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U.S. Retailers Go Global (With Some Technical Support)

Tapping lucrative foreign markets requires major software upgrades


Woman With Shopping BagsMany American fashionistas like to stock their closets with the finest brands from around the globe. Fendi and Versace from Italy, Hermes and Louis Vuitton from France, and plenty of names I’m sure I’ve never heard of. So it makes sense that image-conscious folks from around the world would want to dress themselves in brands from the U.S.

Who better to capitalize on this trend than the First Lady’s brand itself – J. Crew? The privately held upscale casual apparel retailer is among Michelle Obama’s favorites, and its goods will soon be more readily available to Kate Middleton and other shoppers across the pond.

Last week, J. Crew said it would peddle its wares in 107 countries (up from 29) and enable payment in 41 currencies. A company called FiftyOne, which helps solve technology challenges between the “fifty states and one world” did the heavy lifting for this expansion, helping with price conversion and order fulfillment, among other issues.

Additionally, Neiman Marcus recently announced plans to expand its online reach to China by the end of the year.  Neiman invested $28 million in Glamour Sales Holding, which will develop the luxury retailer’s new e-commerce site and help market the brand to a new audience.

This is part of a new trend among American retailers to expand their sales efforts to international audiences, typically through online means. But it’s not just a matter of opening one’s firewall to international users and upgrading the shipping operations to allow for greater distances.

In many cases, e-commerce software requires an overhaul to accommodate international addresses that don’t fit into a standard American format (e.g., a five- or nine-digit zip code). This is such a pressing issue that FiftyOne’s CEO said he often hears this shortcoming “…is the biggest roadblock” preventing retailers from selling internationally.

Retailers need to find a way to conquer this roadblock quickly because as online retail sales in international regions including Western Europe and the Asia-Pacific rim are expected to jump 67% between 2011 and 2015. Domestic online sales are expected to increase just 42% in comparison.

So the demand is there, but is the effort worth it? In some cases, international customers may find delivery from American retailers to be cost-prohibitive. For example, Macy’s (NYSE:M) estimated that shipping and other charges could add $100 in fees onto $100 worth of goods to, for example, Australia.

While it’s difficult to predict any immediate impact to the bottom line of retailers making further headway into the international sales game, it seems like the right choice for many. Early data from the 2011 holiday shopping season spurred one analyst to observe, “Only a minority of U.S. retailers offer international shipping, and the companies that do are experiencing significant financial gains.”

Whether a company succeeds overseas or not may ultimately depend not only on demand for the brands but how efficiently retailers can manage shipping, customs limitations and other potential setbacks.

One encouraging precedent is Abercrombie & Fitch (NYSE:ANF), which made a relatively early foray into international markets when it took its online business overseas in 2006. Last quarter, international sales rose 62% compared to a 4% increase in the U.S. This trend may have helped keep the teen apparel retailer afloat during periods when U.S. same-store sales were sharply in the red. The company now plans further expansion in China, where a “steady increase in momentum” has already been seen.

I wonder how the conservative nation feels about ANF’s oft-controversial marketing campaigns. . .

As of this writing, Beth Gaston Moon does not own any shares mentioned here.


Article printed from InvestorPlace Media,

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