Are virtual storefronts about to supercede traditional businesses? What does the e-commerce trend mean to overseas trade? According to the 2010 Sensis e-business report on small to medium size businesses in Australia, 27 percent of SMEs who make sales through e-commerce made at least some sales to overseas customers and 20 percent are actively targeting export customers. The benefits sound enticing. E-commerce provides smaller enterprises access to wider markets. Services can be delivered electronically or in some cases exporters can use third parties to deliver the goods to their overseas customers. They can run their operation from home, and that’s exactly how some of Australia’s internet export success stories started out. David Brown’s Trixan online store was a finalist in the 2010 NSW Export Awards. The entrepreneur launched his business from a home office 10 years ago. He now employs 50 staff and sells 40,000 products across 100 brands to overseas buyers in the United States and United Kingdom. Brown says, "We wanted to set up an infrastructure that would enable us to sell various types of product from any jurisdiction, including split orders from multiple warehouses anywhere around the world and being fulfilled anywhere around the world."
The fulfillment model
"For many companies fulfillment warehouses provide a great way to ‘outsource’ their logistics arm, without giving up control over their own sales and marketing efforts," says Kylie Hargreaves, executive director with the New South Wales Department of Trade and Investment, Regional Infrastructure and Services. "Many exporters may be familiar with the old concept of pick ’n pack warehouses. Fulfillment warehouses are pretty much a more sophisticated version of this old concept," she explains. "Depending on the provider and the market, you can get support services basically from the point of entry into the market to the point of product return. So that means assistance with customs clearance, storage of inventory in their warehouses (often in bonded facilities), inventory management, pick ‘n pack services, tracking and fulfilment of customer orders, issuing of shipping confirmations to customers, management of 1800 type client service numbers and return services, as well as basic banking services." She says the fulfillment modeal can cut out several steps in a normal distribution channel, which can otherwise cut into your profit margins. "You can pick the full range of support services or just a few, you can scale up or down easily with demand, you can ensure someone else provides in-market support to customers who have placed orders, all while you focus on building up your sales and marketing efforts." Brown’s choice of pet products was purely opportunistic, he says, chosen because of the competitive advantages the sector offered at the time that allowed him to radically undercut retail prices. Since then he has added swimwear and intimate apparel under the brand name Trixan Body and has just completed regulatory and licensing certification requirements to operate a mail order pharmacy in the US. He says implementing the organisational infrastructure to enable taking on multiple suppliers of hundreds of SKUs (stock keeping units) and monitoring their availability involved "a lot of pain". Early on he dumped the company’s existing operational systems in favour of a new infrastructure that would be scaleable for virtually unlimited future growth. "We have Fortune 500-grade systems that can expand from business that is currently tens of millions to tens of billions." The system covers operational procedures, workflow, stock management and tagged data management that assists in getting a product ‘live’ onto the website and took two years to implement but Brown says it has been worth it. "Companies have audited our whole warehouse and operational model and they’re prepared to back us because they can see we’re doing it more professionally than most." Technology writer, broadcaster and Netsmarts CEO Paul Wallbank says that moving into e-commerce changes the nature of how a company operates. "You go from being a manufacturing manager or HR manager to becoming a project manager. With the lean manufacturing model where you’re buying in those services internationally you have to manage your partners overseas." He says spot buying on the basis of cost is a false economy. "The cheaper you go the more you’ll have to manage, which is counter-intuitive because you’re trying to reduce your costs and your management time. It also can leave purchasers exposed if there’s a shortage or change in the labour market. "We’re seeing that at the moment with some of the US manufacturers who are finding Chinese labour rates are starting to climb." While the growth potential for an e-commerce enterprise is unlimited, Wallbank says logistics, finance and management time are important factors. "If you don’t have the team to manage that growth you’re really going to struggle. You’ve got to ask yourself where are the bottlenecks in your supply chain and management structure."
Scrupulous planning based on client driven market research underpins Ansarada’s internet delivered secure virtual data rooms business. Founding partners Sam Riley, his sister Rachel, Daphne Chang and Andrew Slavin, having identified the need for the secure exchange of sensitive information between companies engaged in legal and commercial transactions, developed their product by targeting their potential clients. This tailored service ethic remains at the core of Ansarada’s operations and chief executive officer Riley credits it with being the company’s key point of difference. Clients in different geographies are assigned managers who work closely with them throughout the transaction so "they build up a much deeper knowledge", he says. "We win clients from competitors based on that." Riley says in overseas markets "we try to find out the strengths and weaknesses of each competitor locally" and that positioning the company competitively is one of the challenges, along with understanding the different cultural aspects and maintaining consistent brand identity "when you’ve got people in places that are 12,000 miles and 12 hours’ time difference away". Ansarada has an offshore team of about a dozen people in offices in London and San Francisco but Riley says selling into a foreign market is also "a matter of being aware of the whole process around selling a solution and servicing a client and learning how to maintain your proposition and differentiation but adapt how you go about it so you’re appealing to the market you’re entering". The company has also "tweaked where we fish and don’t fish", scrutinising the provision of any new services to ensure that it is profitable. "We analyse if it’s worthwhile increasing our sales and marketing in those verticals that are a little bit outside of our core experience, whether they provide a lot of benefit: what’s required to service those markets, what’s the sales cycle, how big is the market, what are our existing resources, and decide if we want to invest more or less into that vertical," he says. Wallbank says, "If you’ve got key partners or key suppliers or customers overseas you’re probably still going to have to get on the plane and go and talk to them. If you’re offering professional services, time you spend on planes out of contact is lost time to your business. The rewards are there but you have to be aware of the costs." One thing Ansarada invests in "heavily", Riley says, is technology. He stresses that with an internet focused service "it’s critical that the infrastructure that you deploy your services on is very robust and secure, but also very, very fast", making the point that in e-commerce "like it or not, you’re competing with Google". This extends to their own housekeeping. "Our whole financial and operating systems operate in the cloud so everything is highly scaleable, very customisable to our business. We actually employ someone fulltime who just works on efficiencies." From the start Ansarada also invested in the highest level of internationally recognised certification for secure handling of information and then had the company independently audited. Riley emphasises that obtaining client trust is the basis of the business. [SUBHEAD] Bringing it all back home Naomi Simson of Red Balloon sells experiential gifts online, from sporting or cultural activities to ‘being a rock star for a day’ or driving a high-performance car for a weekend, to be redeemed in Australia or New Zealand. "I didn’t realise that we were an exporter but we actually are because we transact with people all around the planet. I’m earning export dollars without leaving home. Why sit in an aircraft when you can do it from your armchair?" she laughs. Red Balloon hooks into the international gift market through a raft of strategic partnerships, capturing scattered family members, migrants and, significantly, the Asia-Pacific corporate sector. "This developed in the very early days because we looked at our transactions and where traffic was coming from and in the first year a lot of transactions were coming from the UK." Simson realised there was a much bigger opportunity than her two local markets in Australia and New Zealand and is now promoting the Red Balloon experience globally. "One thing that I do to extend our market reach is purchasing local urls and using Google Adwords in each of those geographies. We also do a lot to make sure our websites are optimised. We also look for joint marketing initiatives. There are websites like Gumtree which is very popular in the UK so we do local promotions with them we think will appeal to our market." She says although the product remains the same it’s represented differently on overseas websites in the local language, a move she made a couple of years ago after analysing her sales data, "watching where our overseas transactions were coming from and how many would drop out of the cart at a certain point. That’s why we started communicating differently". Wallbank says, "You should make it as easy as possible for customers to a) contact you and b) pay you," adding that you need to be aware of the types of payment popular locally. "Dealing with that spins into tax considerations as well, you’ve got to be careful with your tax set-up." He also agrees getting the content and the design of a site right is critical to gaining an audience in a target market. "It’s not just your customers who go to your website, it’s also your suppliers, your strategic partners. They are looking at your website to see if you’re credible and substantial and to see exactly who you are." He strongly recommends investing in a serviced office and matching local phone number to put on your appropriately designed website for the target market. "How to appear bigger than you are is one of the things that e-commerce does really well. People like Naomi Simson have done that. A three-person office operating out of a front room can look like a multinational."