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E-Commerce 101: Going Cross Border, What Brands Must Know


September 29, 2021
5 MIN READ
Vinculum
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Vinculum
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While e-commerce was a rage in the market before the onset of the pandemic, it witnessed a favorable yet unexpected growth since 2020. It is no brainer that e-commerce has benefited dramatically from the Covid-19, and cross-border transactions have also increased. As this industry continues to push through new limits, it is high time brands think about investing in opportunities beyond borders.

Cross-border e-commerce is no longer a new trend. Today, consumers have become more aware, while the most prominent players like Amazon continue to grow in size. With global e-commerce becoming the new standard, many companies are eager to take the plunge or, at the very least, experiment with new markets. In addition, they may benefit from the unprecedented convergence of technological advancements, widespread digitization, and the change in shopping patterns due to the COVID-19. However, without a robust cross-border e-commerce strategy, all the attempts to go global may be futile.

What is Cross Border e-commerce?

When online shoppers buy from retailers or brands located outside of their nation, this is known as cross-border e-commerce. Since the whole experience is so flawless, with items delivered directly to their homes for convenience, the buyers may not realize they are shopping overseas at the comfort of sitting on their sofa.

From the buyer’s viewpoint, it means having unlimited access to all of your favorite stores worldwide, whereas, for the seller, it means connecting with worldwide audience enthusiasts and potential buyers.

According to Global-e, a cross-border e-commerce enabler, cross-border e-commerce sales increased by 21 percent in 2020 over 2019. According to Statista, only over 15 percent of e-commerce sales were cross-border in 2016. As customers become more accustomed to browsing and purchasing abroad, this figure will rise to 22 percent by 2022.

The worldwide cross-border e-commerce industry is expected to develop at a 27 percent annual CAGR from 2021 to 2027, reaching $4,8 billion in 2026. Despite a slight decline in worldwide retail spending, this is the reality.

Though this seems like encouraging news as the industry expands, adopting a cross-border e-commerce strategy is one of the factors that frequently puts them ahead of the competition in terms of income — but it is not without its problems. These issues occur due to shipping and logistics, demographic variations among customers, and shifting worldwide consumer expectations. Many customers are still hesitant to buy across borders because they are concerned that they will not get the items or expend excessive effort in returning them if they do not like them.

So, it would be naive to assume that a go-to-market strategy that succeeds in one nation will work in another. Skipping one or doing it wrong may result in costly consequences, a lengthy ramp-up period, needless financial and legal risks, fraud, and severe damage to brand reputation. Therefore, before developing a go-to-market plan, you must handle several critical challenges in cross-border e-commerce.

Things to Consider Before Opting Cross Border e-Commerce

Here are the things brands must know before venturing into the cross border e-commerce:

  • Explore New Regions to Find Viable Markets: Conduct demographic research in new worldwide marketplaces as part of your assignment to identify emerging markets abroad that fit your products and audience. Examine the local competitors and look at common fulfillment routes. After that, figure out how to improve supply chain operations in each market and become familiar with local and national legal issues and privacy legislation. You can use direct interviews, surveys, social listening, and other methods to learn about local customer buying habits.
  • Taxes and Customs as Pain Points: You will have to deal with regional tax rules regardless of where you decide to develop your business overseas. Taxes on cross-border eCommerce activities may be complex and time-consuming, so it is critical to consider tax regulations and their possible impact on your business as you plan your expansion strategy. It is also imperative to be aware of customs and accordingly make payment arrangements to ensure products get to their destination on time.
  • Finding the Right Price:  While deciding the pricing, you will need to factor in shipping costs, in-country distribution costs, insurance, sales commissions, competitors’ prices (both local and global), and more. Meanwhile, the consumer may face varying FX margins depending on how they pay, whether by choice or from the merchant’s alternatives, which would eventually raise their total purchase price. To address this, merchants must collaborate with local banks or professional payment providers to obtain the best FX rates possible, allowing them to enhance their pricing competitiveness and capture more sales.
  • Localize to Impress Locals: Using trusted marketing channels backed by local governments and following the local data protection and privacy rules, develop marketing content in the local language and suitable cultural presentations. Doing so can help cross-border e-commerce companies to improve customer communication, rank higher in search engines, and avoid chargebacks. Hence, translating site navigation, item descriptions, and return policies into the local language is necessary.
  • Hassle-free Checkout: Customer attraction and retention are dependent on a positive checkout experience with no unpleasant surprises. International brands and retailers will need to expand whatever payment gateway is utilized to process online payments when adopting a cross-border e-commerce strategy. You can not just use the payment gateway you are used to; you have to think about your prospective new customers. If customers can not buy from your foreign site using their chosen payment method, they will go to another site that does, resulting in abandoned carts and uncompleted transactions.

Conclusion

No doubt that cross-border e-commerce will continue witnessing a forward trajectory. However, the above caveats must be considered while planning to expand e-commerce business beyond the border.

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