Getting to know your customers in new markets: How to gain demographic insights.
- Written by Kai Li, Senior Vice President at Revolve
Over a decade ago, I started a new job in a Fortune 10 company known for its data-driven analytical culture. On my first day, my onboarding document described my initial assignment, bringing the company's women’s fashion business to China. It had two pages that described potential Chinese customers in great detail: she lives in metropolitan cities, has an annual income of over US$150K; she is confident and bold; she uses fashion to express and differentiate herself…
I had lived and worked in China for 10 years; I knew few Chinese women who fit the profile. At that time, the average Chinese middle class household income was around US$20K annually, and boldness did not fit into mainstream Asian culture values. I was extremely concerned about the size of my addressable market. I spent my first weekend on the job crawling through databases, using a Zillow-like service to map existing customer shipping addresses to rental values. By Sunday night, I realized most of our customers barely spent US$500~700 a month on rent. They were not super-rich, but rather typical young upper middle class women. Suddenly, I felt my addressable market expanded from a few to hundreds of millions.
When we expand our business overseas, we often assume our customers are identical to the ones in our home market. In most cases, that is not true.
Real customer data is critical for building accurate demographic profiles of your customers. This is the primary reason I recommend an iterative staged approach to international expansion. First, start with basic services to cover a large number of markets. This level of business provides broad customer data to analyze. Next, zoom into maybe a dozen high potential markets to build out localized services, thereby gathering more granular customer data. Finally focus on a handful of strategic markets to build out value added services. Throughout the process, customer feedback continuously sharpens our customer profile in each market.
Tools such as Google Analytics and Meta Ads Manager will scream at you with basic customer demographic data, such as age, gender, and location. There are two demographic profiles that are not so obvious but are important to cross-border e-commerce: income profile and psychographic profile.
Income levels of your typical customer will vary quite a bit across different markets, as illustrated in the China example earlier. This is primarily driven by the combination of disposable income and the perceived product value.
It is more complicated to buy a product cross-border; psychographic profiles help explain why people bother. Customers in emerging markets have to decipher currency, shipping, quantities, from other cultures. To quote a customer comment – “what does Universal Power Supply (UPS) have anything to do with buying a Maxi Dress?” She took a lot of risk buying that dress from a logistics company she did not know. If the same dress were available in her city, would she have gone through the trouble of buying it overseas? Probably not. Psychological motivation is linked to the value you provide to your customers. In cross-border e-commerce, accessibility, uniqueness, genuineness, and brand perception often play a bigger role in perceived value than your home market. Identifying which factors drive your customers allows you to tune the marketing message to each locality, ideally in the local language.
I talk a lot about data, but face-to-face meetings are extremely powerful. When I travel, I devote my breakfasts to customers. I know it sounds ridiculous for a company that has millions of customers, but I have learned from every story and conversation. Their joy and frustration helped me build better websites, services, and marketing strategies.
A successful international expansion requires a deep understanding of the local customer base, which often differs significantly from the domestic market. Real customer data and an iterative, data-driven approach are essential for accurately profiling customers and tailoring services to meet their needs. Get out there and meet with your customers; I promise it is worth it.
Written by Kai Li, Senior Vice President at Revolve and keynote speaker at Online Retailer Conference in Sydney, 24th July. Kai’s session will focus on ‘Cross-border E-commerce: The Playbook for Going Global’ with more information available here.
