Cross-border commerce is an opportunity that brands and retailers can’t afford to pass up. According to Insider Intelligence, by 2023 worldwide retail e-commerce sales will total US$6.169 trillion and account for 22.3 per cent of total retail sales. This figure is predicted to expand even further.
But before you take your leap into cross-border trade (CBT), it’s important to know the risks associated with it and also the hurdles you may encounter. It takes careful planning and consideration with tactful execution to reap the rewards of CBT.
To survive and thrive in such a flourishing environment, there are key considerations e-commerce teams must explore before starting on this journey.
Homework for cross-border commerce
If your domestic markets are seeing steady success, then set your sights on international expansion.
With cross-border commerce, there is the potential to expand your reach, tap into previously unattainable markets, and entice many new customers with what your brand has to offer. But expanding your business abroad should never be a decision made on impulse.
If you wish to achieve true success in CBT, you must understand the international markets on multiple levels, from preferred payment types to regulations and infrastructure.
Cross-border e-commerce can be both expensive and time-consuming – and your entire business model can crumble without intentional, intelligent planning. If you are determined to take your footprint globally, it’s time to do some research.
1. Seek out demand and know your competition
The idea of global expansion can be very exciting, but entering blindly without doing your research could have disastrous results.
Choose foreign markets where you’re likely to have success and look for ways to measure interest in those markets to figure out if your proposition will sustain. It can be hard to gauge the potential interest of your brand in a country where you don’t yet have a foothold. This is why you should keep an eye on the resale market in countries where you’re considering expanding. Resale may be a good indication of underlying demand for your products that you could meet with better customer service and product quality. And if there’s already competition, then you must determine and highlight your brand’s point of difference.
There are many ways to reach an international audience, relationships can be crippled just as easy as they are formed. Pete Olanday from Vertex outlines the following things to consider when you begin to expand globally:
- How they interpret information – When thinking globally, words matter, so rather than shifting only language, incorporate your chosen location’s culture, visuals and trends into your branding.
- Understanding what they value – Some shoppers love free shipping, while in other countries, consumers may prefer faster delivery or better reviews. When thinking about a strategy, the best practice is to research what each location values to build that connection with customers.
- Offering the right shopping channels – When building your expansion plan, be where they are – not only geographically but throughout their preferred shopping channels.
- Provide the right payment methods – When implementing your checkout process, consider each location’s preferred payment method to drive smooth purchases.
- Know how they want to be contacted – Only 30 per cent of Swedes use WhatsApp versus 60 per cent of Latin America. When reaching out, use the prefered channels to encourage a positive customer experience.
- Consider how shipping and taxes affect their final cost – The reason customers avoid purchasing cross-border products is high shipping costs and taxes. When planning logistics, work closely with international shippers to ensure accuracy and compliance.
- Making your returns process clear – Don’t make things hard for your customers, and draft a policy that outlines returns, cancellations, exceptions, etc.
2. Seek out suitable cross-border partners to build a foundation
Even if a foreign market is primed for your arrival, there are still plenty of hurdles you’ll need to overcome. Building relationships with local companies is a great way to get ahead. Marketplaces in particular are well-suited to introducing new brands.
When selecting a marketplace, verify the amount of control you’ll have over your branding and overall customer experience.
3. Understand what impacts pricing
A well-designed digital solution for handling fees is beneficial for everyone, from retailers to customers. It’s best to invest in digital tools that automatically handle adjustments, and are transparent with your customers about the fees they may incur. Transparency is often the best policy, even if it means adding extra costs during the last steps of a customer’s journey.
Selling cross-border means dealing with a potentially complicated web of other fees like regulations and taxes. Tax can be a daunting subject when selling abroad, with each region having a different tax policy. The US has a particularly complex model, with each US state having its own tax rates. The EU also presents its own challenges, as VAT thresholds and requirements vary. Fruugo published a blog post, Act Now to Adapt to New EU VAT Reform, where you can learn more about key VAT factors for marketplace sellers to consider.
4. Learn lessons from mature, well-established markets
The Chinese cross-border market is mature and considered the benchmark for global e-commerce. This makes it both an attractive country for Western retailers to look towards to find fresh audiences and well-established marketplaces.
China accounts for more than half of global online retail and experiences ongoing online and offline integration. The popularity of international brands among Chinese consumers makes the country a great target destination for new brands wanting to expand. However, China’s fast-paced market requires constant adjustments to keep up with customer trends and regulations.
While investing in the Chinese market can potentially yield high profits, it’s important for you to be aware of the overall sustainability of economic growth in China, and be ready to adapt, act and rely on local support from partners.
Are you prepared to take your business globally?
Retail TouchPoints recently published the special report “Cross-Border Commerce: How To Tap Fast-Growing Markets With the Right Partnerships” in partnership with ChannelAdvisor and Vertex. Download the full report to find out which continent poses the next great cross-border opportunity for you.