If the world seems smaller and smaller, it is because it is becoming easier and faster to make purchases from faraway places without any real perception of the distances – physical, linguistic, currency, etc. – that separate seller and buyer. For this reason, more and more merchants are considering internationalising their eCommerce as the next step in the history of their business. Nowadays, the global market is inevitable. However, before attempting to reach consumers in other parts of the world, it is important to build a solid foundation. Only 35% of eCommerce owners feel able to do this, discouraged in particular by the logistics and potential difficulties of processing payments from abroad (source: Wakefield Research).
How, then, can businesses take this important leap? Cross-border eCommerce solution providers such as Go Global eCommerce offer invaluable guidance and support to D2C (Direct to Consumer) companies that want to internationalise their businesses, removing the technical and logistical barriers, even for smaller brands. Here we take a look at the key points to bear in mind when setting up your own international eCommerce:
- The world of cross-border eCommerce
- Which channels?
- Rules, laws and constraints
- Challenges and opportunities
The world of cross-border eCommerce
In recent years, international sales have steadily increased, partly due to the growth of a new middle class wanting to buy foreign goods. This process closely concerns the APAC (Asia Pacific) countries, among others. Aided by the pandemic, consumer habits have changed and their expectations are being met by a wide range of offers that go far beyond national markets.
A study commissioned by Visa reports that 87% of eCommerce owners are certain that their future lies in cross-border sales. To date, 66% of eCommerce stores have expanded internationally and cross-border sales account for one third of their total turnover. As a result, 66% of the eCommerce shops that have not yet entered the international market plan to do so in the near future, and as many as 90% within the next three years.
The first step to take when deciding to expand your business cross-border is to identify which markets to target. According to predictions by Statista, a leading platform in processing and providing market data, Europe is expected to be the fastest growing market in the world for eCommerce for the five-year period of 2020-2025, with 67% growth. Cross-border eCommerce, particularly, has growth prospects of 27% by 2027.
At the same time, outside of Europe, other countries continue to ride the wave of eCommerce growth. The markets are far from saturated: according to an estimate by Forrester, online sales in Asia-Pacific countries will reach a remarkable figure of $2.5 trillion in 2023. The US market is also a giant to be reckoned with, according to Statista’s forecast which reports that revenues will exceed $1.3 billion in 2025.
In addition to taking into account general growth margins, each brand must understand how to position itself in each market, and to do this it is necessary to conduct an analysis of local values and consumption styles. This implies not only knowledge of the characteristics of the demand, but also of the pre-existing offer, so that proposals can be adapted to the needs of any given market, and any gaps to be filled are identified.
Another choice online retailers must make is the use of marketplaces such as Amazon or running a proprietary eCommerce. The two options are not necessarily mutually exclusive, but it is wise to know and weigh up the pros and cons of both options.
Large platforms offer companies support in terms of logistics, invoicing, breadth of potential demand and more. At the same time, the size of the offer and the impossibility of customising services risk undermining the visibility of the individual brand and eroding its competitive advantage. As for proprietary eCommerce, a definite investment capacity is required in terms of expenditure and expertise, and all the more so when making the decision to expand into other markets. However, they do allow for the development of a customised and flexible inbound marketing strategy, according to specifications and needs.
The same alternatives apply to eCommerce in general. Yet, when it comes to cross-border e-commerce, it is important to take into account aspects such as payment methods, shipping and logistics, multilingual customer service and return policies. This balances, on the one hand, the potential to enjoy the mediation of a marketplace – paying the cost as described above – and, on the other hand, the advantages and disadvantages of doing it yourself.
Rules, laws and constraints
A key aspect to take into account are the rules and regulations when organising international online trade.
Trade within Europe is simplified by a system of common rules, which make the various steps for buying and selling there both smooth and efficient. Above all, European directives are geared towards consumer protection, whether by labelling, privacy and transparency, or fair trading practices. In particular, 2022 has seen a number of new regulations that merchants will want to look into before proceeding: the Digital Markets Act, the Digital Services Act, Omnibus directives, and new provisions for the management and storage of user data and product packaging. At the same time, it is also a good idea to find out about any specificities or even stricter rules in force in the target markets.
VAT is an issue in itself. The introduction of IOSS (Import One Stop Shop) has meant that, simply by registering with one of the member states, a merchant is able to sell in all European countries. This has greatly eased the process, which previously required registration in each country of destination for the products. Exceptions are transactions with a value of more than EUR 150, in which case the IOSS number is replaced by different regimes: DDP (Delivered Duty Paid), which assigns taxes and charges to the seller, and DAP (Delivered at Place), which passes the additional costs onto the customer.
Challenges and opportunities
With the bigger picture defined, here we go into more detail about the main challenges merchants face at the various points of international expansion.
- Logistics: Consumers are well-accustomed to fast, precise, flexible and traceable deliveries. Inevitably, it is harder to guarantee such a service from one border to another. Tracking, more than anything, can prove difficult, due to the different handovers. Two alternatives are available. Firstly, one can make a cross-border delivery, not dissimilar to a domestic shipment but more complex bureaucratically. Secondly, localisation is an option. I.e., making deliveries from warehouses located in each destination country. This second possibility guarantees greater autonomy but may prove impractical. In the first instance, coordination with partners is necessary, but a more scalable strategy is adopted. The phase from dispatch to delivery is the most delicate and it is here that customer satisfaction is most at stake. Consumers value regular updates on shipment status. Therefore an efficient, clear and accessible tracking service is essential to reassure the buyer that delivery will be successful. As far as shipment management is concerned, the flow of information can also be accompanied by personalisation of the service, turning it into an opportunity for loyalty as well.
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- Customer relationship: Everyone knows how important it is to ensure positive customer experience in successful eCommerce. But this goal is unattainable in cross-border trade if differences aside from physical distances are not taken into account. Cultural, linguistic and currency differences can compromise customer relations or, more positively, present themselves as an opportunity to distinguish oneself from competitors. It is therefore extremely important you localise your business: your website and customer service must be accessible for speakers of other languages, different currencies, and adapted to the various cultural contexts you expect to address. The marketing strategy must also have the necessary flexibility. Consider, for instance, discount seasons and holidays throughout the year in different countries.
- Taxes and pricing: Never lose sight of taxes and additional costs for exports. When setting the price of a purchase it is essential to take into account the various charges that will be incurred. Avoid unsatisfied customers due to nasty surprises when paying or receiving purchases.
- Returns: Something consumers pay a lot of attention to today is return policies. In the case of cross-border eCommerce, however – due to taxes, shipping costs and customs – this is a particularly delicate stage in the purchasing cycle. Sending a replacement item and resigning oneself to a loss only makes sense if the value of the product is less than the shipping costs. If this is not feasible, an appropriate strategy must be devised, taking into account various eventualities. In any case, according to a report by the IPC, only 6% of cross-border purchases are returned, even though ease and clarity of return procedures is at the top of consumers’ preferences when shopping online. A satisfactory return policy is therefore rightfully among the characteristics of a good customer experience.
Speed of delivery, ease at checkout and availability of one’s preferred payment methods are the three main success factors in international eCommerce. While, as mentioned at the start, many retailers feel ill-equipped to expand into international markets, today there are many tools and services available to support their initiative. Merchants of Record such as Go Global eCommerce, for example, are at the forefront of supporting businesses keen to make the leap.