The internationalization of the “small” through the marketplaces

19-03-2018 | Brenda Rodríguez López

In this global scenario characterized by the constant change and hyperconnection of the population, entrepreneurs are increasingly asking themselves if they should sell their products or offer their services to clients outside the borders of their country. Internet has opened the door to the companies internationalization, e-commerce offers the necessary tools to carry it out and digital transformation is giving the final push that companies needed to do it. Companies can now overcome geographical obstacles easily even if they are small or are starting a business project. On their way, they are revolutionizing local and international trade models.

 

The 75.6% of Spanish businessmen and experts consider that the innovation that comes with the digitalization of production models is key and necessary for the internationalization of Spanish companies. This is the percentage that is included in the last report published by the Consenso Económico- PwC that corresponds to the first quarter of 2018. This document also shows that 55% of the survey respondents hold that, in this context of digital transformation, the Internet and e-commerce platforms are removing from the equation elements that were previously crucial when valuing the internationalization of a company such as distance or scale, something that is forcing companies to revolutionize their business practices.

One of the most significant changes brought along with the arrival of the Internet and the development of e-commerce platforms is the transformation of distribution laws and their influence on the change of the rules of the game in international markets. Companies can now reach a wide and heterogeneous public, without having to make a great bet on investment, opening a physical store in other country or reproducing their complete business model abroad. They do not even have to travel to a state to be able to trade in it. These factors have not only affected on the increase in business profitability or the access of different actors to new markets, they have also made possible for companies that they no longer focus so much on selling a limited number of products for generating large profits. The offer is now extensive and specialized according to a model based on the "Long Tail".

Marketplaces, the showrooms of the “small”

A marketplace is a kind of a digital street market or an online shopping center that concentrates supply and demand and where it is possible to carry out commercial transactions. In a space where the client can buy the product from a seller without the need to "stop over" on the online store, even less in the physical store. In short, they are platforms that act as intermediaries between sellers and buyers. Among the most influential marketplaces we can find examples like Amazon, Ebay, AliExpress, Google Shopping, Rakuten or Pixmania. Its great appeal lies on that they are well positioned websites with a lot of traffic that usually also have extended catalogs of products, therefore, it is easy for any small business to find a space in them.

We are aware of the benefits and opportunities that this connected world sets out, but achieving the internationalization of your brand and reaching clients abroad when you are a modest business does not seem so simple. Of course, there are many factors that the entrepreneurs should take into account when considering this alternative, but marketplaces have been a lever in the entry of these kind of actors in the international market. Thanks to these spaces, it is not necessary to have a large budget, nor to develop a complex business model to land in another country, this doesn’t even have to be an important channel for the business distribution. The own platforms often offer the possibility to carry out the logistics of collection and delivery themselves, which is also a great advantage for small businesses.

The internationalization of the “small” through the marketplaces

Why betting on a marketplace?

Marketplaces are not only designed to facilitate the entry of modest companies and small businesses into e-commerce. Any company can use them as part of its internationalization strategy, also as a strategy to test a product in the market, reaching a digital consumer profile, expanding the distribution network, serving as an additional showcase or liquidating stock. Although, the smallest will be the ones that benefit the most from the use of these platforms; because the more they sell, the more they will grow and the more they will see their profit margin reduced. Although it is paradoxical, the more these brands sell, the less profitable it will be to place their products on these platforms. This model is perfect and appropriate for starting, but being aware of its limits or considering it as a strategy that if it is successful, in many cases, it will require a revision in the future.

On the other hand, before considering the possibility of entering a marketplace, it is necessary to do a previous work and take into account aspects like which markets you want to enter, what type of platform is the most appropriate to do it, what marketplaces fit with our product, what index of returns do these markets have or what are the different regulations and legal issues contemplated by the platforms. These digital spaces present great advantages over other channels like the reduction of infrastructure, banking or data management costs, their convenient and simple use, the reduced logistical effort required, the savings when advertising products (the own marketplace does it) and the synergies that are generated (like the possibility of doing cross-selling).

But entering in a marketplace also sets out disadvantages like the high competition, the reduction of the profit margin, the constant price revision in relation to the rest of the platform's products (sometimes the price of your product on it can even compete with yours in the offline world) and the little freedom on the image management. In the marketplace, therefore, it is very difficult to stand out from the crowd, the relationship with the customer will be key to distinguish a brand from the rest. Customers usually prioritize the good management of product deliveries or returns, before other issues such as price. Customer satisfaction affects good opinions and these ones achieve new customers.

At the CEU IAM Business School we bet on the training of professionals who are capable of carrying out a good marketing management in the offline and online world at any level, both nationally and internationally. Precisely because of this, we have designed an International MBA in Marketing Management with which you will not only have the opportunity to acquire a global strategic vision, but you will also learn about the experiences of the big brands and startups told by their own protagonist, because at some point they were also "small".