This number will surprise many, and quite frankly it should. Direct-to-consumer brands by their very nature are borderless. They are digital first, with their webstores and social media presences opening them up to a global audience from day one. Yet only half are shipping orders to their European followers. Let’s look at some of the reasons why:
*these numbers come from our database of the top 1,000 global DTC brands. We’ll be releasing more snippets over the coming blogs. Stay tuned to read more.
Here are the main six reasons they are missing this opportunity...
1) They think Europe is too small
European ecommerce is smaller than that of the US, but the two are much closer than many think. With sales approximately 70 percent the size of the US. That’s clearly a massive market to be ignoring. Many will say they simply don’t have the money available to target and market to European shoppers. However, when we analysed the web visitors for those US DTCs not shipping to Europe, we found that on average 18% of their website traffic today is from international visitors. That’s 18% extra footfall without doing any marketing. That’s a potential 18% sales uplift without really trying.
2) They think Europe is too fragmented
From many an outsider’s point of view, Europe is seen as complicated because it is made up of many individual countries. Each with their own individual languages, cultures, shopping behaviours etc. Many with international ambitions simply get stuck in the state we call ‘analysis paralysis’ and progress no further. The truth is that Europe is much closer to the US than you think. A US State operates in very similar ways to a European country. Culturally the two are alike, both with a high influencer driven culture and shopping behaviour. While many individual languages exist, English language is highly prevalent. [According to a survey published in 2006, 13% of EU citizens speak English as their native language. Another 38% of EU citizens state that they have sufficient skills in English to have a conversation, so the total reach of English in the EU is 51%.] And let’s not forget the popularity of American brands.
3) They believe you can reach European shoppers through retail partners or distributors
Many US brands do take this route to serve their European followers. However, as we know probably the key success factor of DTCs is the fact they are direct. Without they sacrifice building loyalty with customers and perhaps more importantly a huge slice of margin. Many who have initially gone down this route have struggled to end relationships in favour of the direct approach. Effectively having to start from scratch and forcing many loyal buyers to their competitors still stocked by their retail partners.
4) They believe there are too many legal complications shipping to Europe
GDPR compliance, tax and duty rules scare off many US retailers. In reality the US is probably more complex with its state level tax and data privacy rules. In the US each state has its own Data Protection Directive, such as the California Consumer Privacy Act (CCPA), which is similar to the EU GDPR. In Europe GDPR governs all European Union countries. It is understandable that an outsider would be intimidated, but there are many European advisors available who specialise in setting up local entities to ensure compliance. This isn’t an expensive or time consuming worry.
5) They think it will cost too much
Offering every local language, currency, payment option etc. will be costly to reach every European consumer. The key is balancing localisation versus return on investment. Start with your biggest potential markets (you’ll likely know this already from your web visitors), and go from there. The traditional expansion route taken by many US retailers historically has been via the UK. With a shared language and closely aligned culture reducing risk. As mentioned earlier, the prevalence of English language means you can reach 50% of European shoppers with a single language website to start with. Worry about further localisation as your business grows.
6) They think they can just ship everything from the US
For the majority of startups the answer is yes. If you see more than 10% of visitors originating from Europe you should take action to capture that audience with easy steps such as attractive & fast shipping and easy returns (without these in place you'll be putting off everyone expect the most determined of shoppers).
Take this as your starting point. As both visitors and sales from European shoppers begin to increase, further localisation is needed. One of the biggest questions many DTCs ask is at what point does it make sense to have stock physically located in Europe? Unfortunately there is no one size fits all answer. But consider this, once the annual shipping savings for European orders equate to one of your team members salaries, you have hit the point where the move is financially viable. This doesn’t necessarily mean having all your SKUs located in both the US and Europe. Depending on the size of your SKU range it can make more sense initially having only your most popular product lines located on both continents.
If you’re a US based DTC who is thinking about how to tackle your European expansion, or if you’re struggling with your current solution – get in touch. We can help you run the numbers, work out your best expansion paths, and choose the most cost-effective routes.