What is cross-border ecommerce and how can I tap into that growing market?
Expanding into new geographic markets can increase your sales. But selling across international borders introduces new complexities to your business.
When you have the right information and a robust cross-border ecommerce strategy, you can overcome the challenges and boost your profits.
Keep reading to learn about cross-border ecommerce, anticipated growth and challenges, and how to get started with it.
What is Cross-Border Ecommerce?
So what is cross-border ecommerce? It's as simple as it sounds. Cross-border ecommerce is an online transaction where the buyer and seller are in different countries.
Types of cross-border ecommerce include:
- Business-to-Consumer. B2C transactions cover traditional retail where companies sell directly to consumers.
- Business-to-Business. In B2B ecommerce, another business is the customer instead of a consumer.
- Consumer-to-Consumer. The rise of selling marketplaces created a new C2C ecommerce market where consumers sell to one another.
For more about the types of ecommerce and how they compare to ebusiness, read our post on the difference between ecommerce and ebusiness.
A Look at the Cross-Border Ecommerce Market
Analysts predict cross-border ecommerce will account for 22% of all ecommerce shipments of physical products worldwide in 2022. In 2016, cross-border transactions only accounted for 15% of the market.
Cross-border ecommerce is growing at twice the rate of domestic commerce, according to Accenture. What's driving this growth? Consumers are showing an increasing willingness to purchase goods from foreign websites. Just look at the stats below from Cross Border: The Disruptive Frontier.
Examples of consumers’ high adoption of cross-border ecommerce include:
- 62% of German consumers buy from abroad.
- 63% of Dutch shoppers buy from cross-border retailers.
- 75% of U.K. consumers buy from overseas retailers.
- 84% of Irish shoppers buy abroad, the highest percentage of cross-border ecommerce shoppers in the world.
Cross-Border Ecommerce Growth
Improvements in technology and logistics make cross-border shopping easier for consumers. With the rise of marketplaces, many consumers may not even realize they're buying something from a cross-border retailer.
Reasons more consumers are completing cross-border ecommerce transactions include:
- Cheaper Prices. As more logistics and shipping companies enter the international shipping marketing, prices for cross-border shipments decrease. High shipping costs used to offset any pricing advantage a foreign retailer had. But now shoppers find better prices on items from international sellers, especially if the item is lightweight. Nearly 72% of cross-border purchases weigh less than 1 kilogram, according to Accenture.
- Access to Different Brands. Expats or frequent travelers are looking for brands they can’t buy domestically.
- Unique or Specialty Products. So, you can’t compete on price. Cross-border expansion could still be profitable if you offer specialty or custom products shoppers can't find elsewhere.
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Issues Facing Cross-Border Ecommerce
Entering international markets adds a layer of complexity to your ecommerce business. Figuring out how to create an ecommerce website is complicated enough before you add multiple languages and currencies into the mix.
Common pain points for cross-border ecommerce include:
- Logistics and Delivery. Most ecommerce businesses have domestic shipping partners. To sell internationally, you may need additional shipping and logistics vendors. You also need a way to reliably calculate and display shipping charges and times during checkout. And you need to figure out how to manage the customs process.
- Exchange and Returns. How will you handle exchanges or returns? When you research shipping partners, ask about return services.
- Payments and Currencies. What payment methods will you accept? Can you display prices in the local currency?
- Taxation. U.S. businesses are already familiar with the headaches of different sales tax rates and rules by city or state. International commerce adds the possibility of paying sales tax, value-added tax, and tariffs or duties.
- Data Protection. Security is a top priority for all ecommerce businesses. You need to think carefully about protecting your new international customers’ data. For example, if you sell in Europe, you must ensure your policies and practices comply with the European Union’s General Data Protection Regulation.
- Regulatory Compliance. In addition to data privacy regulations, your business needs to comply with local regulations and the company's customs laws.
Why Cross-Border Ecommerce is Essential to Your Business
Despite the additional technical, regulatory, and logistical requirements, cross-border ecommerce is worth the investment. Companies that fail to develop cross-border capabilities will fall behind competitors that enter foreign markets.
Cross-border ecommerce is growing much faster than domestic ecommerce. The best chance for growing your business could be in a global market.
Steps to Succeeding in Cross-Border Ecommerce
To improve your odds of success and ROI, take the time to develop a cross-border ecommerce strategy. Follow these steps to create your plan:
1. Do Your Research
2. Plan to Meet Consumers’ Expectations
3. Pick the Right Partners
Do Your Research
Start by researching which international markets make the most sense for your products. What is the state of the economy? Are consumers shopping cross-border ecommerce stores? Can you compete with local products and pricing?
Once you decide which markets make the most sense, research the country's regulations, tax, and shipping options.
Plan to Meet Consumers’ Expectations
Buyers won't cut you a break just because you're shipping internationally. Many of the same expectations of domestic ecommerce consumers, like fast and free shipping, apply to cross-border ecommerce.
In a survey of cross-border shoppers, the most common expectations were:
- Clear and upfront information about delivery charges
- Simple, free returns process
- Free delivery after meeting a minimum purchase threshold
Pick the Right Partners
To meet consumers’ expectations, you need to find the right vendors for shipping and logistics. For tips on shipping internationally, read our ecommerce guide to international shipping costs. It covers saving money on shipping, including the cheapest way to ship to Canada, the United Kingdom, and Australia — three of the hottest markets for cross-border ecommerce.
Tools for Cross-Border Ecommerce
Expanding to a global ecommerce enterprise is difficult enough without technical issues. Before you can enter a new market, you need a fast, reliable, and well-designed ecommerce website.
Shopping online is a process. Customers want to find the products they're seeking easily. They expect a smooth checkout process. Most of all, they want to know their purchases will make it to them quickly. It's safe to say you'll be focused on your customer experience a lot.
When you host your site with Managed WooCommerce by Nexcess, you don't have to worry about plugin or core updates. You get smart monitoring so you know when sales trends change. You also get the premium tools you need to make your online store just that much better.
Don't want to take the global ecommerce journey alone? Try Managed WooCommerce from Nexcess.