In cross-border e-commerce, manufacturers of goods that sell their own product (range) – as opposed to retailers, which primarily sell other parties’ products – are often referred to as “brands”. Examples include Nike, H&M, Bugaboo and Adidas.
Brands often start selling online themselves when they already have a network of offline and online resellers in place. Just as a “flagship store”, an e-commerce site allows a brand to both sell and create a specific experience for their customer.
This branding effect is a very important reason for brands to ‘own’ a sales channel.
Channel challenges for brands
1) Channel conflict
Brands need to pay attention to their retail network and the conditions these resellers are buying the merchandise from them: companies want to prevent a conflict with their reselling partners because, for example, the prices on the flagship website are ruining the market for them. In an international context, a brand needs to coordinate pricing, offers and brand management with its resellers in order to create a satisfying balance for all participating players.
2) Branding conflicts
Some brands have very specific ideas about how they want their image to be represented. A recent example: sports manufacturer Adidas did not want its EU resellers to make use of online marketplaces such as Amazon, Rakuten, eBay and Price Minister. It issued a restriction of such sales in its distribution agreements. However, the German Federal Cartel Office forced Adidas to abandon this restriction in the summer of 2014, and also the French Competition Authority issued a press release in November 2015, stating that such restrictions are disproportionate to Adidas’ branding efforts.
How to select the countries to expand to?
What markets offer reasonable chances to set up a profitable business within a feasible time frame? In order to select the right markets for an online expansion, the target countries should be profiled in order to determine their potential for the individual seller eyeing expansion. Analyze the search frequencies of your products in the new markets. We also advise a comparison of product prices, CPC (Cost per Click, average costs when running an AdWords Campaign) and CPO (Cost per Order, quality of a marketing measure). The following elements should be taken into account: