Join the CITC’s Perry Goldstein as he discusses the basics of ecommerce, including sales options, evaluating your company and product for global distribution through eCommerce. Webinar Transcription Well, good morning everybody. My name is Perry Goldstein, I’m with the California International Trade Center. And we are going to talk this morning about our Introduction to ecommerce. I want to preface this by saying this is the first of six series of Basics to ecommerce. So this series is really designed for people that want to learn everything from the ground up. There may be a little information you may know, may not, so I’m going to speak at a very basic level. Feel free to send any questions you have at any time, and let’s get this party started. So I thought I’d start out first of all by… I’m having problems here getting my PowerPoint to advance. I’m very sorry. Let’s stop the share and let’s start it again. See if that works, I have a frozen screen. There we go. Okay. Little glitch. I’m still having a glitch. It worked this morning. I’m going to mute my audio for a second. I’m trying to fix my PowerPoint. Okay. False start. There we go. Good morning. My name is Perry Goldstein. I’m an industry expert. Obviously, I’m having a little technical problem here but I think I solved my problem. So, let me give you a real quick background on my history in ecommerce. I was with Panasonic consumer electronics for most of my life. Before that, I was a retail salesperson on Salesforce. So, I’ve spent my life in retail sales and I’ve seen the transition from brick and mortar to ecommerce. I was in the very early meetings with Amazon and with other ecommerce suppliers, vendors at that time. So I’ve been kind of in this from the very beginning, that’s a little bit about me. I’ve seen it all from the start. So, I want to start out with a very important statement. Ecommerce offers any business, any size, the opportunity to enter the global marketplace. So once upon a time, in order to sell overseas, you needed a very large organization, you needed a big budget, and you needed to be a big company. But these days, anybody can get into the ecommerce business even from your own living room. It offers opportunities that have never been available to small businesses before. Our mission, at the California International Trade Center, is to help all of you get into that business. There’s gonna be four portions to my webinar today: Methods and Channels (and that’s the gist of the presentation), Product Readiness, and Company Readiness. You gotta be sure you’re ready to go before you actually do. And then we’re gonna have some closing remarks, some comments, and statements about where to go next. Methods and Channels So let’s start with Methods and Channels right away. So there are basically two ways to sell online globally. First is through your own company website, direct to the end-user. And second is selling through a third-party ecommerce platform. I’ll probably be using the word Amazon a lot. Amazon has become synonymous with ecommerce platform, but its walmart.com is very active, Newegg, Rakuten, there’s all kinds. So when I say Amazon, it’s really more of a large general statement. And I want to start out with this quote. “It goes by many names – cross-border commerce, borderless business, international online, retail. But more important than what it is, is what it isn’t.” Going global is a necessity today, we have roughly 350 million people in the United States and there are billions worldwide. Your product could have a much larger audience than just domestically. It takes some thinking to get into that, but the potential is there for everybody. So first I want to talk about selling through your own website. Your company sells direct products to the end-user directly from your website, ecommerce platforms are easily made available on your own website. The advantage, of course, is you can completely control the message, you control the pricing, there are no competitors and your product is front and center. You are the only product there. The disadvantage is lower traffic than an ecommerce website. You can’t compete with the traffic Amazon gets or any of the other walmart.com gets. You have a very low chance of accidental discovery. What I mean by accidental discovery is if you’ve ever shopped online and you look at a product, they have a whole list of other competing products recommended at some point on that page. I call it accidental discovery because you didn’t know that existed and you may say, “Oh, this is better than the one I’m looking at up. I’ll buy that.” When you’re on your own, you don’t have any chance of accidental discovery. The next statement is not as true today as it was, but it still is to a point. You need additional websites for different languages, different countries. You may need a special domain just for Europe, although there’s more and more opportunity to use just one website globally. And we recommend talking to an expert about that when you’re ready to do that. When you sell direct from your own website, unless you hire a third-party company to do your fulfillment, you are really responsible for the fulfillment: pick, pack, and ship. Send out to wherever people are ordering the product. That’s very important because the general public has become so spoiled with really outstanding service, immediate texts, and immediate emails. You need to be aware that you need to have first-class fulfillment and communication across the board. Here’s another interesting statement. “If you rely 100% on a 3rd party for any part of your business, you’re leaving your business open to changes at the whim of the 3rd party.” So we’re recommending, I think if you can handle it, is going direct through your own website. You may not get the traffic or the sales but at least you have that as a fallback all the time. So, there are two basic models of selling in an ecommerce platform. So we’re gonna leave the whole idea of selling on your own website because that could be its own webinar or its own series of webinars because there are so many things you could do. So, when we go to utilizing a third-party ecommerce platform, there are two basic models. You sell direct to the ecommerce platform or you sell through marketplace. And we’re gonna go to those in-depth in a few minutes here. There’s a lot of different combinations of things you can do. It’s important at this point to say there is no perfect, meaning that there are lots of different combinations of things you can do, each one has a tradeoff, an advantage, and a disadvantage. And we’re gonna talk to that and it’s up to you to really choose what you think is best for your product at this point in its life cycle. So, when you sell direct to an ecommerce platform, it’s selling to the ecommerce platform. You notice I have that word highlighted. And the opposite of to is through and we’re gonna talk about through as well. The operative word here is selling to the ecommerce website. This is a very old-fashioned-type sale, no different than when a product would call in a department store and you’d go sit at a desk across from the buyer and the buyer would buy your product, put it on their floor, and you would sell it to them, you’d bill them. That’s exactly what this model is. The sale is made and billed to an ecommerce site. The ecommerce site sends a P.O. to you whenever they need products, your company sends products to their warehouse, your company bills the ecommerce site, and everything else is handled by them. They handle the transaction to the end-user, the fulfillment, the communication, the payment, everything. Here’s an interesting statement, “74% of small business websites have no ecommerce component.” Now that’s kind of…I would call it a skewed number. There’s a lot of business websites that don’t have a product to sell to the end-user, they don’t want to sell, or they’re just informational. But the statement that it’s making is that the majority of websites don’t sell anything at all, they’re still in the mode of just selling direct to the consumer and their website may just be informational. The advantage of selling to the ecommerce platform direct is single-point billing. You send one bill to them as opposed to the consumer model where you’re billing each end user individually. It’s a quantity shipping, it’s not a one-by-one pick, pack, ship. The content is managed by the ecommerce website. You send them all your information about your products, they put it up there, they manage it for you, they promote your product, they fulfill your product, they return, they handle your returns. Returns is a very important aspect to consider if your product may require that. And we’ll go into that a little bit too. The disadvantage is that retail pricing is determined by the ecommerce website. Understand that they will price your product at whatever level they want to price it at. The margins may be shortened because you’re not selling through your own website, they’re making commissions, there are marketing fees. You lose control of the content. There may be typos on your content, they may have the wrong pictures, it does happen. But more importantly, the thing you got to understand is there’s a long process of getting product onto the website. They have to want your product, they have to invite you to sell direct. And that’s where marketplace will come in at some point, and we’ll go into that a little bit. But you have to have a demand of your product before they will bring it in direct. Now there are two methods of direct to the ecommerce platform. You can sell direct to them or you can sell through an in-country master distributor. I really want to talk about that word master distributor and the word distributor in general. A lot of retailers have marketing statements and say, “We’re a distributor, direct to end-user, at distributor pricing,” it just means they’re giving you discounts. A true master distributor will not sell to the end-user, they will sell only to resellers. So when you’re dealing with somebody that says they’re a distributor, you really need to ask them, “Do you sell to the end-user?” Here’s a very interesting comment here. Amazon has become the first stop for many people doing their research, more so than even Google, because you can see pricing right there, you see competitors. So, having your product on ecommerce websites may or may not translate to immediate sales but they’re wonderful marketing tools that you should take advantage of. So I call this direct/direct because the opposite of direct/direct is selling through a distributor direct. And direct/direct means your company deals directly with the ecommerce company. The ecommerce company sends you the P.O., you send the product, and you bill the ecommerce company. That’s direct/direct. The advantages are you get better margins than if you go through a distributor because the distributor has to take their profit and their marketing funds as well. And here you have a direct relationship with what they call the merchant or the product manager, and that is a person that will drive your sales for you on that ecommerce platform, so you really get to talk one-to-one to them. A distributor is somebody in the middle that doesn’t like you to talk generally directly to the ecommerce merchant because they’re talking to them. The disadvantages of direct/direct are you need relationships with each site individually. So you’re selling to Newegg, and you’re selling to Amazon, and you’re selling to Rakuten, and you’re selling to Walmart. You have to talk to each one of those merchants individually. And sometimes depending on how much time you have to do that, that may be a lot of work. You have to ship to each platform individually. So Amazon has upwards of 20 warehouses. When you would get a P.O. from Amazon, you have to ship the 20 warehouses. Then you have to ship to the Newegg warehouse. So you get the point? You’re really shipping to a lot of warehouses, it’s not just one pallet out. As opposed to a distributor, they’ll consolidate and do that, they’ll do that for you, you just consolidate your shipments to the distributor. And here you have to bill each company separately. So when we go direct through a distributor, the sale is made and the product is shipped to an in-country distributor. And like in the United States, there’s D&H and there’s New Age and there are all kinds of web distributors that sell to and we’ll do the fulfillment for you into any multiple ecommerce platforms. So, you’d now bill the distributor rather than each individual ecommerce platform, so it’s consolidating even more. The distributor can sell to multiple ecommerce platforms. That can be good and that can be bad. There may be platforms out there you don’t want to be on but generally, the distributor opens your product to everybody. And the distributor also in a foreign country in a global aspect would act as your foreign agent, they handle all shipments and billing to the ecommerce site. So they’ll handle a lot of the VATs and things like that for you. Re-sellers, distributors, value-added providers, and other types of channel partners can provide a wide reach for your business. They will get you places you could not get on your own, that’s the advantage. But they may take you places, sites that you don’t necessarily want to be on. And unless you’re a very, very large manufacturer, generally speaking, the rule is they send you everywhere because they can’t manage individual sites. So the advantage of going direct through a distributor is you have one location shipping or the distributor may have two or three warehouses, but you’re not shipping to 40 different warehouses. The distributor handles shipping to all ecommerce warehouses or direct fulfillment to the end-user. In a lot of cases, the distributors will ship the onesie-twosie pick, pack, and ships to the consumers on behalf of that ecommerce platform as well. The ecommerce platform never touches the product, they’re just the go-between to the consumer. The distributor handles billing to each ecommerce site. So, you bill the distributor, they pay you, they take care of getting billed by each ecommerce site themselves. So that removes you from that responsibility, and in some cases, it may be a collection issue, to all the different ecommerce platforms. And the distributor will distribute your content for you. Now a distributor will send out a very basic content portfolio for you. You really still can get better content out there. There are lots of different ways, we will talk about that on another day. Again, content is its own webinar in itself. So, the disadvantage of dealing with a distributor is decreased margins because they have to take their profit, they have their own internal marketing on top of the marketing in different ecommerce platforms. There’s a loss of control of which websites your product is placed on and, again, loss of control of the pricing. Once you sell it to them, it goes where they want it to go and it gets priced the way those ecommerce platforms decide to price it. The potential for channel and pricing does have a channel of conflict. I’m sorry. There is a channel conflict. So now let’s go to marketplace. Marketplace is like having your own store in a shopping mall. Marketplace is selling through an ecommerce site. The sale is made and billed directly to the end-user, and content is managed by the seller. So you’re basically renting a place on Amazon. And you can see here on the bottom, I have it circled, ships and sold by Dainzuy. So they will tell you, you’re not buying from Amazon, you’re buying from the supplier. The sale is made to the end-user whether you fulfill it yourself or use a third-party fulfiller, you are not selling to that website. Selling through the marketplace is placing your product on an ecommerce platform but not dealing directly with them. You have no relationship with Amazon or Walmart other than you’re paying them a commission. All the content and pricing is handled by the seller, which is you, not the ecommerce platform. So you have 100% control of your content and of your pricing and even your distribution, who you sell it to, who you don’t. The manufacturer handles fulfillment to the end-user, if you choose. Payment comes directly from the end user as the product is purchased, so you’re getting paid, essentially, by the end-user on a one-by-one basis. However, where the marketplace is, is important, it’s an audition for a direct relationship. If it is your desire to have a direct relationship with that ecommerce platform, once they see on marketplace your product is selling, they will contact you because they’re monitoring all sales. And at some point, if your product is selling, they will contact you and say, “We would like to offer you the opportunity to sell direct to us.” You may find that you like marketplace better, you’re making more money on it, and it’s selling well. You may not see the advantage of dealing direct, or you may. These are again individual decisions that you would make. So when you sell through, again, remember that word to, so now we have through. When you sell through the marketplace, you’re just using them as a vehicle to talk to the end-user and sell directly to them. The advantages are you retain complete control of content and pricing. Now this is a really interesting concept here. You have a direct relationship with the actual end-user and with that, you will get an email address and you can talk directly to them through email, add them on your email blasts. I think we’ve all bought direct from a manufacturer and then we got all these emails, marketing emails. It’s a great way to reach out to consumers, sell directly to them, have that one-on-one with them, there’s no middleman in between. The ability to market to the end-user directly means, again, you can send them marketing materials right to their email. It’s a quicker go-to-market. You will be on within a couple of days as opposed to indefinitely when you’re talking direct to the ecommerce platform. It’s built-in traffic, you’re getting all the traffic that that website can generate, and it’s less maintenance than a company-owned website. So, a lot of companies don’t have their own website, they have a place within one of these ecommerce platforms, that is essentially their website. And there are different ways you can do that depending on the ecommerce platform. The disadvantage is a commission is paid to the ecommerce platform, as opposed you don’t have a commission on your own website, you’re paying something to them. You have returns responsibility. Again, we go back to that returns. If your product has the potential for returns, if it doesn’t work, if it’s missing parts and it’s broken, you have to take care of that return. Generally speaking, on an ecommerce platform, they offer you the ability to give them an extra couple of points and in exchange for those points, you never see a return, they handle the returns and it never comes back to you. A disadvantage of being on a marketplace, just like being on a third-party ecommerce platform, you’re just one of many, many products and you’re placed with competitors. So which method is best for you? Do you want to go through these platforms, which is your own company website is considered through, you’re going through your site directly to the end-user or marketplace? Or do you want to just sell to a distributor or the ecommerce and let them take you to the consumer? You’re just selling to them and then you’re absolved of most responsibilities. What’s interesting here is what Nike had done, this is a couple of years older, as you see, but over the next three years, they plan to grow their direct consumer sales by a factor of seven. So they are selling through their own website, they’re selling through marketplaces because they see the advantage of talking directly to the end-user. So now let’s go to what I would call System Evaluation. System is your company and the product together. So we’re gonna start with evaluating your company, your product readiness, and your company readiness. There are two different issues here. With the product, you have to evaluate your strategic position, your marketplace position, the demand in different countries, different countries may have different demand for your type of product, and then the physical readiness of it. And the company readiness, is your organization ready? Do you have enough people to do all the things that you need to do to increase sales? Your product support…? Can you handle product support internationally and then distribution and fulfillment methods? Product Readiness So let’s go to Product Readiness first. Strategic product evaluation, this is really very high level. Before you even decide if you’re gonna sell globally, and we’re really talking globally here, everybody should be on domestically, it’s an incredible reach. But before you go globally, you have to decide how much after sales support does your product require? Is it technical? Will they need help hooking things up? Do you have a profit margin to support the additional cost of sale? When you go overseas, there is value-added taxes, there are all kinds of costs that you don’t incur here, can your profit margins handle it? The uniqueness of your product, have you done the research? Have you seen your competition? What do you offer versus your competition? If you go to all this expense to ramp up your company, are you competitive? And then your market positioning, where are you priced versus your competition, the market demand and your channel strategy? And again, you’re doing this globally, so you’re dealing with countries you may not know enough about their market, you have to do that research. This is an interesting comment here, “Gauging market size and demand can be difficult.” So there are websites, BuzzSumo, Google Keyword Planner. Before you make a decision to go, you should be looking into different countries, seeing how their products sell, what keywords they’re using on Google, to determine how you present your product and even if there is enough of a demand. So we go to the physical product evaluation. Does it meet regulatory requirements? Is the packaging sturdy enough to withstand rough handling? If spare parts are required, do you have a process and repair warranty process? So let me go into this a little bit because I come from the electronics industry and the electronics product is very technical. And there are lots of times we have direct out of the box failure or missing parts, the product is broken, and that can happen with anything. So you need to make sure you meet the regulations, is your product RoHS? If it’s electronic or which is the U.S. equivalent of Underwriters Laboratory. Your packaging will go through a lot more internationally than it will domestically. It’s being handled by more places. Is it sturdy enough? Have you had it tested? If somebody needs spare parts, do you have a process to send to them? And if they claim they didn’t get a part and you have to send them a part, does your profit margin handle the extra parts that you’re now sending out and the mailing costs to get them out there? And if they need repair or warranty, how are you gonna handle that in a foreign country? These are all issues that need to be addressed. Company Readiness So we’ll talk about Company Readiness now. Is your organization ready? Do you have an online ordering system? Everybody has been ordering online. Now, we’re all used to getting those texts instantly after we order in the email. Are you able to do that if you’re fulfilling from your own company’s website? Do you have a shipment tracking system for the end-user so they can see where it is at any given time? What about your customer service personnel inside your own organization? Do you have enough to answer questions? Do you have a texting system, some sort of communication system? Do you have a translation system? Most people want to do business in their own language and if you’re in the U.S. and they’re in Italy and they’re writing you service questions in Italian, you have to get that translated. Now there is Google Translate. There are services that weren’t available before that are now. Are you set up to use that? Your shipping personnel, do you have enough people in your warehouse, and what if your product takes off? I’d call it a good problem to have, but what if your product takes off? How quickly can you add parts into your supply chain to increase your production, to increase the demand? Because if all you’re doing is building back orders, you’re spending money not getting sales, and you could be doing yourself more damage. So you should talk to your suppliers if that’s the case that you’re in and ask them what would happen if you need an extra goods quickly. Okay, so now your product support evaluation. Is your user manual online in a PDF form that could be printed? It should be on your website even if you’re not selling on your website, your website should be the first point of defense for customer service. Are you in multiple languages? Have you had your owner’s manuals translated into different languages? Do you have a text chat for after sales service that accommodates foreign languages? And what if the product’s broken or they claim it’s broken? Are you gonna replace it? Do you want them to send it back first? Do you want them to send it back at all so you can evaluate that? Those are policies that have to be addressed before you make your decision. Distribution/Fulfillment Methods. So do you want to go through a master distributor? Do you want to go direct to the end-user? Do you want to use your own warehouses? Do you want to use third-party logistics warehouses? Do you want it fulfilled by the ecommerce site? Amazon has fulfilled by Amazon and most of them do at this point. What is your decision? That will come down to your own resources versus others, costs. There are all kinds of things you have to take into account. So before you decide to go, all of these questions have to be addressed. Conclusion So I want to close off. I think I saw some texts. I want to make sure that I get to those at the end of this because I didn’t want to interrupt, still kind of learning the system as we go. So in review, sales models, self-managed versus third party, do you want to do it yourself or do you want a third party to do it? Do you want the company direct versus the ecommerce platform? Do you want both? Those are your options. Product readiness, your strategic versus your physical. And have you evaluated all of those and company readiness? So you have to look at what sales model you want, is your product ready, and is your company ready? And now here are some considerations I want to put up for you. Again, is your product ready, is your company ready? What is your go-to-market plan? Before you execute, have a well thought out and written out go-to-market plan, share it with your organization, and then track it as you go. That is the most important thing is having it all written out because when you write it out, it’s been thought out, it’s been discussed. Shoot bullets at everything and see when it becomes bulletproof then you’re ready to go. Here are some recommendations. Marketplace may be and probably will be the fastest and least expensive way to market initially. Fulfillment through third party takes less internal resources and structure and they actually have the expertise you may not have. Your channel strategy is required before entering global ecommerce. Channel meaning, how many places are you gonna sell it to? How are you gonna control shipping, pricing, things like that? And you can overdistribute, which would mean price wars versus not enough exposure, you have to determine. My recommendation, start with a few products in a single market, on a single platform before you go all out. Here’s my Rule of Two. There are two choices when selling through ecommerce. You can either do it yourself on your own company or you can do third-party ecommerce platform. Again, you can do both, and you really should, but you have to make that decision. Two choices when selling through an ecommerce platform, either direct (and again, either direct/direct or through a distributor) or marketplace. And then you have two choices when selling to a third-party ecommerce platform. Either you go direct to that ecommerce platform or all of them, or you go through a master distributor. So in each case, there are really two options for you, and you can take both options. You can take either option, but it boils down to two choices in each case. And I liked that because it’s easy to remember. So with that said, that’s what I have here. I want to share with you my coming attractions. February, all of our ecommerce Basics will be the last Wednesday of the month at 10:00 AM Pacific time. The next one will be February 26th, Everything Amazon. After that, we’re going to have one with one of my colleagues talking about Feeding the Content Monster. The content monster is a huge deal, it’s supplying each platform with plenty of information about your product, tutorials. And I call it the content monster because you can never have too much content, good-quality content. We’re gonna talk about an April 29th, Fulfillment & Logistics. On May 27th, we’ll be talking about Beyond Amazon because there are lots of places to go and Amazon may or may not be the right place to start. They’re a monster. And there may be some smaller websites, ecommerce platforms, you can work with. And then on June 24th, we’re gonna be talking about VATs (Value Added Taxes) going global. Q&A So I think that wraps it up. Let me see if I can answer any of these questions, I didn’t have them come up. Here’s two chats. Okay. “Hi, Perry, I have a few questions. How do you deal with the issue of scammers who use other people’s stolen credit card information to make purchases on your own website? What is your take on the risks of selling to customers or if they ship to an address outside of the U.S.?“ Okay, I’m gonna answer that live and that is a gazillion-dollar question. When you go to internationally, there are problems with credit card fraud and there are companies that will actually help you with that, that you can be protected by it. So my recommendation is you should enlist an expert. I believe if you send us an email and, again, I have an email address. You can reach us through our website here, send us a note and we’ll follow up. I’m gonna actually make a note to follow up with you on that because that’s a good question, there are lots of resources, you shouldn’t do that by yourself. There’s things you can do to protect yourself though. And that’s a lot of times working with the credit card company. But scams are always a problem, especially when you go internationally, once that product is out of your sight, you’ll never get it back again. And so I don’t have an easy answer to that but we will get back to you on that. So I think that’s all, we have in questions. So I’m going to end our webinar for the day. Thank you very much. We’re recording this. I hope it was informational, I would look forward to any sort of feedback: good, bad, or indifferent. And we hope to see you at our next one. Thank you so much. About the Author Perry Goldstein has spent over 40 years in the electronics industry, in both the Consumer and Pro A/V sides of the industry. He is a pioneer of the ecommerce industry, working with ecommerce platforms since the advent of the channel in the mid 1990s. He has extensive experience working with Amazon since their entry into the electronics industry, as well as many of the biggest online retailers.