Traditional enterprises are faced with many choices when transforming into cross-border e-commerce: establish a cross-border B2C website or open a store on eBay and Amazon? Should they be a hypermarket covering many categories or a franchise store focusing on one category?
This question involves many factors and there is no absolute answer. However, if an enterprise only does a certain category, it is equivalent to self-limitation, because the market size and development space of a single category are obviously not comparable to the market of all categories. This is exactly why many procurement and sales companies without production lines continue to expand their product categories.
In addition, the characteristics of the cross-border e-commerce platforms where these procurement and sales sellers are stationed have also promoted their continuous expansion of product categories. At present, the main platforms for domestic sellers to engage in cross-border e-commerce transactions are Amazon, eBav and Ali’s AliExpress.
Similar to Taobao, unless the stores on these platforms can obtain highly loyal fans through long-term effective customer operation and store image building, they can only attract traffic by continuously increasing product categories.
Take the purchase of mobile phones as an example. On these platforms, when consumers need to buy a mobile phone, they usually enter the commodity transaction interface by searching, rather than directly entering a seller’s store. For consumers, it is important to find a satisfactory mobile phone by comparing prices, functions, etc. on different pages, and then they will care whether the store to which the purchase page belongs also sells other products.
Under the guidance of such platform rules, in order to attract more attention, sellers will make eye-catching first pictures and titles, and gain more exposure opportunities by continuously increasing the product categories of the store.
However, for procurement and sales sellers who are new to cross-border e-commerce operations, choosing heavy vertical categories and entering the market through segmented products is actually more cost-effective than continuously expanding categories to achieve sales growth. Because from the perspective of input-output efficiency, in the early stages of cross-border e-commerce operations, the costs of vertical category operations, customer service, products, inventory, supplier maintenance, etc. are lower, and it is easier to control related risks.
In addition to vertical segmentation of products, traditional enterprises also need to conduct vertical segmentation of target markets when transforming into cross-border e-commerce. Just as McDonald’s sells rice in China in addition to fried chicken, product producers or sellers should choose suitable products according to the specific needs of the target market. For example, a mobile phone may have different network systems in different countries, and an appliance may use different voltage or plug standards depending on the region.
Even for exactly the same product, companies should conduct more precise marketing promotions based on the usage habits and scenarios of customers in different countries and regions. For example, for the same flashlight, diving enthusiasts in Australia are more concerned about its waterproof function, while outdoor sports enthusiasts in inland countries may be more concerned about its shockproof and drop-resistant functions. Therefore, vertical market segmentation and accurate grasp of the usage scenarios and user demand pain points of the target market can achieve smooth monetization of products.
Traditional companies that have transformed into cross-border e-commerce mainly include three categories: one is a manufacturing factory with OEM/ODM experience in various products, the second is a traditional B2B foreign trade company, and the third is a company that has no product production and foreign trade experience and is purely following the trend of cross-border e-commerce. The third type of company is not discussed for the time being. In the process of manufacturing or trading for many years, the first two types of companies have actually accumulated a lot of “big data” that is conducive to vertical market segmentation and positioning, such as the export standards and main markets of a certain product.
In terms of product category selection, although the first type of traditional enterprises have great advantages in terms of products and supply chain resources, the lack of product categories often becomes a constraint on the growth of such cross-border e-commerce enterprises. In this regard, enterprises can integrate the products of upstream and downstream enterprises based on their own supply chain advantages to make up for the shortcomings in product categories. For example, a company with LED bulbs as its main product can integrate upstream LED driver products and make smart home related products around LED lighting.
From a deeper level, product selection is actually an examination of the company’s own resources. The company must first ensure product quality, and then integrate upstream and downstream products based on the characteristics of the market segment, so as not to blindly expand categories, nor affect the scale growth of cross-border e-commerce due to lack of categories.