One size does not fit all. In this day and age, highly divergent markets have prevented companies from adhering to one fixed formula. When setting out to conquer a new business environment, companies must reengineer their structure and align their business models to local market imperatives in order to remain relevant to end consumers.
As the world’s largest and most populous continent, Asia is also home to some of the most rapidly emerging ecommerce markets on the planet. According to the Goldman Sachs Next 11 Report, six out of the 11 countries that have the most potential of becoming the world’s largest economies in the 21st century are located in Asia. This list excludes the BRICS emerging national economies: Brazil, Russia, India, China and South Africa. As a result, these findings seem to suggest that Asia may have the most potential for economic growth and long term stability for investors. Asia, then, may offer investors the most lucrative packages in terms of economic potential and prosperity.
Conversely, popular products among American consumers do not always translate well in other countries. With consumers from different cultures and regions behaving distinctly from one another, it becomes incredibly challenging for businesses to succeed in Asia, despite it a being a highly profitable market. This particular market has often led to a long list of global brands and ventures who’ve failed miserably. For instance, businesses such as Best Buy, Walmart, Carrefour, Costco and Home Depot were all major corporations in America, but also took huge losses in Asian countries. What could be a combination of arrogance, failure to localize, poor timing and cutthroat competition is what ultimately led to their downfall.
Understanding your niche market
A few businesses were able to learn this concept early on and utilize their applied knowledge to customize their products for their target market. For example, LG TV’s Indian market created a tailored TV that included a built-in cricket video game with amplified sounds because many Indians are known for their love of cricket. In addition, LG concentrated its efforts on customizing its TV on-screen-displays and manuals in over 16 different languages due to the fact that India has over 16 official languages.
People in Russia, a key emerging market, are more likely to entertain guests indoors during the harsh winter seasons. LG developed a popular karaoke phone that can hold more than 100 Russian songs. The phone was a hit, and sold over 220,000 units. In China, many refrigerators have a larger freezer at the bottom and a smaller compartment at the top; this is because Chinese consumers like to store foods and meats for the winter. WhiteGoodsco has designed a nest style of refrigerator with a refrigerating compartment on the top, which has reduced the frequency with which consumers have to bend to get food. They have also designed refrigerators with large volume freezer compartments and smaller refrigerating compartments for the northern Chinese markets, which reflect the habits of storing food in the freezer during the long winter season, whereas consumers in the south are more likely to shop for fresh produce on a daily basis at one of the many street markets and have a greater requirement for cool fruit and vegetable storage.
It is possible to have a thriving business in Asia, but it’s important to truly understand your niche market. Knowing how essential translation and localization are to ecommerce success is key. To succeed in foreign markets, translating websites and brochures are not enough. Businesses need to consider changing their approach and even their products, but they first need to think outside the box. Brands need to be able to speak the same language as their audience; because each culture and region is just as unique as its language.
Identifying the differences between East and West
The family and cultural principles of Asian countries and the United States differ dramatically from one another. Each region has its own unique set of standards and expectations. Consequently, it would be difficult to explain the values of Asia as whole, but rather, easier to explain the values based on each country.
Let’s say your if your computer or printer is broken, it may take up to a few weeks to repair. In Korea, a technician can come to your house the same day and fix it within minutes. Charges and fees? It’s completely free, as long as the product is still under warranty. In America, there are only a few businesses open 24 hours a day. In Asian countries, not only are the convenience stores open 24 hours in residential areas, but almost every restaurant delivers throughout the night for no additional charge.
Another example is the moving services in Korea. On the day of my move, I could carry out my usual daily routine and return to a fully furnished house. Within a day, all of the furniture, rugs, beds, drawers, closets even the picture frames and clocks were placed exactly where they were supposed to be. Yet when I moved in the USA, I spent almost the same amount of money on purchasing moving supplies alone.
Many know of eBay’s infamous attempt to dive into three of Asia’s major markets utilizing one sole business model. This gaffe proved costly, as eBay received three very different results for their singular effort, and this taught them and the rest of the world that you cannot succeed on a macro level unless you understand your market at the micro level. Grouping entire nations together because they reside on the same continent will always yield unwanted results. eBay is an excellent example to demonstrate the reaction of each domestic player, the varying results and how each country is diverse. eBay first entered the market in February of 2000 and at that time was already successfully operating in 19 other major countries. The 21st century is the century of globalization, and eBay was determined to be at the forefront. Although the Japanese portal Yahoo! Japan was doing an auction service, eBay assumed that Japanese consumers would enjoy the global standard service as well. The first challenge eBay faced was fees for its users. Traditionally in Japan, sellers have more power than buyers. For instance, in real estate, landlords in the US will pay all of the broker fees and tenants only have to pay first and last month’s rent in addition to a deposit. In Japan, tenants have to pay three months of rent, a deposit, any broker fees and sign a letter of appreciation. In some cases, many foreigners even have to pay the entire year’s rent up front in cash. In Japan, the online auction seller is not required to pay a fee. Sellers can cancel bids at any time before the auction ends if the bidders are new and have little to no reviews, without acquiring penalties. However, eBay tried to keep their guidelines simple, stating that sellers would pay all fees. They believed that this concept would be welcomed by consumers, but there were not enough sellers or goods.
The second issue that raised concerns were payment methods. eBay required credit card information to open an account; however, credit cards were not as common in Japan as they were in the United States. Instead, in Japan, there were other unique payment methods. One excellent example is cash on delivery. Using this method, the buyer could pay the delivery man directly for the item they ordered.
Another unique form of payment in Japan is called Convini, referring to convenience store transactions. Convenient stores play a large part in the everyday life of Japanese consumers. As you may have seen if you have ever visted Japan, there are 24-hour convenience stores on virtually every street corner. These stores are more than just places to buy snacks and household goods. They act as mail boxes, post offices, banks, restaurants and pharmacies. You can buy movie or concert tickets, pay utility bills, make wire transfers and send and receive packages. Those in Japan prefer this method because it’s efficient, inexpensive and quite literally more convenient. Most of all, you don’t need to give your personal banking or credit card information to the seller. Last but not least, eBay neglected to implement customer support in its Asian initiative. Japan is widely renowned for the quality customer service they provide. Even for online purchases, real time telephone services were available. eBay was not ready to make the appropriate changes to their service to accommodate their target market. As a result, eBay gained only a small share of the Japanese online auctions market and in 2002, withdrew from the Japanese market altogether.
Korea takes the win
Although the American multinational corporation struggled in Japan, in January 2001, eBay merged with the biggest ecommerce company in Korea. One of the first decisions they made was to change their existing URL and interface to the same global eBay logo and interface. However, there was high resistance from Korean executives. After much debate, they agreed to hire a marketing firm to conduct a customer survey. Results divulged that Korean customers preferred the Korean style better. Soon after, eBay announced that they would keep the Korean URL and interface. The second dilemma the company encountered was the matter of fee structures. Korean fees were a lot more complicated. On top of the base fee, sellers could choose different premium listings. As a result, the first two pages displayed only premium paid listings. eBay headquarters thought clients would prefer simple organic listings. This time they pushed harder and made their website visually cleaner, ignoring the recommendations of local executives. eBay executives were surprised to learn that the new site not only reduced advertising income but also the number of visitors. Comparable to a shopping mall, the busier shop would get more attention. Again, the Korean staff proved that they were correct and headquarters had to follow the local office’s decision. With the help of Korean staff members, the company successfully remained as the top auction site in the Korean market.
Having the home advantage
With a strong presence in multiple international markets, eBay instinctively replicated their standard business model and headed for the Chinese market in hopes of becoming the leading consumer-to-consumer online trading platform in one of the world’s fastest growing economies. Unfortunately, assuming homogenized consumer needs do not always translate well in a foreign business environment. Unaware of home-grown rivals, the ecommerce giant was blindsided by up-and-coming competitors who catered to the needs and wants of locals. In particular, Alibaba.com, a dominant marketplace that facilitated business-to-business retail, launched its own consumer-to-consumer platform to fend off eBay’s intrusion into the Chinese online economy. Eventually, the lack of localization strategy resulted in eBay’s withdrawal from China’s online auction market in 2006.
In 2003, TaoBao, an affiliate of Alibaba, emerged onto the market with a vastly different business model compared to eBay. While TaoBao offered a no-transaction-fee model, eBay continued to drive Chinese customers away by upholding the position that quality services do not come free. Years later, eBay reevaluated its payment policies but it was already too late into the game to turn the tide. Already in a favorable position, TaoBao went on to introduce an instant messaging interface, allowing buyers and sellers to communicate in real time. With about three hundred million cellphone users in the nation, the Chinese population was greatly receptive to this service, which allowed the immediate receipt of acknowledgment when participating in online transactions.
With the rise of online business ecosystems, various forms of online payment solutions also began to come onto the scene in order to conform to evolving consumer behavior. In particular, Alibaba introduced Alipay, an online payment and escrow service. Prior to the adoption of digital-based wallet, the sole universal form of payment in China was wire transfer. With Alipay, it offered consumers a convenient yet secure online payment experience as payment would not be transferred to the seller until shipment had been delivered to the buyer. Aside from integrating Alipay with ecommerce platforms, the ewallet could also be used offline from transportation to department stores. In comparison to PayPal, Alipay is much more integrated into the daily life of consumers and its multifunctional nature soon won the hearts of many in China. With over 400 million registered users, it quickly earned the title of China’s largest epayment provider, taking up 82.3% of the market share and processing more than 80 million transactions per day, which is three times the amount handled by PayPal.
Another factor that impeded eBay’s advancement into the Chinese market was the lack of proper localization. Despite its huge success around the world, eBay’s centralized business model proved to be detrimental when adopted in China. For instance, eBay’s universal technical maintenance takes place on Thursday nights Pacific Standard Time regardless of the region. Taking time difference into consideration, eBay’s Chinese webpage would be inaccessible on a Friday afternoon in China, when traffic is at its heaviest. In order for companies to gain global recognition, it is crucial to find a balance between localization and standardization. Localization is not merely about breaking the barriers of language, but culture and customs as well. eBay is a prime example that attests to the importance of meeting local market demands with modification of layouts and interface customization for a culturally aligned user experience. While standardization could guarantee a unified brand identity, localization would yield better results in the long term.