When a mother company decides to funnel their online sales channel into another region, a subsidiary faces the challenge of choosing the right ecommerce solution. It can customize the adopted technology or build a new one provided usually by the local partner. In this entry, we present what to consider when choosing one of these solutions.
The pandemic accelerated the digitization of retail and changed customers’ purchasing habits. Selling online is a must for every major retail chain today. Thus, big players are under pressure to open new regional online stores.
However, launching an online sales channel on such a scale is a complicated process that must reflect the specificity and legal conditions of each of the regions. It is not possible to state without a detailed analysis what will be better – adopting software from the mother company or choosing a new solution strictly customized for a specific regional market. However, based on our experiences (see case study of Office Depot) we can suggest what to consider while making such a decision.
1. Leveraging on existing technology
If the parent company has an online sales platform, it may be considering implementing an identical solution in a subsidiary in another country. This is a way to leverage the efforts and investments made so far for the development of ecommerce technology. Moreover, it supports corporate standardization and allows the transfer of know-how and best practices.
Unfortunately, such a move can only pay off when the markets are quite similar. You need to take into account differences in numerous areas, such as: language, currency, units, integrations with local payment gateways, tax system, and customer behaviour. What’s more you may risk taking over a solution with technical debt as was the case with companies from Western Europe that ended up making the digital transformation before those in the CEE region.
2. Multi-store platform
Adopting a solution that does not have out-of-the-box multi-store functionality will in practice mean starting with a separate application from scratch. The adopted solution needs to have the possibility to set up a new domain, currency, and language.
However, if you adopt a solution with multi-store functionality, make sure you are able to customize it independently with no need to deploy changes to all other versions.
3. Total cost of ownership
No matter what solution you choose, you need to take into account the so-called total cost of ownership. These are the cumulative costs of owning an ecommerce platform including the upfront investment expenses such as: hosting, license fees, maintenance, SLA, security, replacement, etc.
When adopting a mother’s solution, the cost of implementation can be low, but further rates of developers for customization and maintenance can be very expensive (especially when you are a CEE based subsidiary and pay for Western Europe’s mandays). As for the licence fee for use of the ecommerce platform, be sure to check additional costs or considerations associated with the model (flat fee, Gross Merchandising Volume (GMV) that is becoming standard among the top tier platforms, etc.). The optimal financial choice for the mother company may not be a good fit for your region.
4. Flexibility & vendor lock-in risk
It is easy to imagine the situation that if only one ecommerce software house or in-house team is responsible for the development of the platform, the work for the parent company will always have the highest priority. That’s why it’s important to have a good relationship between the both management boards to agree on the priorities.
Vendor lock-in is a thing that is hard to avoid completely, but you can minimize the risk by, for example, adopting only open-source ecommerce platform. At this point, if the cooperation with, for example, the software house from the mother company’s country does not work out, you can hire programmers from your own country (although it might not always be easy to find developers specialized for a mother’s company platform).
5. Legal regulations
It’s always a good idea to ensure that the operation of the ecommerce platform in a given field (e.g. personal data protection such as GDPR) and fiscalisation reflects the legal status of a given country. If the adopted solution is from the same larger region (such as the European Union), the situation is somewhat easier, a we can also come across some significant differences. In the Czech Republic, for example, there is the EET system, which requires additional implementation when adopting a solution from another European country.
Worse is if the platform is adopted from a country outside the European Union. In this case, a thorough compliance process will have to take place, which may extend the adoption time and increase the costs of customization.
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We hope that this text will help you a little bit in making your decision. Should you need any further assistance, please don’t hesitate to contact us.
