7.8 billion people.
As of the time of this writing, that’s the global population. Only 332 million of those people (about 4%) live in the United States.
Think about that for a second. If your business has exclusively operated within the borders of America, you’ve only had the potential to engage with 4% of our planet’s population.
Granted, we need to be realistic. Most people on the planet do not have purchasing power on the scale of the United States. Even fewer fall in your target demographic, and fewer still will ever be exposed to your products.
But even at the most conservative estimate, globalizing your ecommerce operation can increase your total attainable market by a factor of 15 or more.
Globalizing isn’t easy, of course. As the old truism suggests, if it were that easy, everyone would be doing it. Any business going international has some serious challenges ahead of them.
This post outlines the most significant challenges businesses face when going global and some strategies to overcome them. We’ll also cover some of the proven best practices of international inventory management and ecommerce.
Let’s dive in.
What are the challenges of global inventory management?
Getting visibility into all moving parts
Utilizing two sales channels may increase your inventory management complexity by a factor of three. But three sales channels may increase your inventory management complexity by a factor of five.
That’s because inventory management and ecommerce logistics are exponentially complex. Meaning, when you add multiple layers of logistics into your inventory management, it doesn’t just increase complexity in a straight line.
As you augment your business with more suppliers, vendors, markets, warehouses, sales channels, and employees, your “complexity multiplier,” if you will, also increases.
The more complicated and intertwined your business logistics become, the more critical it is to have a single source of truth. In the world of inventory management, this is your inventory management system (IMS) or warehouse management system (WMS).
It’s already a massive headache to try to manage domestic inventory logistics with manual processes. That is, manually updated Excel spreadsheets, email chains with suppliers, and par levels scribbled on scrap paper somewhere.
Entering global markets without an IMS is a fools’ errand. There are so many unpredictable variables in dealing with overseas assets. You must have a single source of truth where stakeholders can have clear visibility into all moving parts.
The importance of this will crystallize further as we move through subsequent globalization challenges.
Sales forecasting on a global scale
Everything important in domestic inventory management is ten times more important in international inventory management. Why? Because, unless you’ve got warehouses in every geographical region you’re serving, you’re shipping product very long distances.
That requires two things: money and time — things that no ecommerce business owner is keen on wasting.
Therefore, costly mistakes in domestic inventory management become crippling mistakes in international inventory management.
One of the best ways to avoid hemorrhaging resources is to lock down your sales forecasting.
Sales forecasting is something we talk a lot about at Linnworks. We’ve seen it first hand: ecommerce businesses that fail to plan are planning to fail.
IMS platforms like SkuVault Core will aggregate all of your sales data (across all markets and channels) and create sales projections based on historical data.
Accurate sales forecasts not only help you plan financially but also helps you make data-driven decisions on when and how much stock to order from your suppliers to meet demand.
But we’re talking about entering new markets. What good is historical data from customers in New York when we’re about to engage prospective customers in Europe?
Using historical data is a good starting point, but it will undoubtedly need tweaking. As you spend more time in the market, you’ll better understand your international customers’ cultural and economic nuances.
Finding reliable suppliers and manufacturers
Expanding to international markets often means you’ll have an even deeper dependence on third-party suppliers, manufacturers, and distributors.
Not every country has the same standards of excellence as the US. Locating reliable international entities for your supply chain is your first challenge. Then you also have to thoroughly vet them to ensure they’ll be able to accommodate your needs and not introduce problems or delays.
As we move into the best practices section of this post, we’ll talk about the importance of laying the groundwork of some market research and unearthing best practices from consultants and other experienced organizations.
Longer transportation timelines and bloated supply chains
Inevitably, your international supply chain will be contingent on more third-party entities than your domestic supply chain.
Not only do you need to deal with customs, potential additional taxation, and other factors not present in domestic supply chains, you may be dealing with those things across cultural and language barriers.
Longer and unnecessarily bloated supply chains have a higher likelihood of introducing human error. They usually also result in more extended timelines for the product to get from the manufacturer to the end-user.
This could result in poor customer experiences or unacceptably long shipping times.
Offsite storage and associated overhead
You may realize that the extended lead times of manufacturing, processing, and shipping product overseas is unacceptable to your customers.
Like customers in the US, international customers have also become accustomed to fast shipping times and expect the same from your business.
If you see a high enough demand in international markets, it may necessitate installing a warehouse or storage facility locally in that particular country.
International storage facilities come with a whole host of complications. You’ll need to:
- Staff the warehouse with trustworthy employees
- Ensure you’re abiding by all laws, taxes, and customs regulations
- Monitor your financial metrics to guard against inflated storage costs
On some rare occasions, it may be cheaper to store your product internationally than domestically. This is a win-win situation. Your product is situated close to your target market, and it costs you less money to hold it there.
Language and cultural barriers
All things being equal, it’s far more preferable to expand into a market that speaks English (or your organization’s first language).
Think about all that’s involved in moving to a country with another language. You have to:
- Work with a localization expert to translate all your website copy, labels, and marketing material
- Study the cultural milieu so as not to offend, off-put, or otherwise turn away your target customers
- Hire, train, and install warehouse employees of another language
All of this is possible but very costly.
But sometimes, ecommerce business owners don’t have this choice.
You can’t control if your product is going gangbusters in the Chinese market. Maybe there’s a lot of traction there (and, therefore, a lot of potential revenue).
At that point, you need to decide the following:
Is it better to harvest these fields and take on the additional complications of localization, or are these costs simply not worth it?
Taxes, import laws, and currency conversions
ecommerce business owners are often visionary people. As such, it’s soul-crushing for them to deal with the “death by papercuts” details of international laws, customs, and taxes.
There are so many legal ramifications of international commerce, and each of these varies across countries. It’s not unheard of for businesses to enter global markets only to realize that they’re losing money on taxes and import costs.
The only way around this is to hire help, likely a consultant or accounting expert with a specialization in commerce in that particular country.
Another good (and potentially cheaper) option is to dig into other ecommerce operations in adjacent industries that successfully broken into this market.
Offer to pay them for a consultation, maybe buy them lunch if they’re local, and pick their brain. Most times, fellow business owners are more than happy to share their mistakes and how you can learn from them.
What are some best practices for inventory management on a global scale?
Conduct thorough market research
If there’s one thing you take away from this post regarding scaling your business to a global level, let it be this.
Do not even think about entering into an international market without thorough market research to ensure (or at least confidently predict) a positive ROI for your efforts.
For many small business owners, “market research” sounds like a scary, unapproachable concept reserved for the corporate elite. Let me clarify: we’re not saying you need to hire a top market research firm and spend a small fortune on a 100-page report.
Sure, if you have the resources to do that, it may be a drop in the bucket compared to how much money you could gain in a successful market pivot.
But there are less formal, “scrappier” ways to do market research. For example, you can run targeted Facebook ads aimed at customers in particular countries and study the analytics of how they perform.
You can have a translation expert spin up a basic landing page in a particular language, redirect traffic to that page, and study your web analytics on how it performs.
As mentioned in a previous point, you can thoroughly study other ecommerce businesses to learn from their mistakes. Many ecommerce business owners are happy to speak with you and share their own best practices in breaking into international markets.
However you do it, whether you hire a firm to do market research for you or “piecemeal” your research together, extensive market research is an absolute must before executing your international inventory management strategy.
Hire local consultants to understand best practices
A strategy that’ll save you a ton of headaches is to hire a consultant with expertise in country-specific commerce practices.
But how do you find these folks?
Thanks to the internet and the gig economy, there are several platforms for connecting with experts. For example, I searched the reputable freelance site Upwork for “Brazil commerce.”
I found several experts with successful job ratings and a reasonable hourly rate.
Another excellent option is the site Clarity.fm, which allows you to book consulting calls with experts on almost any topic.
On this site, I again searched “Brazil commerce” and found at least half a dozen hireable experts in Brazilian ecommerce and market research.
An investment into these conversations is essential as part of your market research and global market strategy. It can help you disqualify markets as bad fits or uncover some pro-tips for how to maximize ROI in a given international space.
Understand and leverage seasonality and holidays
If you’re the type of ecommerce store that sells seasonal items, you’re used to fluctuations in demand. But how would it impact your business if you could sell seasonal items practically year-round?
For example, let’s say your designer swim trunks are your consistent best-sellers in the summer months. That’s to be expected.
But then you realize that in Australia, the summer months are from December to February. While your American customers bundle up in the snow and your swim trunk sales dry up, Australians are on the beach in t-shirts and shorts, putting shrimp on the barbie.
Crikey! Now you can sell your swim trunks domestically in the summer months and internationally to Australian customers in the winter months.
Of course, this is assuming you have robust demand forecasting tools like those built into SkuVault Core. Otherwise, you’re just flying blind.
This is a prime example of how expanding into international markets can elevate seasonal items into evergreen status, thus beefing up your revenue and creating more consistent sales cycles.
Visualize your supply chain timeline and price in lead times
For each market, there will be different lead times. This is inevitable, as you have to transport products to meet customer expectations and not break the budget.
Sticking with the previous example, the supply chain of getting swim trunks to Australia vs. domestic sales will be much different. There will likely be higher costs, longer lead times, and potentially higher storage overhead for your international sales.
Business owners must factor all of these things into their product pricing as well as when to reorder product from suppliers.
Thankfully, IMS platforms like SkuVault Core automatically compute demand forecast data to create intelligent reorder points. As an administrator, the system will automatically remind you of when to reorder to meet international demand.
Don’t wait to globalize
Sometimes it can feel irresponsible to expand into international markets before you’ve exhausted all of your “market runway” domestically.
But as we’ve alluded to above, you may have a raving audience just waiting for you in an international market that can scale your business faster than in your home country.
Every business owner needs to make this call for themselves. But don’t think that you need to wait until you’ve sold everyone in your hometown before crossing international borders.
Integrate all your systems with your IMS
Moving to global markets will likely mean adding new technology — things like POS systems, supplier interfaces, your sales channels, and more.
Thankfully, SkuVault Core integrates with just about every 3rd-party ecommerce technology you could ever need — including those necessary for expanding into global markets.
If you plan to go global, you need an IMS to track. It’s truly the heart and soul of your international inventory management strategy.
We’ve designed SkuVault Core to help ecommerce business owners track all aspects of their inventory management, integrate with all their systems, and provide a single source of truth on the health of your business.
We’d love to show you how SkuVault Core can come alongside you to transform your international inventory management and help you find sustainable success in global markets.
Reach out to our team for a live demo today to learn more.