How a French ecommerce entrepreneur expanded to selling in 129 countries | OnGlobal's ecommerce international expansion case study.
By any measure, Jean-Philippe Khodara has turned zChocolat.com from an idea into an international success.
In 1999 he returned from the US to France with the goal of selling a French product into international markets. He was arguably one of the first ecommerce entrepreneurs, recognizing and seizing on the potential of the internet to sell a local product globally.
The story of how he started as a developer and grew his business to sell and ship to 129 countries makes for a real-life French international ecommerce case study. Not to mention a lesson on how to compete against a larger competitor. zChocolat expanded from France while taking on countries, like Belgium & Switzerland, with an arguably better-known product. Including big companies with larger marketing budgets and market share.
His success was based on selecting the right product, persistence in finding unique packaging and delivery solutions, and a do-it-yourself mindset to overcome the barriers inherent in crossing international borders.
To start, he chose a product that had universal appeal. Beginning with cheese, he switched to chocolate. "Chocolate”, Jean-Philippe says, “appeals to everyone, everywhere". But he didn't start with selling to everyone, everywhere. From the start of his business, he had only one country in mind: The United States.
For the first five years, the US was their target market. Jean-Philippe said he picked it because it was a market he knew well (presumably because he had lived there), and because it was much more internet savvy than anywhere else. For years, the United States represented 80% of their sales. As zChocolat's international expansion grew, that dropped to 30% of revenue -- still a substantial contribution to their ecommerce sales.
OnGlobal Opinion: By focusing on the US market first, zChocolat set themselves up for success. They avoided the enormous opportunity cost that is incurred when European ecommerce owners expand to a neighboring country. They were familiar with the US market, presumably because their CEO had lived there. That alone increased their probability for success. Interestingly, starting in the US increased their product differentiation from their European competitors. French chocolate had a higher perceived value in the US then it did in Europe. Remember, the supposedly superior Belgian and French chocolate producers were dominant in the European market. As zChocolat moved to a market that was farther away, the consumers in that US market would see the French, Belgian and Swiss chocolate as more equal. A concept known by those expanding internationally as "psychic distance".
One of the key things zChocolat had to overcome was international ecommerce shipping and logistics challenges. Here Jean-Philippe's approach was to 'just do it' and solve the problems later. He freely admits there are pluses and minuses to that approach and it may not be the right thing to do. "Maybe it would save time and money. I don't think it would save time, maybe money". Back in 1999 they made a lot of mistakes. Resulting in their dumping a lot of chocolate. Jean-Philippe admits his approach may not have been the right approach, but that was just how he was wired.
Here are two problems that zChocolat solved themselves (DIY) that would eventually become competitive advantages to their international expansion.
The first problem arose because they sold a perishable product. Chocolate has a relatively short shelf life. Initially Jean-Philippe said they didn't do a good job at keeping the chocolate solid -- it arrived at the customer's location melted. Chocolate needed to be maintained at a very specific temperature and relative humidity. (Remember they started first in the USA, where temperatures can run to well over 100F (38C).)
They had good isothermic packaging, but later learned it was not good enough. They worked through several packaging and gel pack combinations, eventually getting it right. This packaging learning combined with their geographic-specific experience turned into a later competitive advantage in a new market -- the Persian Gulf (GCC) region. The GCC countries have exceptionally hot climates. Today within that GCC region, Saudi Arabia ranks as their number two country for international sales. Perhaps because they figured out how to package and deliver a flawless product in the heat of the Southern US.
Their second key problem in international expansion was something that they had no control over: Import duties imposed by the customs officials of the destination countries. They have tried multiple approaches over the years to deal with this, but they eventually settled on making it a pass through charge for most countries. That knowledge of customs and duty charges and how they vary from country to country, makes their distribution model difficult to replicate. Any competitor, be it a large or small business, would have to relearn those lessons to copy their model.
But zChocolat's key competitive advantage comes not from their product, packaging or distribution knowledge, but from how they position their product in the minds of the customer: As a gift.
By positioning chocolate as a gift to be given, zChocolat made their larger, better known competition irrelevant. Jean-Philippe started with gifting as a founding product principle. Illustrated by the fact that the first chocolates that shipped were enclosed in engraved mahogany boxes. Jean-Philippe told us that people will spend ten times on chocolate that is a gift versus buying it for themselves. And the number of gift occasions is nearly endless: Birthdays, anniversaries, Mother's Day, Easter, Easter, and Ramadan to name a few. They also have a suite of gifts for businesses to use with clients.
OnGlobal Opinion: Whether Jean-Philippe intended it or not, he was applying the now classic innovation theory called "Jobs To Be Done" by Clayton M. Christensen in 1996. [For a good overview of JTBD, read this article from Harvard Business Review.} We’ve done a lot of work with Ash Maurya, the Founder & CEO of Leanstack, in applying JTBD theory to our projects. You can read more about “What Is a Job To Be Done” on the Leanstack blog and see our latest product of that collaboration at TrustMarkTel.com
zChocolat is an innovator in every aspect of its business. From the founding principle around ‘gifting’ as a business differentiator, to building a unique distribution channel to deliver a perishable product world wide, to turning customs and duties into a competitive moat -- Jean-Philippe Khodara and zChocolat is an international expansion case study worth further study.