassy said the changes of the pandemic made its logistics a "different network." That may be true of the whole company. Rather than an isolated cycle of overbuilding and pulling back, this may prove to be a period that changes Amazon altogether. The bets will still be there, but the risk will be magnified with fewer dollars that don't pay off to go around. As hinted by the logistics buildout of the pandemic and even Buy with Prime, they also may look more operational.
Less delivery robot, more delivery optimization.
As Jassy put it: “We're going to be very thoughtful about how we streamline our costs, and I think you see a lot of that, but we're also going to continue to invest for the long term.”
The recipients of those investments will say a lot about where it wants to head in this next year.