International expansion for e-commerce businesses – a multi part series

Many promising and new e-commerce businesses grapple with the daunting initiative of international expansion. Common questions that many ask themselves are:

• When is the right time to go beyond the borders of our home market?
• How much should we invest in internationalization (I18N) vs focusing our energy on our home market?
• Which team should work on i18n?
• Which other countries / markets should we enter and why?
• Should we have a separate product platform for each market?
• How much localisation is required for each market? When is the right time to fork into localisation?

Here’s a simple framework to address the first question of the ideal timing to embark on i18n.

Timing:

If you are building a promising e-commerce business, I believe you should have aspirations to go global from Day 1 and plan your execution accordingly. While you need the perfect mix of ingredients to embark on the i18n journey (a strong product-market fit, sufficient growth capital, strong core team and dedicated resource to expand), you should always be building your product platform for scale from the beginning (local language, local currency, global paid search, SEO etc). If you have to re-platform your product to go international further down the line, you will lose valuable time entering markets that are starved for your product. That said, if you have all the other ingredients but your product needs to be re-platformed for international growth there are ways to do so quickly.

For example, modern marketplace businesses (that do not require hyperlocal operations) first re-platform the buy side of their product to start getting cross-border customers. They invest in language translation, multi language paid search and buy-side payment processing to unlock cross-border customers for their local supply. Once they reach a critical mass of demand from an international market, they start to work on re-platforming the supply side of their product platform to go deeper into new market opportunity. Some e-commerce players also start by only launching web/desktop platforms in international markets – mobile apps follow once web/desktop reaches a pre-defined critical mass threshold.

To decide the right time to seriously/wholeheartedly embark on the i18n journey, I recommend a 3-point framework:

• Sustainable unit economics in home market:

It is critical to have a sustainable operating model and unit economics in your home market before seriously investing in i18n. This means, you should be able to (if your hand was forced) to run your home market business at break-even on an operating contribution basis for multiple months if you had to divert all your resources to investing in new markets. Reaching this threshold proves that your business has strong product market fit, you have a solid operating playbook and a good grip on the levers that drive the profitability of your business. In fact, I would stress test the sustainability of your home market unit economics for a couple of months before launching a new market. I think your current investors (especially the “switched on” ones 🤑) would also expect you to be able to prove this fact quickly so that they have strong confidence in following on with more capital/investment to support your international expansion.

• A solid and committed team with the ability to onboard more like-minded folks:

The most important learning from my past experience is that the whole leadership team and the top contributors to your business need to be wholeheartedly bought into the i18n opportunity. The current senior team will act as the foundation of this initiative and there will be multiple incremental demands on their time/energy/commitments when you embark on international expansion. Take the time necessary to get everyone bought in, so that when you onboard new teams for i18n you establish a strong drive and culture. If your senior team is clearly going to struggle with more complexity, you may want to re-think your timing and strategy. Here’s a quick litmus test: are they willing to take your best mid-level employee out of the day-to-day and have them 100% focused on the i18n initiative? If your senior team has reservations about this, you still need to do more work with them.

• Run a test with a small market with few/no competitors. Identify the unknown unknowns with the least upfront pain:

I believe it is critical to run a test of your capabilities and i18n thesis in a small + ‘relatively’ non-competitive market before seriously investing in international expansion. Once you’ve done this and created operating templates for important functions (payments processing, paid search/social media, SEO, product translation, customer support and logistics if needed) then the timing is right to foray into bigger markets. There are so many unknown unknowns when you expand, testing and refining your approach before full throttle expansion will save you a lot of pain later down the line.

Obviously the framework above outlines a fairly simple approach and there are varying levels of complexity depending on your business model. With that said, if you find it difficult to mould the complexity your problem space into these 3 points, I would recommend holding back on investing in international expansion until you are able to simplify further – the timing might not be quite right for you.

I really enjoy discussing the subject of international expansion for e-commerce businesses and look forward to hearing your comments/thoughts/questions on this post.