Top Challenges in Entering Into New Amazon Marketplaces

Top Challenges in Entering Into New Amazon Markets

When your Amazon business peaks, it's natural to want to expand internationally. There's undoubtedly a green field of opportunity in doing so. But it comes with substantial risks and challenges you must be prepared to face head-on. Before we dive into the challenges of new Amazon seller marketplace head-first, let's first examine how to lay the groundwork to start selling your products internationally.

The first step is to research the markets you're considering.

How to Pick the Right International Markets for Your Product Mix

Top Challenges in Entering Into New Amazon Markets

When evaluating new Amazon seller marketplace, there are seven factors to consider:

  1. Language barriers
  2. Cost of upfront investment & Customer Acquisition Costs (CAC)
  3. Market size and growth potential
  4. The urgency of the need for your product(s)
  5. The nature of the sales cycle
  6. The "evergreen" potential of your products
  7. Speed to market

Language Barriers

The challenges here are obvious. Considering adding Iceland as a market? Icelandic is among the world's most difficult languages to learn for non-native speakers. 

How much time do you want to spend learning Icelandic before you introduce your products? Maybe an extreme example. But the point remains: language barriers are a considerable challenge.

You will be communicating with authorities and organizations to ensure everything you're doing is above board. If you can't speak the local language fluently, you'll have to have someone trustworthy on board that can. And be confident the proprietary information they have won't be abused or used in a way that harms your business.

Cost of Upfront Investment & Customer Acquisition Costs (CAC)

It's true when starting any business - traditional brick and mortar or online. Excess upfront investment costs can kill momentum. The picture can be very different when exchange rates, geopolitics, and economic uncertainty play a role.

Let's take Australia, for example. If you had $20,000 to startup an Amazon business there, you would need $26,514 AUD. The exchange rate is currently $1.00 to $1.33 AUD. Can you protect that $.33 margin with consistency? Can you sink $20K into the business now and quickly recover that capital investment?

How confident are you that the Australian dollar will stay 1/3 more expensive than the US dollar? What if that gets worse?

Customer Acquisition Costs

It's vital to pin down your Customer Acquisition Costs (CAC). CAC is critical to long-term planning for any Amazon business. How does CAC vary with the exchange rate(s)? 

Can you reasonably benchmark the CAC you want to target in your new Amazon marketplaces? Do you need help doing so? Either way, make sure to pin this down to have a solid feel for how the money you spend leads to growth.

Market Size and Growth Potential

The first step in estimating market size is to have a clear picture of your buyer persona. It would help if you tweaked this persona for each market you explore. This practice helps to set the initial market size.

With clear personas, you can use online statistics databases like Dun & Bradstreet's Hoovers database and federal statistics from the country you're considering. Once you know how many people could be interested, it's time to consider competition and penetration rate. If a government body mandated your product, your penetration rate would be higher than if it's an impulse buy.

Once you know penetration rate, you can determine market volume and value. There's been plenty written on this process, so we won't get too granular here.

The Urgency of Need for Your Products

This one's self-explanatory. How urgent is the need for the product(s) you want to sell in the new Amazon seller marketplace? Does your product fill a gap? Or solve a difficult problem? Or, is it a luxury purchase?

The answers are how much urgency your customers will feel about your product.

Nature of the Sales Cycle

Sales cycles are volatile. The volatility level depends on factors unique to each country. It would be best to plan for your cycle to be unpredictable and do your best to control what you can.

That said, it's vital to determine what the "controllables" are. What can you manage daily to make the cycle more predictable? Which factors do you need to flow with because they aren't in your control? Outline these and isolate them. This practice makes it easier to focus your efforts in the sales process on things you can control. 

The "Evergreen" Nature of Your Product Mix

It's vital to consider how "evergreen" your product mix is when entering a new Amazon seller marketplace. It's more challenging to expand by selling disposable or single-use products.

Also, evergreen can refer to the demand for your product mix. Are you trying to ride the wave of a fad product in a new market? Or, are you bringing a product with a solid sales history and proof of longevity to a new demographic?

There's a difference here. Riding the wave of fads and single-use disposable products into a new market is difficult unless you have money to burn. Even then, the risks outweigh the potential rewards.

Stick with evergreen products whenever you can.

Speed to Market

All of these factors play a role in speed-to-market. The more difficult each roadblock, the longer it will take you to get to market. If the timeline is too long, a competitor will beat you to the punch. If they do, expansion may become a moot point.

Throughout the process, keep speed to market in mind and how each challenge you encounter affects it. If things become too overwhelming, it may be time to tap the brakes and revisit later.

If everything is manageable and you're staying on schedule, then full speed ahead! Once you've evaluated the opportunity, it's crucial to consider how you'll face challenges unique to your new Amazon seller marketplace.

Expansion Challenges to Consider

Top Challenges in Entering Into New Amazon Markets

There are four categories of challenges to consider when considering expansion:

  1. Business challenges
  2. Product challenges
  3. Logistical challenges, and
  4. Cultural challenges

Business Challenges

There are six business challenges you'll face when evaluating new Amazon seller marketplace for expansion:

  1. Organizational readiness
  2. Rebuilding brand authority & trust
  3. Understanding geographical differences in demand
  4. Price points
  5. Fraud risk, and
  6. Payment differences & currency considerations

Everything begins and ends with organizational readiness. If your organization isn't ready and equipped to face expansion challenges, you'll have an impossible road ahead.

Organizational Readiness 

How you determine your organization's readiness can depend on company size and structure, but most practices remain the same. The culture of the group working on expansion is important. How much change have they encountered before the growth? 

What have been the effects of these changes - both positive and negative? If the balance is positive, there shouldn't be much resistance to change. If the inverse is true, it's going to require some finesse to get things done.

With strong support, the nuts and bolts of updating procedures, policies, and expansion guidelines should be comfortable and straightforward.

Rebuilding Brand Authority & Trust

Building brand authority and trust is a tough task for any new business. It requires in-depth knowledge of your customer persona, and what makes them tick. It requires smooth collaboration among multiple departments with an equal stake in growth.

Rebuilding brand authority in a brand new Amazon seller marketplace is a unique challenge. 

While tasks may be similar, nuances make it more delicate than your native market. 

Cultural and language nuances, speed of adoption, and hesitancy to trust "outsiders" can all slow things down. Nimble navigation can be the difference between building trust in your brand and failing, which will kill momentum.

Understanding Geographical Differences in Demand 

Just because one product flies off of the virtual shelves in your primary market, that may not hold in a new market. Sometimes, potential customers in a new country won't have any interest in your product. Either because your product doesn't make sense to them, or it doesn't fit their lifestyle.

Other times demand has to do with preference. Preference can include color, materials, look and feel, environmental impact, and similar factors. Preferences vary depending on the new market's demographics: age and gender, ethnicity, average annual income, and education level.

Weather and climate considerations also matter if your product is seasonal. Your go-to-market timing needs to reflect this, so you don't drop at the wrong time and have lackluster sales. 

Setting Price Points 

There are many challenges with price points in new Amazon seller marketplace. Customer response to pricing levels can vary from your primary market. This reaction can be due to government limits on product prices and tax structures that make purchases tougher for the average consumer.

Some of these reactions can be hyper-local. Local regulations and requirements can be vastly different in some countries. 

These differences can lead to headaches when you're first evaluating a market, but with experience, they're easier to overcome.

With these factors in mind, you can set a reasonable initial price point for your product line. Like anything else, this could change in time and likely be tweaked. But that's part of the process.

Fraud Risk

With an expansion into more international markets, you're dealing with new currencies and increased payment processing. These factors lead to more fraud exposure. Hackers and criminals often are a step ahead of regulatory agencies and find unique ways to steal sensitive financial and proprietary information. 

They're getting increasingly sophisticated and continuously find new ways to defraud those doing business honestly.

It's intimidating, but take it as a reminder. You'll need to have systems in place to ensure financial and proprietary data is 100% safe.

Safety in the e-commerce realm doesn't come cheap, so plan for the resources you'll have to allocate.

Payment Differences and Currency Considerations

Everything we've discussed in these sections comes back to one thing: payment differences and currency considerations.

A deep understanding of the role currencies play in international transactions is essential. You'll need to know the payment platforms used across borders. Not everyone uses PayPal, Square, Stripe, or Venmo. 

Many people prefer specific payment platforms. These come with unique fee structures, levels of reliability, contractual formatting, and quirks. While it's best to keep your payment providers limited to avoid tracking nightmares, sometimes there's no way to avoid working with several at a time.

Make sure the mix is reasonable and something you can handle. Without having to hire an expensive accountant or financial professional to be your watchdog.

Once you have business challenges under control, the next step is to consider product challenges.

Product Challenges

There are two main product challenges to consider:

  1. Compatibility and restrictions, and
  2. Sizing and consistency standards

Compatibility and Restrictions 

It's important to consider product compatibility and geographical restrictions to prevent product design costs from becoming too high.

Different areas may have restrictions you wouldn't anticipate without in-depth research. The most common issues have to do with electrical power systems. If your product uses electricity, you'll need to make sure components are compatible with your new market.

Consumer safety brand marks are also good "safety proof" to have for your items. In EU countries, this is usually the CE mark. Compatibility is half the battle. Ensure city and federal governments don't have restrictions regarding your product type(s), so you don't waste time on compatibility without it being worth it.

Sizing and Consistency Standards 

Consistency of weights and measures is important.

The differences in metric and imperial systems will determine the labeling format. Usually, you'll be using metric. It's the global standard. There will be times when imperial measurements are preferred. International size conversion charts can be very helpful. Especially if you have a clothing brand, sell shoes, or items with one size for US customers and various sizes in other markets. Clearly stating sizes and offering sizing charts for customers to use as references is good practice.

Return rates can skyrocket, and seller ratings can drop if sizes are incorrect and new customers become frustrated. Frustration leads to returns. These returns affect your bottom line. Negative reviews quickly hurt momentum. 

Consistency can't be under-estimated. 

Consistency is one of the essential elements of an eCommerce shopping experience. You build a group of repeat customers by offering high-quality products. But that's just part of the equation. Your customers also want a seamless, predictable purchasing experience.

Find well-manufactured products to add to your line, so you don't run into any surprises from your contracted factories. But also provide a consistent, quality experience for your customers. 

They'll start to see you as a favorite place to shop.

Once you've tackled business challenges and have your product squared away, logistics challenges are next.

Logistical Challenges

There are four logistical challenges when exploring new Amazon seller marketplace:

  1. Fulfillment and shipping practices
  2. Legal and data protection issues
  3. Accommodating increased sales volume, and
  4. In-market customer support

Fulfillment and Shipping Practices 

When you explore new markets across borders, this is cross-border eCommerce. Cross border eCommerce comes with challenges. Two of these are fulfillment and shipping practices unique to each country.

This process can be complicated for several reasons, including:

  • Trade compliance considerations
  • Customs considerations
  • Wildly fluctuating shipping rates, and
  • Nuances surrounding order fulfillment which are unique to individual markets

To minimize headaches, it's smart to partner with a fulfillment company that focuses on fulfillment and shipping.

These fulfillment partners navigate more effectively than you will on your own. They may be expensive, but the expense is worth the problems they solve for you.

I would imagine you don't want to become an expert on fulfillment and shipping in every market you want to enter.

Legal and Data Protection Issues 

With the onset of the General Data Protection Regulation (GDPR) by the European Parliament and Council in 2016, there are new legal issues to consider when protecting your customers' data. These issues include what you can and cannot use to market your business across borders.

When your goal is to serve foreign customers, it's smart to separate product offers for businesses (B2B) from those you're selling directly to consumers (D2C). 

If you're selling wholesale to other businesses, making a distinction between B2B and D2C can make logistics easier. Customers in a new Amazon marketplace must have a clear understanding of what they're buying.

Accommodating Increased Sales Volume 

As you enter more markets, you should see an increase in sales volume. It's an excellent problem to have, but not one without challenges.

Order fulfillment is the most obvious. It's vital to consider your fulfillment systems' efficiency and the warehouse space you'll need in new markets to meet demand. Hooking up with a 3PL (3rd-party logistics) firm is a good idea. Especially when entering new markets with unique regulations and requirements.

If you can afford it, having a 3PL handle fulfillment and inventory management on your behalf is well worth it. With the increase in sales volume, there will be a need for localized customer support.

In-Market Customer Support 

As online shopping customers become more sophisticated, an expectation of bespoke, localized customer support is standard. You must prepare to provide in-market customer support to your new customers. This support must be in their language and align with cultural conventions.

Some elements include a local phone number, email support, and even live chat if you can make it unique to each market. Give your customers several options to get in touch when they have an issue. Localizing your website is one way to minimize problems. But infrastructure must be in place to make them feel heard and understood if a customer does have an issue. 

Creating comfort among your customers that their issues will be resolved builds trust.  And trust is the critical factor in developing consistent, repeatable business.

Even if you've prepared a great product, business structure, and logistics plan, if you don't have a strong awareness of cultural nuance, things could get dicey.

Cultural Challenges

When entering a new Amazon marketplaces, there are two cultural challenges you'll encounter:

  1. Geopolitics, and
  2. Cultural nuance

Geopolitics 

Have you heard of Brexit? I imagine you have. With the British government's decision to emancipate from the European Union, the face of economics in the country changed almost overnight. If you were a savvy eCommerce business owner, you prepared ahead of time for the fallout this decision would have on your business. If you weren't, well, you didn't. 

These types of geopolitical situations happen all over the world. Most aren't as impactful and heavily publicized as Brexit.

No matter the market's political stability, geopolitics, and globalization play a role. Political stability, ironically, can create more challenges than instability. Politically stable countries tend to have numerous hurdles for you to clear. Opportunities are less complex in less developed countries when market conditions are right.

Your competitors in some countries - especially China - may have direct economic support from the government. Before you decide to dive into a new Amazon seller marketplace, make sure you're not competing against a government-supported corporation. That battle would likely end in a loss.

Cultural nuance is important to understand. To show you're serious, you need to understand the unique norms and traditions unique to markets.

Cultural Nuances 

Reaction to and respect for cultural nuance plays a considerable role in how easily brands expand internationally. 

According to WebInterpret, more than 6,500 languages are spoken by seven billion people worldwide. 42% of people never purchase using a language other than their own. You need to communicate fluently in local languages, but nuance doesn't stop with language.

For example, when you compete in Chinese markets, there's a step-by-step process to build trust before initiating a business relationship. If you jump ahead and go in guns blazing, things won't end well. 

Having a cultural advisor on the ground makes things more manageable. They understand the progressions and build trust to help you avoid tripping up.

Types of Cultural Nuance 

There are three specific types of cultural nuance to consider:

  1. Individual vs. Collective
  2. Long-Term vs. Short-Term, and
  3. Emotional vs. Rational

In some cultures, individual liberty and desires outweigh those of the community. In these cultures, impulse purchases are common, and fewer decision-makers play a role before a purchase. The long-term use of products has a greater value in some markets.

 If your product isn't evergreen, you could be in for some tough battles to find market share. If it isn't, look instead for new Amazon marketplace where disposable or single-use products have a foothold.

Long-term versus short-term also relates to how long you'll be active in a market. In some countries, if there's an impression you're there for a quick fix, people will ignore your brand. Show you're in it for the long-haul to develop trust and loyalty from customers in these markets.

In emotional cultures, indulgence has value and a place. In rational cultures, the opposite is true. Value is in restraint. Think of this in a religious context. In more religiously conservative countries, fewer impulse purchases tend to happen, and vice versa.

In Conclusion

Top Challenges in Entering Into New Amazon Markets

Expanding into new Amazon marketplace isn't for the faint of heart. It's best to keep things simple and move deliberately. Do extensive due diligence to ensure the opportunities you take on are worth the challenge. 

With experience, these decisions become much easier to make. And, you'll find a pattern that leads to success, and also helps you to identify situations where potential reward doesn't justify the required effort.

With finesse and careful execution, the rewards are well worth the effort!

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