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Launching an e-commerce business in the world’s biggest markets

E-commerce · 7 min read

David vs. Goliath - How to take on established markets

Harvard Business School’s Michael Porter said, “Attractive markets are a conundrum. You can look longingly at them, but you can’t enter them easily because of barriers erected by market leaders.” So what are the barriers? And how might they be overcome?

Yes, it can feel like the odds are insurmountable. Yes, it can seem like you’re entering an intimidating arena dominated by huge multinational power players. But even the mighty Amazon started off in a garage. Being small, nimble and smart has its own distinct advantages in established markets. Let’s look at some of the challenges and opportunities.

Look for the gap

Before you enter an overcrowded, highly competitive marketplace, it really pays to do your homework. Who are your competitors? How dominant are they? What are their product, pricing and promotion strategies? Then take a long hard look at yourself. What are your strengths? What can you bring to the market that’s different? And what about the market itself? Are there any unfilled niches your business can slot into? Take Australia for example. Only half of Australia’s fashion businesses have an online presence. So there’s an opportunity right there to target fashion-conscious digital shoppers. The first rule about established markets is: you need preparation with a capital P.

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Play by your own rules

The Harvard Business Review has some strategic advice on entering established markets, “Smart newcomers refuse to challenge incumbents on the latter’s terms and turf. They don’t duplicate existing business models; they don’t compete for crowded distribution channels; and they don’t go after mainstream customers—at least not at first.” They cite Virgin Cola and Red Bull as an example. Virgin Cola attempted to tackle Coke and Pepsi head on, with a heavy advertising budget and an immediate launch into multiple retail outlets. Nine years later, the brand had fizzled out. By contrast, Red Bull entered the market with a niche product marketed initially through bars and nightclubs. It’s now the leading energy drink in the world, with annual sales of around $6.30 bn.

Bide your time

Serious about cracking an established market? Be prepared to play the long game. Brompton, the English bike company, maintained a quiet presence in the US market for many years. Then, when cycling suddenly became massively popular in US cities, they were well placed to reap the rewards. Asia and the US now account for around 80% of Brompton’s sales. In other huge markets, the patient approach is the only way to go. In China and Japan, doing business is all about gaining trust and building long-term relationships.

Break it down

Big markets seem impenetrable. But as Tracy Young of PlanGrid construction software company puts it, “What we call a ‘market’ is really just people and companies.” The key to PlanGrid’s success was narrowing their huge potential audience down to one specific niche – superintendents. The lesson here is to cut your market down to size and don’t waste your efforts trying to be all things to all people.

Know your marketplace

Although retail e-commerce sales worldwide amounted to $2.3 trillion in 2017, online shopping habits varied dramatically from country to country. In 2016, an estimated 19% of all retail sales in China were made on the internet. But in Japan, that same figure was only 6.7%.  In other territories, mobile is taking over. It’s estimated that around half of UK and US online sales will be made on smartphones by 2020. Some countries have their own unique payment oddities that are worth being aware of. For instance, it’s quite common for German customers to pay after they’ve received their goods. 

Make sure you deliver

When you’re trading with an established market, you’re dealing with customers who are mostly highly sophisticated and very demanding. As Wes Knight, co-founder of Erroyl luxury watches confirms, “Our customers expect prompt deliveries, especially since they are used to receiving domestic orders within one to two days.” So it’s important to find the right partner that allows you to mobilize orders quickly. Erroyl chose DHL, “Since we’re based in Australia – for many the other side of the earth – we need to ensure timely delivery. DHL gives us the ability to ship from Australia to Europe and the US in a few working days.”

It all comes down to this…

Sevgin Eroglu, associate marketing professor at Georgia State University's J Mack Robinson College, outlines the hurdles of entering an established market very well:”It is inherently a very risky business," she says. "You cannot imagine how difficult it has become for even the giants to survive.”

Her advice to any business willing to take on the challenge is summed up in two short words, “Be brave.”

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