Categories
Global Marketing

Amazon: Technology Making International Marketing Easy

 

According to a Reuters article from earlier this year, more than one-quarter of all Amazon sales for third-party sellers on the platform were cross-border transactions. Leveraging its supply chain infrastructure, brand recognition, and international customer service operations, Amazon is able to provide sellers with a level of support that makes selling internationally nearly as easy as selling domestically.  Amazon offers both international Fulfillment By Amazon (FBA) in an expanding number of countries and FBA Export to sellers of all sizes.

Through its FBA program, Amazon is offering small and medium-sized businesses a means of quickly and effectively expanding internationally.  Amazon is able to distribute these sellers products to countries throughout the world with minimal shipping time, handle taxes and tariffs as required, and provide customer service in the local language on behalf of a business. Additionally, Amazon is able to provide sellers with connections to services that will assist with customizing product detail pages and messaging to adapt to local cultures on country-specific Amazon platforms.  Smaller companies are also able to capitalize upon the trust that consumers have for Amazon, reducing the need for individual sellers to build trust beyond that of Amazon reviews and rating.

This offers a significant opportunity for smaller businesses that may not have considered international sales an option.  An increasing number of these companies are opting to sell in Amazon’s expanding international channels, which has led to cross-border sales growth for Amazon increasing at a rate that is outpacing its 31% overall net sales increase.  This trend also means an increase in competition in all international markets that Amazon is able to serve as a growing number of sellers begin taking advantage of Amazon’s programs. For marketers, it may be difficult to continue with differentiation or low-cost strategies as more and more markets become saturated.  This may eventually lead to a large number of companies developing a more focused differentiation approach in order to target a niche market that may value a very specific product offering.

With the successes that Amazon is seeing from employing robotics, information tracking, and internet technologies to allow companies of all sizes to sell, market, and distribute products throughout the world, it is likely that other large global e-commerce players like Alibaba, jet, FlipKart, and Rakuten will work towards copying this strategy. There is a high likelihood that marketing globally will become more cost-efficient and simple for businesses of all sizes to incorporate into their businesses.  In domestic markets, companies will need to consider the potential threat that this ease of market entry by international competitors will generate. Additionally, companies, especially those that are early adopters, will have the potential to greatly increase their revenues and global reach.

References

https://www.pymnts.com/amazon-commerce/2018/amazon-vendors-international-payments/

https://www.reuters.com/article/us-amazon-com-trade-exclusive/exclusive-on-amazon-a-quarter-of-merchants-sales-are-cross-border-idUSKBN1GW1AE

Think You're Too Small to Export? Amazon Can Help

http://www.supplychainquarterly.com/news/20180501-study-amazons-fba-onsite-program-poses-a-threat-to-3pls/

Categories
Global Marketing

E-commerce Regulations: International Opportunity or Threat

The US, Japan, and Singapore are among nearly a dozen World Trade Organization (WTO) members that are pushing for international e-commerce regulations.  The US has specified that the agreement should cover the free flow of information, digital security, fair treatment of digital products, trade facilitation, protection of proprietary information, and facilitation of internet services. At the WTO Ministerial Conference in Buenos Aires last December, 71 members of the 164 WTO members were in support of beginning talks on e-commerce with a join statement formalizing this stand.

India, which has yet to establish a national policy on e-commerce, is concerned that many countries do not yet understand the full implications of binding rules in this space due to asymmetric development of e-commerce globally. Several countries in Africa have are also opposed to e-commerce negotiations at this point.  However, with the US, EU, Japan, and China backing negotiation proposals, it is unlikely that India will be able to prevent negotiations from going forward.

This comes at an interesting time for India as India’s e-commerce is experiencing a period of rapid growth and its largest e-commerce player, Flipkart.com, is close to closing a deal with Walmart and Alphabet, Google’s parent holding company.  According to Forrester Research, India’s online commerce is expected to grow from $19.6 billion in 2017 to $27 billion this year, nearly a 38% growth. Additionally, the deal to acquire a more than 70% stake in Flipkart.com for $20 billion by Walmart and Alphabet is close to closing.  As a nation with a quickly growing e-commerce market and no national policy for e-commerce, an agreement by the WTO is of great concern to the country. It is for this reason that India is now rapidly working to develop a detailed national policy, which Commerce Secretary Rita Teaotia has stated would assist “India in articulating its stand on e-commerce at the World Trade Organization.”

What is FlipKart?

There is also speculation that the US is attempting to utilize an agreement on digital trade to counter China’s digital trade barriers. As Stephen Claeys noted in an article in The Hill, the US paper on negotiations states that the agreement should cover all trade-related aspects of commerce through electronic means.  This would expand the negotiation agreement beyond the WTO’s narrow definition of e-commerce, which “only covers activities related to the electronic provision of goods and services, such as distribution, marketing and sales (Claeys).”   Although it is unlikely that all objectives in this paper would be accepted into a WTO on e-commerce, if they were, it would eliminate the top barriers to technology and information companies and would make a significant move towards the liberalization of digital trade.  

For companies currently in the global e-commerce market or considering entering this market, a WTO agreement regarding e-commerce could pose a large opportunity or threat.  One topic of concern is that of information freedom and security which may alter the gathering and storage of data for companies either in a more restrictive way or more open.  Additionally, the negotiations are likely to cover taxation, tariffs, and other potential costs for companies, which may increase or eliminate these costs for international e-commerce.  If eliminated or reduced, large international companies would be able to compete more aggressively with domestic companies in many countries. Companies looking to enter international markets through e-commerce will need to continually monitor progress on this front as regulations may offer a significant opportunity or threaten the profitability of their business in the near future.

 

References

Clays, Stephen. The Hill. http://thehill.com/opinion/finance/384120-digital-trade-paper-shows-us-using-wto-as-part-of-approach-to-china

https://thewire.in/trade/as-push-for-global-e-commerce-rules-gain-pace-india-starts-taking-a-stand

https://timesofindia.indiatimes.com/companies/walmart-alphabet-together-may-buy-over-70-in-flipkart/articleshow/64036426.cms

https://www.businesstoday.in/current/corporate/google-alphabet-walmart-flipkart-deal-amazon-stake/story/275751.html

https://www.thehindubusinessline.com/info-tech/govt-to-frame-policy-on-e-commerce/article23660302.ece

 

Categories
Global Marketing

Greener Shipping: Impact on Global Marketing

https://www.youtube.com/watch?v=jP5Ln5SMd_I

Earlier this month, the UN International Maritime Organisation (IMO) reached an agreement to reduce carbon emissions in the shipping industry by 50% from 2008 levels by 2050.  The implementation strategy for this plan is not expected to be finalized until 2023 and it has been suggested that it may be subject to review in 2028. However, mandatory rules have been put in place by the IMO for new vessels to increase fuel efficiency in order to reduce carbon emissions from ship engines. Some proposed measures for the plan “include speed reductions and tougher energy efficiency design rules in the near term, market-based levies and subsidies in the mid-term, and the development of zero-emission fuels further down the line (Stefanini).”  The next meeting of the IMO’s environmental committee will not be until October.

Outside of the shipping and ship manufacturing industries, this new agreement is likely to impact the global supply chain of many companies engaged in international trade.  Depending on the requirements agreed upon, it is likely the cost of transporting goods through shipping channels will increase to cover new ships and compliance upgrades to existing ships.  Additionally, one of the proposed short-term measures is the speed reduction of shipping, which will slow delivery time significantly to international markets and increase product lead time.  These cost increases and delivery delays may result in price increases for imported products and may reduce the viability of international trade with certain countries for some companies.

Chile and Peru have already spoken out against the short-term speed reductions to reduce emissions as these would negatively impact the export of avocados, cherries, and blueberries.  These countries have submitted a 13-page document to the IMO requesting that the organization work on developing an “optimal speed” rather than a “speed reduction” while detailing the impact on fruit shipping, especially to specific geographies.  One scenario that Chile provided in this document was the example of shipping cherries from Chile to Shanghai, China, which currently takes 33 days, but at the proposed slower speed would take 44 days, which is likely to impact fruit quality. In considering products like fruit, it is possible that these countries will need to discontinue exporting to countries that are too far away to maintain quality or will need to raise prices to make up for the cost of spoilage and additional man hours for the ship’s crew.

This change in the regulatory environment of shipping will impact a large number of supply chains for companies that are manufacturing or marketing globally.  Additionally, the loss of cost and time efficiencies for exporters to specific countries may be advantageous for domestic companies that will not incur these additional costs.  Going forward, businesses need to be aware of the potential cost changes that may impact their international sourcing or trade. In anticipation of these changes, companies should consider building additional margin into pricing in new international markets so that prices do not need to be raised in the future.  Additionally, this may make some international markets less desirable for companies to enter if there is a long distance over which goods will need to be shipped.

References

Stefanini, Sara. Shipping to halve carbon footprint by 2050 under first sector-wide climate strategy. Climate Home News. http://www.climatechangenews.com/2018/04/13/shipping-halve-carbon-footprint-2050-first-sector-wide-climate-strategy/.

https://www.reuters.com/article/us-imo-emissions/u-n-shipping-agency-reaches-deal-to-cut-co2-emissions-idUSKBN1HK20F

http://www.industryweek.com/supply-chain/world-shipping-industry-agrees-reduce-carbon-emissions-50-2050

http://www.climatechangenews.com/2018/03/19/avocado-trade-threatened-shipping-climate-measure-say-chile-peru/

http://www.climatechangenews.com/2017/01/09/un-shipping-body-rejects-eu-climate-initiative/

 

Categories
Global Marketing

Marriott’s China Blunder: Learnings for International Marketing

Earlier this year, the hotel chain, Marriott International, made the mistake of sending out a questionnaire to rewards program members asking for their country of residence and listing Hong Kong, Macau, Tibet, and Taiwan as country options.  Although this may seem like a fairly innocuous and easily corrected error, it has had significant repercussions for the Marriott's China operations. As briefly explained in the videos below, although visas, governments, currencies, and local authorities are all separate for these regions, China considers these regions to be part of “One China.”  To state otherwise is considered to be an undermining of China’s sovereignty and territorial integrity.

“One China” Video Explanation CNN Money

This oversight on Marriot’s survey received a positive Twitter comment from Friends of Tibet, a pro-Tibetan independence group, thanking the hotel for listing Tibet as a country rather than part of China.  Compounding the problem, Roy Jones, an American Marriott customer care manager logged onto the official Marriot Twitter account and “accidentally” clicked “like” on the tweet. Mr. Jones was in charge of handling complaints, reward-point questions, and questions directed to Marriott's Twitter account.  When later interviewed, he stated that it had been an accident and that he had not received any training about China-related issues (2).

 

The entire situation led to the shutdown of both the Marriott and Starwood websites and app in China for one week, disrupting operations for its more than 120 locations in China.  Additionally, Chinese authorities have stated that “Marriott’s wording violated cybersecurity and advertising laws (7).” China’s tourism ministry immediately ordered an investigation and warned the industry that all “hotel companies must immediately review all information on their corporate websites and apps, and strictly abide by Chinese laws and regulations.” China’s cyber regulator demanded meetings with two regional executives from the Marriott hotel chain and order a “comprehensive self-review and rectification (7).”

Marriott’s Response

Marriott responded quickly to the incident by apologizing for the error, denouncing its employee's actions, and announcing an eight-point rectification plan.  Mr. Jones and the third party vendor from Canada that was contracted to create the survey have both been let go by Marriott International. The eight-point rectification plan includes “expanding employee education globally, improving mechanisms to approve content, creating a more convenient complaints channel for Chinese customers, studying Chinese regulations better, and more strictly supervising the work of third-party contractors (1).”

The actions listed in Marriott’s rectification plan are being implemented reactively to address this marketing and public relations crisis.  However, these can also be utilized by any business as a proactive action plan to prevent an incident like this from occurring in the first place.  Two notable actions mentioned in this plan are expanding the global education of employees of the company and studying Chinese regulations better. These are connected to ensuring employees have an understanding of the external environment in the countries a company is connected to throughout the world.  The external environment which includes the sociocultural, legal, and political environments that were the key areas related to this particular PR crisis that agents of the company were uninformed about. This particular case illustrates the importance of having a company-wide understanding of the external environments of other countries especially in an age when technology allows all agents of the company to communicate globally.

 

Sources

1 https://www.hongkongfp.com/2018/03/29/us-senator-slams-long-arm-china-us-marriott-staffer-fired-liking-pro-tibet-tweet/

2 https://www.hongkongfp.com/2018/01/12/dont-support-separatist-groups-us-hotelier-marriott-apologises-tibet-hong-kong-geography-gaffe/

3 https://www.thedailybeast.com/how-big-us-companies-learn-to-grovel-in-china

4 https://jingdaily.com/marriotts-blunder-a-warning-in-dealing-with-beijings-understanding-of-history/

5 https://www.washingtonpost.com/news/business/wp/2018/01/18/china-demanded-marriott-change-its-website-the-company-complied/?utm_term=.629eb6566fab

6 https://www.nytimes.com/2018/01/11/business/china-marriott-tibet-taiwan.html

7 http://money.cnn.com/2018/01/11/news/companies/marriott-china-website-app-blocked-tibet-taiwan/index.html

8 https://www.hongkongfp.com/2018/01/19/hotelier-marriott-unveils-eight-point-rectification-plan-tibet-hong-kong-geography-gaffe/