Cross-border Ecommerce: Catching the Trade Winds
As senior director of cross-border trade, I recently had the privilege of representing PayPal at an ecommerce panel in South America. I was impressed by the panel’s insights—particularly its heightened awareness of cross-border ecommerce.
Some countries aggressively pursue this opportunity, while others, like North America, leave it untapped. It makes sense that countries with smaller domestic markets would reach for international sales, but those with larger domestic markets should also consider the possibilities.
- Consumers: Over the next three years, more than 85% of the new online buyers will come from outside North America and Western Europe.
- Size: According to a study conducted by PayPal, the volume of cross-border ecommerce in 2013 was 105 billion USD. If this trend continues, cross-border ecommerce is expected to grow to more than 300 billion USD over the next five years—that’s larger than all North American ecommerce today.
- Growth: As developed ecommerce markets (like the US) continue to mature with growth rates in the low teens, less-developed markets (like Brazil and Mexico) are expected to grow at almost twice that rate.
Examining the marketplace proves that brands can blossom into cross-border franchises. Online fashion player ASOS sells and ships to 237 countries. eBay has more than 20% of its volume transacted across borders. And offline brands like Aéropostale are serving international consumers with localized experiences from their websites.
There’s no doubt that cross-border ecommerce presents challenges—such as international licensing rights, elaborate customs regulations, and shipping regulations. But companies with successful cross-border operations have met these challenges and reaped the rewards. Here are some best practices:
- Inventory: Consumers venturing outside of their home markets are pursuing either price or selection. Since pricing arbitrages are difficult to maintain and often create channel conflict, unique inventory presents a more realistic, sustainable advantage. It’s tempting to focus on localizing language, shipping, and currency instead of inventory, but don’t be seduced. Inventory is crucial to success.
- Brand awareness: Generating demand abroad is difficult and expensive without strong brand equity in the destination markets. Start out by focusing on areas in which your brand is well known, then build awareness from there.
- Shipping: For cross-border buyers, shipping is about traceability and certainty—not speed. Focus on transparency. Increase trust by providing effective tracking mechanisms; avoid surprise costs and import duties; and facilitate returns for a seamless, easy customer experience.
- Mobile: Consumers in emerging markets are adopting ecommerce on tablets and smartphones even more quickly than those in the US and Western Europe. Mobile shares as high as 40% or 50% are not shocking. Remain competitive by optimizing your consumer’s mobile experience.
- Organization: Sometimes existing cross-border flows are deemed too small, or considered part of the domestic business and therefore overlooked. To be successful, cross-border operations demand attention—especially when starting out. If cross-border is not yet part of your operation’s DNA, then dedicate resources and a specific P&L to it.
Cross-border ecommerce is a fertile opportunity for the right brands. If you’re considering expanding to cross-border markets, the best advice is to try it out. Start small. Work with your existing infrastructure, inventory, and marketing before incurring costly localizations. If it seems to be working, iterate quickly. If you’re successful, you’ll catch the trade winds.