In 2017, I hopped on a plane to Philadelphia, PA with the goal of launching my ecommerce business in the US market. The process of discovery that summer - of having to re-test all my assumptions about my business - was like starting out all over again. It was exciting and a huge amount of fun.
To this day, I am often asked by British ecommerce friends and contacts about how I did it and what advice I would give to others wanting to sell to US customers. They usually find my first response quite surprising, because I ask them: "Do you even need a US presence at all?"
I'm not questioning people's legitimate and positive desire to sell to new customers. What I'm highlighting is that there are two ways direct-to-consumer (DTC) brands can reach these customers: either from within a target market (by launching a version of your business which has some kind of physical and legal presence there), or simply by shipping internationally from an existing website and base of operations.
This is a choice faced by US brands too, and is potentially more pronounced, because of the smaller size of foreign markets relative to the massive home one.
The simplest way to reach an international audience is to sell from your existing base in the US. Your marketing and advertising tools can be run remotely after all, and it should be easy enough to add £GBP as a currency option to your website. Fedex, DHL and most of the major shipping carriers will offer reliable international shipping to most destinations.
Just make sure you levy a high enough shipping fee at the checkout to cover your costs, and warn your international customers that they may be subject to customs duties when their package arrives in the destination country.
The main advantage of staying put is that it allows you to use your existing logistics infrastructure, whether you fulfil orders through your own location or use a third party logistics (3PL) company, operating a single inventory location rather than managing two or more.
Managing two or more inventory locations is a real headache. You're going to run out of particular stock-keeping units (SKUs) in one location while having too much of it in another. You'll probably want to launch new products as soon as they're received in your home location, while international customers wait, leading to potential discrepancies in marketing messages. You'll have to work closely with your 3PL(s) to make sure it's clear who's responsible for fulfilling which orders for which locations.
One of the hardest things to do well in ecommerce is predict demand and plan inventory accordingly, and with multiple inventory locations you've made your job even harder. Selling from your existing US base avoids this.
It’s also helpful to at least test the water with the international market by shipping from your home location. ‘Early adopter’ customers from abroad have often sought you out specifically; they tend to be more patient when it comes to shipping times and can give you helpful initial feedback.
The obvious downside of staying in the US is with distribution. Either you or your customers pay significantly more to ship internationally, packages can take a lot longer to arrive and face administration, duties and tax charges when crossing borders.
In today's world with politicians growing more sceptical of free trade, these barriers are in some cases getting bigger not smaller.
These obstacles make the majority of customers hesitant to order from abroad. It’s a hesitancy which can be overcome by shipping your products in bulk to a UK location (probably a 3PL like Eirios), ready for final delivery to the end consumer at the point of order. Your customers will pay far less for in-country shipping and completely avoid the headache of their order going through customs, as will your customer service person/team.
The very act of setting up a base in the UK is likely to orient your business far more towards the needs and preferences of British customers. Perhaps you'll designate someone in your organisation who's specifically responsible for managing that UK operation, from logistics to marketing.
As you grow, you may want a version of your website dedicated to a UK audience, with tailored offers, pricing, shipping and delivery information. This offers a much better experience for your foreign customers. It's also easy to designate orders from each website to different 3PLs to avoid any overlap.
The decision of whether or not to go for a UK presence can be helpfully considered as a product of two variables.
Firstly, for ecommerce businesses with annual revenues below $1 million, it’s unlikely to be worth the effort at this stage, and they should continue to focus on growing their domestic audience while serving occasional UK customers from the home market.
The second variable relates to the number of products you sell. Brands with a high number of SKUs will need to devote more resources to managing two inventory locations and are more likely to find themselves in the frustrating situation where certain products are available in one location but not the other. These high-SKU brands may still be ready for a UK presence, but will probably want to first hit a higher revenue level compared to low-SKU brands.
In short, low-revenue but high-SKU brands should sell to UK customers from their home location. Higher revenue, low SKU brands have a much stronger case for requiring a UK presence.
Consider the above chart a rule of thumb. Of course the decision will be bespoke for every business, and you may have additional reasons for considering a UK presence early in your development, such as a high number of existing British customers or your product’s manufacture already taking place in or close to the UK. Perhaps you're thinking very long term to a time when your brand is bigger, or are looking for product or marketing insights that only direct exposure to the UK market can give you.
The chart also applies specifically to US businesses, where there's more potential to reach that $1m revenue figure from within the home market before venturing abroad. There's a stronger case for a Canadian brand, for example, launching in the US or UK much earlier than this.
You may also just love the idea of visiting Britain to launch your brand. And with the dollar so strong right now, the costs of things like fulfilment service and shipping costs in the UK may feel especially good value.
