E-tailers: Globalize with Caution

A word of advice to small U.S. e-tailers: what works for EBay (Nasdaq: EBAY) might not work for you.

In a characteristic trend-bucking move, EBay recently added Singapore to its roster of international trading sites.

Prop that up against the backdrop of analyst reports that more than half of all Internet users reside outside the U.S., and you might ask yourself, "Why can't my company do that?"

Here's why. Localizing your Web business to a non-English speaking region is costly and risky. The likes of Amazon (Nasdaq: AMZN), Yahoo! (Nasdaq: YHOO), and EBay will continue to tap international markets with measured success , but at costs too steep for most smaller e-tailers' budgets.

If you spot a real opportunity overseas, by all means, explore it. But be careful not to blindly hitch up your wagon and head for gold over them there seas.

Foreign Affairs

It may be true that only 45 percent of Internet users are native English speakers while 85 percent of the Web's pages are in English. There may indeed be untapped revenue opportunities overseas.

But I've witnessed first-hand an Internet startup burn valuable development cycles and precious capital trying to bootstrap an Icelandic version of its site. Weeks into the project, the effort was abandoned due to insufficient language support, spotty knowledge of Icelandic customers and the complexity of changes that had to be made to the software code to accomodate multiple languages.

As you consider if and how to invest in international opportunities, be sure to weigh the legal, technological, logistical and cultural factors that could severely crimp your returns.

Beyond Interpretation

First off, be diligent. You should expect to spend up to 10 months evaluating and planning overseas Internet strategies, Jupiter Media Metrix estimates.

Translating your site into another language is just one component of effectively localizing your site. It must be done in a programmatically scalable way that will accommodate multiple languages over time.

This will cost you as much as US$100,000, perhaps more, depending on how many languages are involved, according to the Aberdeen Group.

Perhaps an indication of the complexities connected with translation is that EBay's Singapore site is in English, reflecting the company's strategy to enter international markets more efficiently and with minimal technology investment.

Earthly Bodies

Effective site translation takes more than slick (i.e., costly) software solutions, like those offered by Uniscape, Idiom or GlobalSight.

More often than not, it is not adequate for foreign language sites simply to be translated versions of an English language site. The content, design and product offerings may have to be entirely unique to appeal to a certain region or culture.

Your bottom line will feel this too, as full-time or contract language specialists will have to oversee the content.

Look at international versions of Yahoo! and Amazon. Yahoo!-Germany does not consist of translated directory entries from the U.S. site. As with the original site, there are fluent editors compiling the information.

Similarly, Amazon France contains entirely different products and accompanying marketing campaigns to effectively target French customers.

The Law Won?

As Yahoo! knows all too well, setting up shop overseas can also trigger legal pitfalls.

The company is currently facing severe scrutiny for selling Nazi paraphernalia to French customers. Even though the merchandise originated on Yahoo's U.S. site, some have argued that Yahoo's French site should bring the company under the jurisdiction of French laws.

"The problem is that there are an infinite number of laws that might be applicable to any given Web site, and most of them you don't even know about," said Thomas Vartanian, chairman of the American Bar Association's Global Cyberspace Jurisdictional Project.

Short Leash

Yahoo! will likely withstand the bruises from its days in court. But the same might not be said of a smaller e-tailer.

Any combination of these international e-tailing snafus, including countless others related to taxes, shipping, currency exchange and payment methods, might be enough to drain the resources of a modest-sized e-tailer.

So, if the receding domestic economy has you looking for new veins of revenue overseas, proceed with caution. Most e-tailers can no longer afford to sacrifice capital on ill-planned experiments.

What do you think? Let's talk about it.