Why Cross-Border Ecommerce?
In 2014, cross-border e-commerce accounted for $230 billion of a total estimated $22 trillion in worldwide e-retail sales. By 2020, forecasters predict an annual growth of approximately 20 percent, bringing that number to over $1 trillion, or almost 30 percent of all B2C retail transactions.
Numbers don’t lie. But what is cross-border e-commerce? What drives its increasing popularity? What separates it from traditional e-commerce and what advantages does it bring to your business in an increasing global market?
What is cross-border e-commerce?
In essence, cross-border e-commerce refers to online international consumer retail transactions, particularly of products and services that may be otherwise unavailable in home countries. By default, the process frequently requires platforms that optimize factors such as currency conversion, international customs and tax requirements, alternative payments, delivery expedition and other international logistic dilemmas.
One of the strongest regions witnessing an exponential increase in cross-border e-commerce has been Asia; in particular, China. Currently witnessing an unprecedented rise in consumer sales due to a blossoming middle class, an estimated 25 percent of China’s retail purchases are expected to come from e-commerce within the next three years. While this may seem minor in comparison to traditional strongholds of e-commerce (such as the U.S. and Canada), it is worth bearing in mind that not only does China currently hold the world’s largest population of mobile internet users (some 527 million), cross border purchases increased from a total of $2 billion to $20 billion in just two short years alone (2012-2014.)
What are the advantages of cross-border e-commerce?
One of the key mitigating reasons for the success of cross-border retail is the ability to expand into otherwise unknown or underexposed demographics—in particular, localities with a burgeoning economy. In an increasingly global marketplace, even smaller retailers have indicated increased revenues owing to the proliferation of international e-commerce. And with increased revenue, comes the need for increased support. Demand, after all, dictates growth.
The rise of cross-border specialists and consultants (including Alibaba and its ubiquitous CEO, Jack Ma) have helped bring international trade to the forefront of B2C retail, particularly in areas governed by barriers of language and distance. Gone are the days of international trade being the sole province of “Big Three” corporations and lobbyists. Now more than ever, the need for transitional, strategic and support services are at an all-time high. And as cross-border sales traffic continues to increase, the need to refine and optimize delivery and operations has never been greater.
What are the drawbacks of cross-border e-commerce?
No retail expansion is ever going to result in a seamless customer response during its initial stages, and nowhere is this more true than in cross-border e-commerce. Despite decreased regulatory restrictions and the plethora of vendor payment options, the dilemmas of B2C international trade remain myriad, from tax and liability variances to language barriers. Ensuring a robust understanding of international commercial regulations, logistics and the viability of non-local incorporation may seem like a daunting task to the average smaller retailer—but in a marketplace driven by global innovation, it’s a matter of survival.
Currency conversion providers and alternative payment services are one way to meet the rising changes in international currency and fees, but the solution is also fraught with the same security risks as traditional methods of e-commerce. Ensuring encrypted network security precautions has never been more vital, particularly with the increased viability of alternative payment methods. Implementing local technology support in distant locations, be it outsourcing or partner acquisitions, is critical in helping to meet security risks of international e-commerce.
A localized sales strategy is another crucial method of understanding key demographics in previously uncharted territory. While it may demand a seemingly disparate shift in marketing foci and strategy, understanding cultural and geographic differences in emerging markets means all the difference in establishing brand recognition—no matter the immediate return on investment.
Personal identity in a global age
Despite the daunting task and unfamiliarity of adaptation to international markets, the increased development of cross-border e-commerce remains an untapped potential for many retailers; and with it comes the demand of establishing a unique global identity. If demographics differ substantially between Manhattan and St. Louis, then the gap is even more perilous between the U.S. and Singapore. Ensuring a transnational identity may remain a recurring dilemma in the dynamics of your marketing; but further refinement and streamlining of strategies can help reduce the seeming cultural barriers into one critical element—the human element. And at the end of the day, that’s what any successful marketing strategy is ultimately about.
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