Digital Expansion Is No Guarantee for Global Profitability

The concept of "testing the market digitally" has rapidly become a business cliché. Where brands once relied on selecting specific retailers or establishing a first physical store to gauge international interest, digital channels are now widely viewed as the primary gateway to global markets. However, while online activity can be managed from a brand's domestic base, transforming it into a profitable revenue stream requires avoiding several significant pitfalls. This challenge was the focus of discussions at the "Welcome on Board" event, where Mathieu Grodner, President of Simone Pérèle, shared his experience alongside logistics specialist Rémy Daguillard of Stellae and digital expansion expert Basile Ricordel of Global-e.

For Grodner, head of the premium lingerie brand, digital expansion was seen as a complementary solution to the brand's established international brick-and-mortar presence. "The question was how to develop our digital business in a way that was profitable, efficient, and compelling for our end customer," he explained. The brand, fortunate to have existing logistics flows in place, focused on delivering high-quality service to customers worldwide. They began by prioritizing core markets, starting with the US and Australia, before expanding into other regions. Grodner stressed the importance of adapting to different geographical areas and the international context by implementing tools that identify customer locations and provide appropriate responses in terms of currency, language, payment methods, customs duties, and local logistical complexities.

The complexity, according to Rémy Daguillard, president of Stellae France, lies in removing all potential barriers to purchase on the website. As a logistics specialist for premium and luxury brands, he emphasizes ensuring that the global consumer enjoys "the same customer experience as if your brand were domestic or local." Basile Ricordel, commercial director at Global-e, added a crucial point: "The question is not necessarily to sell everywhere in the world... Rather, can you do it and be profitable?" He cited the example of the American brand Surface to Air, which viewed e-commerce as an "El Dorado" only to find that costs quickly accumulated due to miscalculated customs duties and taxes, improper packaging, and a failure to account for returns. These issues rapidly erode margins and can push a business into the red.

To prevent this margin erosion, specialists recommend several tactical adjustments. Brands should carefully scrutinize customs duties and taxes to ensure they are not paid multiple times. They also advise right-sizing packaging to match the actual dimensions of products, which reduces shipping costs. Furthermore, creating local returns collection points in specific markets allows brands to consolidate weekly or monthly returns, thereby lowering unit transport costs significantly.

While e-commerce provides access to global markets, experts recommend a step-by-step approach rather than trying to conquer every territory simultaneously. Global-e, for example, uses data insights into consumer habits and macroeconomic trends to help brands identify potential markets that warrant investment. "Given the international context, the US market is perhaps more complicated at the moment," said Ricordel, suggesting that brands might redirect investment budgets toward other markets, such as Japan. The strategy involves focusing on five to ten countries that promise the best returns rather than pursuing an extensive list of targets.

Rémy Daguillard underscored the necessity of taking local and geopolitical realities into account. While certain markets, like Russia, are obviously tricky right now, others require a nuanced understanding. He pointed to Mexico as a dynamic market for luxury goods, but one with specific hidden costs and unique features, recounting a misadventure where customers had to bribe couriers to collect their parcels. "You can devise your best model; these things happen, and France doesn’t have the same norms as Mexico, Brazil, or Australia." Mathieu Grodner confirmed this cautious approach, stating, "You can’t be adventurous on all fronts." He emphasized that to be a credible international brand today, a brand must strive for homogeneity in pricing and offerings across different territories, rather than having too much disparity.

This need for strategic prioritization has been amplified by geopolitical instability, particularly concerning the US market. The recent abolition of the de minimis exemption, which since 2016 had allowed brands to send parcels to the US without paying duties or taxes on products valued under $800, has significantly disrupted export strategies. Since August 29, brands have been forced to adapt to new tax and customs rules. Rémy Daguillard noted that implementing a model allowing customs duties to be paid on the transfer price has helped reduce the impact for clients.

Basile Ricordel added that the de minimis change raised complex questions for brands, especially concerning products made in Europe versus those made in China. Brands are now considering whether to hold local stock in the US and if they need to appoint a fiscal representative—all while seeking the best possible options to prevent a total erosion of profitability in the US market. While opportunities for digital expansion remain in the US and elsewhere, the unstable economic and geopolitical context demands greater precaution and strategic planning when rolling out new markets.