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Mark Forster: “E-Commerce can be successful in the U.S., but Swiss SMEs need to be patient.”

Owing to its rapid development, the American e-commerce market offers Swiss exporters good distribution opportunities. But the U.S. market is large and delivery times of just two hours are common. Mark Forster, founder and CEO of the technology company Adello, explains how the market works and what Swiss exporters need to know about it.

Delivery times of a few hours are a need in metropolitan areas
Delivery times of a few hours are a need in metropolitan areas

How would you describe the e-commerce market in the United States? What characteristics does it have?
From my perspective, the U.S. e-commerce market is quite different from the Swiss e-commerce market. Obviously Amazon was a trailblazer which started very early on and set the standards in terms of customer care, service, and product selection, which is far superior to what we are accustomed to here in Switzerland. So in a certain way, the e-commerce market in America is much more sophisticated. That represents an opportunity, but also a challenge, because Swiss companies usually do not deal with customers the way that Americans do. Think about the restaurant experience in the States: You get served because you’re paying. In a sense, you’re the absolute authority – the customer is always right. Things don’t work that way in Switzerland, so you need to adapt how you interact with customers. Customers expect a lot of service there.

How can Swiss companies become part of this e-commerce market?
There are several ways of doing that. For one, obviously there are established players like Amazon through whom you can sell your products. That is one route that companies may pursue. You could also build your own presence, your own e-commerce shop and m-commerce shop, which is what other companies do. This obviously requires a lot of investment up front to make this a viable option. So often times you see companies going for a hybrid approach, leveraging existing vendors or infrastructure players like Amazon while building up their own presence at the same time. It depends on the product, I would say. And it depends on what you want to achieve in the long run and how many resources you put behind it. If you don’t have resources in the States, if you don’t have presence in the States, it probably makes more sense to just latch on to an existing player. 

If you want to become big and you believe in your own presence, I think it’s probably essential to build your own e-commerce presence.

Is an e-commerce shop a must-have for Swiss exporters in the U.S.?
I would not say it is a requirement to build your own e-commerce presence or even to go the e-commerce route. Some companies stay on the sidelines. It really depends on the company.

How does the e-commerce market in the U.S. differ from those in other countries?
In the U.S., service plays an important role in e-commerce. I think it was back in 1997 that Amazon said they want to be the most service-oriented company in the world. I think they achieved that. You can return any product, you can receive orders in just two hours – it’s incredible. In terms of that level of sophistication in e-commerce, they’re probably unmatched worldwide. Nevertheless, you have Asian companies like Baidu or Alibaba that are pushing their e-commerce presences into the market as well, usually by combining very low prices with a wide selection. And since most of the goods are manufactured in China anyway, they have a certain advantage. I think it’s an interesting time right now, where we in the West are still looking to Amazon as a market leader, but Asia is definitely close behind and in certain cases already overtaking the U.S. market. I think that’s another growth area to observe because they are going global.

How does customer behavior in the U.S. differ from other countries?
If you look at the Swiss, they have all the requirements for success in e-commerce. Switzerland has the highest iPhone penetration rate in the world – unmatched. It has tremendously well-established broadband networks for mobile and e-commerce. We’ve got all the ingredients to be an e-commerce powerhouse. There may be a cultural component because everything is close in Switzerland; it’s a small country. You can walk from one end of Zurich to the other in 45 minutes. So the need to shop online because it’s such a hassle to travel is less pronounced. There are certain reasons why Switzerland has not been so dominant in e-commerce. E-commerce makes our lives easier due to its convenience. Yet things that need to be carefully selected or tried on in person like clothes, I believe retail adds a lot of value. I believe new technologies (i.e. AI/AR) could revive retail. The evolution of mix between channels is to be seen.

What hurdles do Swiss companies have to overcome if they want to run an e-commerce business in the U.S.?
The lean approach to starting out in e-commerce is probably to work with Amazon or a similar company. Because then you send your goods, have a contract with them, and they handle everything. But that’s obviously also the place where you earn the least, because they take a huge cut of the retail sales price. So it depends on what you want and whether you are in it for the long haul or not. If you just want to sell a little bit, it may be a good option. If you want to become big and you believe in your own presence, I think it’s probably essential to build your own e-commerce presence.

 

What three pieces of advices can you give Swiss companies to make their e-commerce business in the U.S. a success?
Because the U.S. market is so huge, certain requirements need to be met to be successful. For one, I think the Swiss companies need to conduct proper market research. Understanding your customers, understanding the market demand and the customers who want to buy your product. Not everyone will buy Swiss products. The information gathering part is really crucial. The second thing is that the U.S. is massive. To cover the entire market requires a lot of advertising dollars. It might be smart to select a certain region or city, say, New York or maybe the state of California, which has the fifth largest GDP of any country worldwide. This regionally focused strategy can save you a lot of money and hassle because the transportation routes are shorter and you can handle these cities pretty easily. The third thing is about whether you want to be there for the long term. Say you actually have the stamina and funds to succeed over a longer period of time; success will not come in three months. We need to be aware that if you try to bust into the U.S. market, you’ll probably not nail it right off the bat. You have to be persistent and that takes money. E-commerce can reap large rewards in the U.S., but you need to be patient.     

Adello uses AI to customize advertising – what kind of information have you gained so far?
At Adello, we crunch a lot of data in real time to predict the behavior of devices and therefore act as a proxy for people. So AI factors into our entire business proposition. What that means for e-commerce is that our systems try to understand the indications of how customers might behave. So if you think about a potential shopper who saw an advertisement, went to the vendor site on their phone, clicked on the product, and maybe bought the product online – our system tries to understand what led the person to make the purchase and search for other devices that are likely to result in the same behavior. So, in effect, we reduce your advertising spending, using artificial intelligence to make every dollar work harder for you. In a certain way, it’s like a weather report. The weather report is based on crunching data to predict what is going to happen with the weather in a given location at a given time. We try to predict behavior with devices as the result of a certain stimulus – and we’re quite good at it.

Evaluate your opportunities

Would you like to learn more about the e-commerce market in the USA and explore your business opportunities? Contact our consultant for North America, Annina Bosshard.

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