Finding Your M.O. is an on-going series on The Business of Fashion penned by Áslaug Magnúsdóttir, co-founder and CEO of Moda Operandi, on her experience at the helm of a fashion-technology start-up. Last time, in Part 6, we asked the question: how wise is conventional wisdom? Today, we look at the complexities of serving international markets.
NEW YORK, United States — Today’s fashion industry is truly international, with designers, manufacturers, retailers and end consumers scattered across the globe. And as an Icelander living abroad, it is doubly important to me that M’O is an international company. We hire employees from different countries. We showcase emerging designers from markets like Australia, Brazil, Israel and Scandinavia. We ship product to customers worldwide. And our website, customer care managers and personal stylists operate in multiple languages.
But being a global business comes with a number of challenges. Indeed, when it comes to things like multilingual support, customs and duties, and managing different currencies, deciding what to do, where and when, is tricky and M’O has learnt its share of painful lessons along the way. Here are some of the key challenges around going global and how we tackled them.
Customer Acquisition and Awareness
Going international means having international customers. But how do you acquire customers spread across the globe? Young start-ups rarely have extensive marketing budgets, which means pursuing the whole world at once is not an option. When M’O launched, for example, our marketing budget barely covered the cost of our PR agency. What to do?
• Push vs. Pull: Since we had to be creative about customer acquisition, M’O adopted a “by invitation only” policy at launch that created an air of exclusivity. This pulled customers towards us, rather than us pushing our message out to them. The result was an influx of prospective members and a positive response from the press, which kept the acquisition cycle going.
• Partners: With little money to spend, M’O brokered editorial partnerships with sites such as Goop and The Zoe Report, where we provided content in exchange for promotion. We then partnered with Vogue in a similar manner, which drove awareness in places like Japan, China and Russia via the magazine’s international sites. These deals didn’t require cash payment upfront and were, therefore, feasible for us.
• Prioritisation: It’s easy to spin your wheels on marketing efforts that look promising but realistically contribute little in terms of awareness or customer acquisition. Be careful to prioritise efforts and focus on low hanging fruit, particularly at the beginning. At M’O, we divided up our marketing budget into three clear categories: 1) priority markets, where we spent the most, 2) tier 2 markets, where we spent a little but focused on searching for partners and 3) non-priority markets, where we spent nothing but looked at PR opportunities on a case-by-case basis.
Global companies need to serve global customers, so we launched with a small 24-hour customer service team that was spread between New York and London. We assumed most of our business would come from the US, so we focused the majority of our resources there. Our initial team also included Spanish speakers in order to better serve speakers of at least one other major language. And as we grew and became more international, we began to upgrade our customer service team to support additional markets and languages.
The take-away: start small but make sure somebody smart and personable (and, ideally, multilingual) is by the phone at all times. You will soon learn what you actually need and can adjust accordingly.
When M’O launched in February 2011, the site was only in English. While we knew that many of our international customers would not necessarily read or speak English very well, we decided to learn more about those customers first and then adjust our approach to meet their needs. Indeed, following customer demographic data, we partnered with an external online translation company to offer the site in Spanish and Portuguese and we are adding further language support gradually as our customer base develops in different geographies.
The key here is not to go crazy at inception and build overly robust language support. Localising your site to accommodate many languages is harder and costlier than it seems, whether the work is outsourced or done in-house. As with customer service, get your feet wet first and then integrate additional languages based on demand.
Pricing and currency
Two critical complexities of selling fashion internationally are: 1) some designers price their collections differently in different regions and 2) customers tend to prefer purchasing items in their local currency. Having anticipated these issues, M’O took a ‘wait and see’ approach to tackling them. We didn’t really know if these issues would be massive or manageable. We first launched with US dollar support only. But as our international business grew, this became a problem for both our designers and consumers, at which point we added support for Euros and Pounds Sterling and are now working on adding other major currencies to the site.
The lesson we learned: offer a few major currency options from the get-go. The value of being able to weigh and complete a purchase in a familiar local currency is extremely meaningful to customers.
Warehousing, Shipping and Duties
One of the big decisions you need to make when selling merchandise internationally is deciding where you store inventory. Selling product around the world can be very expensive when you consider the costs of warehousing and shipping, as well as duties that are typically applied to commercial goods when they arrive in the country of destination.
At launch, M’O warehoused and shipped all product from one location in the US in New Jersey. The location of this facility allowed us to ship to North America and Europe relatively quickly and cheaply. Initially, M’O offered free international shipping to encourage international sales, but this meant bearing significant costs. We then added an international warehouse in the UK to service customers in Europe, the Middle East and Asia, a move that reduced shipping costs considerably such that customers have been willing to absorb these costs as part of the purchase price. Finally, in order to help international customers anticipate any duties they may be asked to pay on receipt of their order, we partnered with an international shipping company to help calculate and communicate these costs prior to purchase.
The key for young businesses: project where your core customer is located at launch and warehouse your product in that market. If you grow a customer base elsewhere, you can expand accordingly. And be sure to carefully calculate who is going to cover shipping costs: you or the customer. While it may be attractive to offer free shipping, these costs can really add up, especially if you also offer a generous returns policy.
When going international, how you get paid is also complicated. Consumers in different countries prefer different payment methods and terms. In Japan, Paypal is a popular method of payment when shopping online; in China, UnionPay and Alipay are the most prevalent payment methods; in Brazil, customers are used to being able to split payments for online purchases across several months. And in some countries, consumers are still not comfortable using a credit card online.
Clearly, to be competitive, you need to offer payment methods that local consumers are used to. Here, M’O also took a gradual approach. We launched accepting only major credit cards. And now we are gradually adding additional payment methods to better serve our growing international customer base.
While you want to help customers everywhere pay in the way that is easiest for them, you can spend a lot of time and money implementing billing methods that might only produce nominal sales revenue. Go slow, start with the ubiquitous payment methods and expand one option at a time, based upon who is buying how much and where.
To effectively serve international markets, there are other issues to consider, as well, including differences in sizing, regulatory issues, the need for regional microsites and how social media is used differently around the world. But these are fine-tuning points that can be addressed after your global business begins to take off.
Overall, if going global is critical to your company, it’s important to remember that internationalisation comes with many challenges and should be pursued carefully and iteratively, one step at a time. Figure out which features and solutions are most critical to success and knock those out first. Then step back, assess how you’re doing and make adjustments.
Previous articles in the Finding Your MO series:
Part 1: From Big Idea to Launch
Part 2: The Need for Speed
Part 3: The Business Plan is Your Roadmap
Part 4: Making the Most of Mentorship
Part 5: How to Choose the Right Investors
Part 6: How Wise is Conventional Wisdom?
Áslaug Magnúsdóttir is co-founder and CEO of Moda Operandi