Mastering Cross-border eCommerce
To survive in a global marketplace, it’s no longer enough to simply sell in your home country. Cross-border trade as a revenue stream is being facilitated through advances in eCommerce and the breaking down of international barriers - and it’s a sector of the retail industry that’s growing.
Shopping across borders gives consumers an expanded choice of products, without the limitations of the local market. In Southeast Asia, economic development, poverty alleviation measures, and rising levels of spending power all point towards a bright future for cross-border eCommerce. But challenges remain. It isn’t enough to simply have the technology and infrastructure to sell across borders.
According to recent studies, if ASEAN were a single economy, it would rank third in population size with over 600 million people, and seventh in GDP output with US$2.5 trillion (S$3.4 trillion)) recorded in 2016. Yet, in most ASEAN nations (with the exception of Singapore), eCommerce accounts for a small percentage of total retail - despite its potential opportunities for growth.
Why are eCommerce players like Zalora and Shopee so small in Southeast Asia? The size of the available markets has a part to play, making it difficult to establish the kind of infrastructure needed for effective cross-border trade. But there are other factors hampering the growth of cross-border eCommerce, and challenges that retailers will have to meet, if the sector is to live up to its potential.
The Global Spread Of Cross-Border Online Shopping
The PayPal Cross-Border Consumer Research report indicates that consumers from small but relatively well-off countries are most likely to have recently bought something online from a foreign vendor. These nations include Belgium, Israel, Austria, and Ireland. A 2018 survey by Bitkom Research breaks down the figures as Ireland (with 16% exclusively domestic purchases), Austria (19%) and Israel (21%).
In Asia, Japanese customers (with 94% exclusively domestic purchases) are almost exclusively visiting in-country web stores. By contrast, the citizens of Singapore and Hong Kong are highly likely to have purchased something from abroad within the last 12 months.
Consumers in those markets most receptive to cross-border eCommerce have relatively high household incomes, and a well-established consumer market. These are sophisticated consumers who know what’s available out there – they just might not be able to source it locally, in a comparatively small domestic market.
China and the US are the dominant destinations for cross-border shoppers. According to PayPal consumer research, China in particular (with a 26% global market share) is ranked the most popular cross-border destination for global shoppers. The UK and Germany are also popular destinations.
Chief Motivations For Customers When Shopping Online Cross-Border
For most consumers (72%), a lower price is the principal motivation for purchasing goods abroad. Almost half of them (49%) name availability as a significant factor. Cross-border eCommerce in essence transforms the global market into a locally accessible catalogue.
Besides availability, cross-border consumers value fast and reliable delivery of the goods they buy. For this reason, they tend to pay more attention to the reputation, sales policy, and logistical provisions of foreign websites than they do to the website’s design. Good word of mouth and positive reviews are essential for such retailers to gain their trust.
A study of the Spanish market has detected a direct relationship between the customer’s level of digital education and the numbers of cross-border shoppers. With more sophisticated online skills, customers feel safer, and make better informed purchasing decisions based on the reviews of other consumers.
The increasing levels of digital sophistication of shoppers worldwide make it a priority for retailers looking to profit in the cross-border space to provide a clear and fair policy, which protects the customer’s privacy and facilitates a safe and secure shopping experience.
In Asia, inhabitants of Singapore are the most active participants in the region purchasing products online from overseas, with two out of three people doing so once a year. The absence of Goods and Services Tax on imported goods of S$400 (US$293) or less is a huge incentive for this. Singapore is followed by Thailand and Malaysia, where nearly every second person buys something online from foreign countries.
Surprisingly the majority of cross-border purchases are still made on desktop computers or laptops. According to PayPal’s research, in key markets such as Canada, France, Germany, and Japan, a solid 70% of cross-border purchases are made on a desktop or laptop.
Moving into the Asia Pacific region, the picture becomes more mixed. In India and China for example, desktop and laptop sales account for less than half of cross-border shopping. And in Singapore, cross-border eCommerce is often facilitated by mobile apps.
Despite the high reliance on desktop at present, prevailing trends indicate that mobile will become increasingly important for cross-border eCommerce, in future.
Challenges Of Going Global While Staying Local
The mechanics of eCommerce now makes it incredibly easy to shop directly from merchants scattered all across the globe. For small to medium-sized sellers in particular, this trade enables enterprises to greatly extend their reach, and expand their customer base to international levels. However, doing this successfully necessitates a shift in mind-set.
Cross-border selling requires retailers to think globally when considering the geographic spread of the customer base, but act locally in addressing the needs of individual consumers. This involves the customisation or redesign of websites and online assets, and a rethink in logistics and methods of delivery.
Language is often a barrier, but content can be localised for various languages through the use of translation software engines, the hiring of indigenous translators, or a mix of human and machine translation. Keep in mind that if you make localised language services available to buyers, those same consumers will expect to have support available in their language, as well.
Cultural translation is also desirable, to avoid paying the price for campaigns which may be seen as inappropriate in a local context. Retailers looking to cross-border markets should therefore work with trusted people who live in the country to learn customs, language, and business nuances while in the planning stages - and be willing to hire the staff or advisers needed to put this knowledge into practice as campaigns roll out.
Multi-language websites and customer service are also an advantage in addressing the fear of fraud, which is the major reason identified by the PayPal study as to why potential cross-border customers refrain from completing an order.
A lack of transparency regarding import duties and taxes is another concern that complicates the flow of cross-border shopping. For 38% of respondents to the PayPal customer survey, it is important that costs are transparently shown, and that payment is possible in their local currency.