Marketplace eCommerce

Building an International Marketplace Business Model

Updated  |  5 min read
build international market business model

Steps to Build Your Business Model for an International Market

  1. Determine your method of approach
  2. Build your infrastructure
  3. Invest your resources strategically
  4. Adjust accordingly

When building an international business model, the first step is to determine how you’re going to go about this, or your method of approach. There are many factors that go into this, which we describe in detail below. Your method determines the infrastructure and how it will make sense to invest your resources.

As you go along, you need to adjust to the market since it will change. These things will allow your international marketplace to grow and build the right business model.

Proper Logistics Are Key

One of the most challenging things about operating an eCommerce marketplace in an international market is the logistics, which is a key part of the business. This is especially true if the marketplace products are physical items, but it is also true for digital items. Dealing with customs, duties, and taxes, as well as legal restrictions of what digital or physical items can be sent or shipped, can have a major impact on things.

For clients that we’ve worked with setting up international marketplaces, they set up a light footprint in a wide regional area. The goal is to experiment and validate which regions are more receptive to their offering.

Does the Market Fit the Area?

When setting up that light footprint, you want to make sure that the area has been properly investigated, so you can know if your marketplace eCommerce is or isn’t the right fit for that area. Some marketplaces will work well right out of the gate and be a great fit for certain product offerings and with relatively minimal branding or product data changes that are unique to that market. In which case, it’s possible to penetrate this market.

For example, there may be a marketplace that’s operating in the US and Great Britain, and they’re looking to expand into all of Europe, and possibly Australia and Japan. Most likely, the European market and Japanese market might be more challenging because the US and Great Britain website, although technically they use different currencies and are in different locations, have a lot of similarities in the branding and marketing that’s going to work.

market area

When they go to expand into Europe, then, there needs to be a lightweight footprint as far as the distribution. Inventory needs to be held in Europe as well as Japan for expanding into those markets. This means the business needs to keep its overhead low until there’s proof that the revenue is going to follow. However, the extent to which you follow this method, or whether you do this at all, depends on what makes sense for your marketplace.

Still, this can be a key factor in whether or not the marketplace has enough cash flow to persevere. This is why you want to focus efforts on the virtual presence of the website and actual marketplace. The marketplace platform needs the ability to fulfill items and correctly convey how long products will take to fulfill. There should also be a focus on high value items and categories.

Coordinate with Vendors

If your marketplace is going to use a dropship method or the vendors within the marketplace will provide the shipping and fulfillment, and you’ll be coordinating that through the marketplace, then it makes sense to talk with the vendors, or manufacturers and sellers.

coordination with vendors

Start a conversation and get them to weigh in, discuss, and vote on where they’d like the international marketplace to go. Many of them will have international locations they are particularly interested in, and they may be willing to hold inventory for other non-competing offerings.

You can take advantage of and provide this partnership to keep your footprint low as far as your physical inventory and fulfillment needs. This is a key factor for the logistics of an international marketplace.

Tailor Your Marketing Content

The other key aspect is the marketing. Your marketing efforts and resources need to be focused such that you’re benefitting from them. If you don’t get beyond a certain threshold of success from marketing, then the value of the marketplace will diminish.

The marketing needs to match the branding of a particular region or country of the people receiving the advertising and other content. If the ads don’t match what they’re expecting, they won’t feel as comfortable, and the ad won’t look as credible, because in their area they’re used to another type of ad.

tailor marketing content

Therefore, to have effective marketing, you need to home in on each of the regions and countries to understand what the consumers there are looking for. You also need to factor in the types of items they are buying in that area, and target marketing campaigns so they fit the buyer persona of a person buying a particular item in a particular area.

It can take a lot of effort to lock this in, whether it’s organic advertising, social media, or building social proof. It can also be some form of affiliate marketing, network or paid advertising or any combination thereof, newsletters, etc.

Marketing also includes establishing the branding and content on the site in catering to a particular region. It will take a significant amount of effort to get it going, and to isolate and refine specific aspects so we can understand exactly what’s going to be successful in that market.

Plan an Incremental Approach

Just like we mentioned before with building a physical location, then physical inventory, etc., many international marketplaces start by creating an online presence and enabling the ability to purchase in a particular region.

With this, you need to be able to translate the content and use the appropriate currency and payment providers that will work in that particular region with that currency. You’ll also need to manage taxes and handle the logistics of shipping across borders.

incremental approach

If you don’t have a logistics plan in place, then it will be challenging to operate in third-world countries that don’t have much established for logistics. You’ll need to assess this first. With a relatively small footprint of physical infrastructure and marketing activities, but a lot of analytical review and auditing, you can find out what’s performing well and what are good markets to invest in.

You can then reinforce any necessary physical infrastructure in those well-performing places. This can start with shared space in a distribution center, and then move to a dedicated distribution center, and then multiple distribution centers.

It’s important to take this incremental approach and constantly model what it would look like to get a certain threshold. Then you can plan where to get additional resources, and make those available for storage, distribution, logistics, etc., to fulfill the items.

Now, again, if you’re working with manufacturers and sellers who do the fulfillments themselves, you can coordinate with them to help them grow their fulfillment in these different regions.

So even if you’re not directly responsible for fulfillment, you’ll still benefit from an international marketplace business model by interacting with the vendors and making sure they understand what the opportunities are. You can even help create a joint venture or promotional opportunity for particular regions.

In a similar vein, as things continue to scale, you’ll want to invest resources incrementally based on certain thresholds on the marketing side, including the branding and content. That way, you can establish a unique presence within each country and region.

You can also look at the GEO IP or where someone specified their location to be, and cater the content, branding, presentation style, and overall experience with the marketplace eCommerce platform to match what someone would be used to in that particular location.

Comply with Legal Requirements

Businesses need to have robust resources for dealing with taxes, customs, duties, and again, the logistics when they create a marketplace website. It’s important to be able to predict this information. Most of our clients do this with ERP systems and are well supported for international eCommerce marketplaces and general international business.

When you’re looking into your international marketplace business model, it’s a great opportunity to establish what it’s going to look like to have multiple physical locations or multiple countries where you’re targeting buyers of them items.

Legal implications are important, and making sure there’s legal entity and a physical bank account that matches that particular location’s banking requirements, and any form of corporation or incorporation as it pertains to the local government, etc.

You also have to be able to comply with tax laws and country-specific and company-specific accounting, and properly audit and prepare this information. If you don’t have these things planned out and in line before you begin the process, then it can be a negative experience later trying to resolve these issues. Particular local governments and jurisdictions may charge significant legal fees if you make errors. There may be implications, like not being able to conduct business in that particular region or country.

It goes without saying that there are serious consequences for not properly incorporating and setting things up and managing legal aspects, which is usually best done using a centralized ERP.

Adapt to Changes in the Market

It’s critical that you can deal with inventory and manage trends and analytics so that as a market in a country or region scales up and you get additional traffic and purchases, you’re prepared to grow into them appropriately and move ahead with any of the changes.

For example, a certain region might have a lot of purchases from a specific vendor, or a specific product type might be selling really well. You need to be able to see this so the business can adapt and grow to these changes.

If we’re using a rudimentary set of ERPs and accounting systems, it will be challenging to get a good view of the whole enterprise in an international setting. From an accounting perspective and ERP perspective, you need to know:

  • What’s selling now?
  • How well is it being fulfilled?
  • How well the is customer support working? 
  • What are the directions of trends?
  • What are the causes of those trends?
manage trends and analytics

These are all critical questions that you need to answer to be able to work with an international marketplace business.

Work with an Experienced Partner

Because of the complex nature of working with an international marketplace business, we recommend that you work with a partner who has experience conducting these collaborative steps and has completed these types of tasks with previous clients, who have successful international marketplace eCommerce sites.

Although many of these areas are challenging, they also present a lot of opportunity for international marketplace business models that get these things right. It won’t exactly be easy once there is an established country-specific value, but it’s significantly easier to take advantage of the cash flow of the business and then pour into that particular country or region.

It’s good to keep in mind that in order to drive things with your business, having an incremental approach is the best practice for optimal growth, projections, and knowing what steps to take for logistics and marketing.

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Discover Your International Marketplace Solution

If you’d like to learn more about how to build an international marketplace business model and what features your marketplace platform needs, sign up for a free, no-obligation discovery session with our experts—we’ll go over your business’s needs and then provide suggestions on what features would be the best fit. There’s nothing to lose, so why not give it a try?

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Autumn Spriggle is a Content Writer at Clarity Ventures who stays up to date on the latest trends in eCommerce, software development, and related topics to provide readers with the latest and greatest. She strives to help people like you realize the full potential for their eCommerce business.