International Expansion — Top Tips for D2C & Game Plan

Learnings & mistakes from expanding waterdrop from one to eight markets in 2 years. And how you can do it right.

Christian Hoppe

Christian Hoppe


June 18, 2024

International Expansion — Top Tips for D2C & Game Plan

Expanding your ecommerce to new markets is not all glitter & shine. It takes resources, planning and great execution.

In this week’s Thought, I will share my learnings so you don’t have to repeat my mistakes:

  • When is the right time to open a new market.
  • Creating a separate P&L and forecast for each market.
  • Lean testing vs. “all in”: why localization matters & why market research is overvalued.
  • Channels & strategy: Examples how each market is different. And sharing different GTM strategies: Big bang vs soft launch.
  • Who to hire, when & how new markets impact your teams, company culture, language and processes.
  • How to evaluate market performance & iterate.

Many ecommerce brands asked me, "Should we go international?" and often don't know how to start.

When I was at waterdrop and responsible for D2C, we went from one to eight markets in less than 2 years. Quick expansion. And I wanted to share my biggest learnings and mistakes so you can do it right.

But before we start…

When is The Right Time to Expand into More Markets?

You shouldn't do it too early, but not wait too long. It's important you have traction in one market and product market fit before you expand. Expansion takes a lot of resources and focus and will change many things in your business.

But also you don't want to wait too long. If you have strong market penetration in your core market, it will take time to grow new markets. So, don't wait too long if you're already established and ready to plant seeds in different markets.

I want to speak about the expansion game plan and what's important. I have five points:

First, a separate P&L for each market. Second, whether to do lean testing or go "all in."

Then, what channels and go-to-market strategies for different markets. Also, hiring and team, which touches on language, culture, and processes.

Lastly, how to evaluate and iterate once you’ve started in a new market.

P&L and Forecast for Each Market

It’s important to create a separate Profit & Loss statement (P&L) and forecast for each market.

I've seen businesses enter new markets and continue looking at one combined business P&L, without understanding how the new markets perform.

When you start in a new market, you have 100% new customers. It will take time to grow an existing customer base.

Unless you are profitable at first purchase or at least at cost break-even, a new market means an investment from the beginning, so it might have a negative contribution margin first.

Over time, the goal is for each market to have a positive contribution margin. You want to measure that, and forecast how long a new market takes to bring a positive contribution margin and how much money you need to invest from your core market into a new market.

It's important to do that forecast and look at the metrics for each market separately.

Furthermore, the cost structure differs per market.

Your acquisition and retention metrics, logistics might be different in another market.

On the other hand, it can have a positive effect as well, e.g. you might be able to charge higher prices in another market, so your margins could be higher.

To sum it up: Consider each market as a separate business in terms of profit and loss and have a clear forecast before you start.

Lean Testing vs. “All In”

The second point is whether to do lean testing or go all in.

Localization matters. In Europe, many markets are not English native, but the English level is high. For example, Netherlands, Benelux, or the Nordics.

You might think, "Everyone speaks English." But as soon as we’ve localized and used local languages, those markets exploded.

You can do lean testing, like launching Performance Max campaigns in many markets and see where there's demand. Or set up Meta ads and seeing what message performs.

However, those tests won't yield the same results as going all in and focusing on the market.

In addition, bigger markets like the US need certain speed to stay afloat. You cannot just spend $100 a day or $1,000 a day and think you will get traction. You need resources and speed to go into the market.

Market research is often overvalued. For example, when we started growing D2C at waterdrop in 2019, there was no hydration market in Europe at that time. We were creating that category from scratch.

In contrast, in the US, the hydration market has already been established and there were other players in the game.

Market research would have suggested no demand or market size in Europe, but the only way to find out is to go into a market and focus on it

Channels & Strategy

Channels and strategy differ across markets.

E.g. in the UK, consumers expect same-day or next-day delivery, unlike other European markets. You need to have a local warehouse to achieve that, which requires significant investment and adds operational challenges.

Marketing channels vary as well. E.g. in Benelux (Belgium, Netherlands, Luxembourg), influencer marketing didn't perform well because influencers had mostly an international audience and the cost was way higher.

In contrast, in France, there is a large choice of influencers, resulting in way lower prices. And since there are not many countries in which French is spoken, the majority of their followers are in France.

When you launch a new market, you can choose one of two strategies: A big bang, or a soft launch.

A big bang aims to create buzz and brand awareness from the start. We’ve tested viral games (e.g. in simple terms, our campaign was: order a free product, just pay shipping. And when you share it with 3 friends who also order, you get a bigger bundle free).

Those campaigns can work well, but also fail. At one market launch, we’ve lost over half a million $ and the retention out of that campaign was close to 0.

When you soft launch into a new market, you have the chance to smoothen out hick-ups, fix bugs and test different messages before you start scaling.

Hiring & Team (Language, Culture & Processes)

The impact on your business once you open new markets is overlooked.

International expansion changes your business. Ensure you define the team you need to hire beforehand because, once you go live, you’ll deal with support tickets, comments on your ads, and other issues that require real customer care.

If you don't have a native person for Customer Support and Community Management, you’ll soon find that much of your efforts are wasted.

I’ve seen multiple businesses start working with translation agencies, but this is a huge mistake. Often the quality of translations is not great, leading to misunderstandings with your customers.

It’s better to hire native speakers internally who can help you through the process. This is cheaper in terms of costs and efficiency. Also, these people will understand your brand voice and translate your messages more accurately.

Furthermore, you’ll need to decide whether to use a centralized or decentralized structure for your human resources management.

A centralized structure means concentrating your marketing and operational teams at your main country’s headquarters. And a decentralized structure involves country managers working in their respective countries.

I'm a big fan of a centralized structure. It creates much less overhead and allows you to be leaner. In case you choose to have country managers and at the same time have a central marketing team, ops team, etc., you will quickly have internal conflicts.

If one market becomes a core market at some point (at least 30-50% of your business), it makes sense to have a decentralized or two centralized structures. But usually country managers will not be a full-time person and won’t be able to have the same in-depth knowledge than your local marketing expert.

If this is the case, you can start with agencies in certain areas of the local market, especially if you want to have local communication and expertise.

There's not a right or wrong. Just keep in mind that your company’s structure and your team structure will change once you go international.

Another important point is company culture and language.

Every country has its own culture and you’ll notice it once you start hiring people from different countries and areas. That’s a good thing and something that I like, personally.

When we started waterdrop, I wanted to have an international team because we aimed to expand internationally. I said we couldn’t have only German speakers; we needed to adopt an international mindset already, and adapt before going international.

However, this shift might require changes in your company’s language, which will significantly impact your overall business and existing team.

Lastly, processes will inevitably change. At waterdrop, we were German first e.g., and translated to English, and from English to French or English to Italian. This means lots of steps in between. A good idea could be that you get started with English first.

Even if your company is English-first with an English-speaking team, all the processes will still change. You’ll need to add extra time for tasks requiring translation (e.g. launches, sales campaigns, email campaigns), and if there’s anything that’s late, everything else will get delayed as well.

There’s also different holidays or seasonalities per country. Everything you're running now will become more complex and will demand more resources and effort. E.g. setting up landing pages will need to be done two or three times for each market.

So, these are all challenges that you’ll need to be prepared for.

Evaluation & Iteration

It’s important that you understand and forecast your acquisition and retention metrics for each market, as well as your overall business metrics.  

Once you go live, analyze how your business is doing in terms of acquisition, if it’s profitable in your core market, and if it’s possible to achieve the same results in a new market. Initially, this might not happen since you won’t have the same awareness, referrals, and organic traffic making your blended acquisition metrics likely more expensive.

However, it might also be the opposite scenario if you have better margins or tap into a market with significant potential in a specific acquisition channel. If so, prepare separate forecasts and P&L, and understand your metrics for each market.

Lastly, and most importantly, analyze how your retention and cohorts are doing.

In Europe, for example, the biggest and best ecommerce market is Benelux. I've seen it across many countries and verticals: Netherlands, Belgium, Luxembourg have higher retention. At least 30-50% compared to other markets like Germany or France.

However, this might also vary in other markets. It depends on a lot of things, e.g. your product. Metrics will differ for each market and it’s important to pay attention to them.

Ultimately, you should look at your overall business metrics. E.g. how much contribution margin does a new market bring in and how you can develop a stable customer base that consistently brings in contribution margin over time.

Final Thoughts

Going international is tempting, especially if you aim to grow. However, you should know that it will increase your efforts and will require significant resources.

Initially, your business might not be profitable. It will raise your fixed costs, internal complexity and processes.

Consider all these factors carefully before you decide to go live into a new market.

Hope this was helpful and good luck going international!

About Me

Hey, I'm Chris 👋

I started out in marketing & ecommerce 15 years ago.

Building websites, online shops and running ads.

In 2019, I built waterdrop's direct-to-consumer business, growing it from $5 to $100 million in three years.

And worked as a fractional CMO with several 7- to 9-fig brands.

Today, I help winning ecommerce brands grow faster & more profitably with Forwrd Agency.

I also run my own businesses and invest in the ecommerce sector.

People know me for my straightforward, honest, and critical insights.

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