Last year, British Internet
pioneer Lastminute.com did what so many U.S. Net
firms are now planning to do: It rolled out a bold
and risky Pan-European strategy. By December, having
already launched sites in Germany and France, the
online travel company, which specializes in discounts
on unsold plane tickets and hotel rooms, debuted
in Sweden. "Sweden's a technologically advanced
country. They buy things with credit cards, they
travel all over the world," explains Tom Virden,
a company VP who at the time of the Swedish debut
oversaw international development. "The business
plan was perfect."
But perfection can be elusive,
particularly for companies expanding into foreign
markets. At first Lastminute Sweden scored solid
traffic, but after the initial rush of customers
burned through the site's deals there wasn't much
stockpiled to sell. Soon, customers were turning
their backs, frustrated and underwhelmed. Lastminute
Sweden had created a nightmare cycle for itself:
Good word-of-mouth generated new visitors, who in
turn generated bad word-of-mouth.
The problem was staffing. Like
many foreign companies, Lastminute had put down
stakes in white-hot Stockholm, center of the region's
economic surge, and an infamously tight market for
talent. The travel business demands a network of
well-connected staff to harvest good offers, but
Lastminute Sweden had to rely mostly on recent college
graduates, managed primarily from London, while
the company scrambled to find a managing director
with experience and local contacts. "In other countries,
we've rarely had anyone turn down a job offer,"
Virden says. "But at the time there were 60 dot-coms
lined up to go public in Sweden, and zero unemployment.
It took the Swedes a long time to make up their
minds [about job offers], and often once they did,
they told us no." In Stockholm's close-knit new-media
scene, Lastminute simply wasn't part of the family
- something its executives hadn't figured on.
Finally, seven months after
launch, Danish travel veteran Henrik Bjørn-Hansen
took over the operation, with hopes of rapidly expanding
his staff with more senior managers. Though Lastminute
Sweden still faces competitors that have a near
stranglehold on the package deals so popular in
the region, the site's sales have finally started
to rise. "Our first launch was not ideal," Bjørn-Hansen
says with Nordic frankness. "So now we need to re-attract
all those customers who visited the site and found
nothing for them. In some ways, we're very much
at the beginning again."
Lastminute is headquartered
in the shadow of Buckingham Palace, but its travails
in Sweden aren't simply a British problem; in fact,
they closely resemble the problems facing U.S.-based
Net companies as they expand internationally. "We're
seeing a very widespread trend among U.S. companies
toward globalization, and it's not just large-cap
companies," says Michael Elliot of New York- and
London-based eCountries.com, which connects such
firms with local businesses that specialize in everything
from headhunting to accounting. "Many small- and
medium-size companies in the States have started
to notice overseas competitors and think, 'If they're
coming into our market, maybe we should go into
theirs.'"
Business-to-business infrastructure-builder
CommerceOne is among the bigger U.S. Net companies
currently pumping cash into a European expansion.
This summer it forged an alliance with German b-to-b
giant SAP. Last year CommerceOne competitor Ariba
(ARBA) set up "regional hubs" in Amsterdam, Munich,
Stockholm, Zurich and Middlesex, England. On the
online retailing side, in June Priceline.com announced
a separate venture, Priceline Europe, which plans
to get a U.K. site up this fall with Germany, France
and Benelux expansions to follow.
For American companies, European
expansion often begins in London, the path of least
linguistic resistance. But the U.K. is the shallow
end of the Pan-European pool; eventually you need
to dive into other markets scattered throughout
the Continent. "Scattered" is the operative word
here. Forrester Research (FORR) says in order to
reach 80 percent of Europe's e-commerce market,
companies need to be active in France, Germany,
Holland, Italy, Sweden and the U.K. This is where
things get dicey: Such a company would need to operate
in six languages, six legal structures and three
currencies (the English pound, the Swedish krona
and the euro).
It gets worse. The canon among
global strategists is that foreign outfits must
try to look and feel like a local company - thus
the buzzword "glocalization." Yahoo (YHOO)'s global
success is often attributed in part to its glocalization
strategy, which involves hiring teams of locals
to sift through content for each Yahoo site launched
outside the United States. Ola Ahlvarsson, chairman
of Results.com, a site that specializes in helping
foreign companies spur their European expansions,
says, "Everything customer-oriented has to be localized,
but also your management has to be locally present,
with natives on board, so that you become a topic
at the breakfast table, on TV shows, in the local
magazines. Otherwise you're the big, bad wolf, the
outsider that everyone hopes will lose."
American companies have a reputation
for trying to bully their way into foreign markets
without studying local conditions. Daniel Gestetner,
CEO of Pan-European shopping portal ShopSmart, recalls
his late-1990s experience at Revlon (REV). "We tried
to expand in Asia by selling American glamour, using
our Cindy Crawford ads," Gestetner recalls. "L'Oreal
(LORLY) used a Chinese star." Revlon took a beating.
Today, Gestetner sees a Europe full of Internet
opportunities created by American oversights. "So
many major American companies dip a foot in the
U.K.," he says. "Then they try to sell their product
the same way [throughout Europe]."
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