Cross border e-commerce: What exactly should you know for your business?

So what exactly is cross-border? The term generally refers to international online trade when consumers buy from merchants online, located in other countries.

Cross-border ecommerce can refer to online trade between a business (retailer or brand) and a consumer, between two businesses, or between two private people.

According to an ecommerce study by Google and Temasek, Southeast Asia’s internet economy has exceeded US $ 100 billion for the first time in 2020 and online consumers have jumped from 49 million in 2015 to US$ 150 million in 2020.

The sudden increase of cross-border ecommerce could be traced back to the growth of the young, urban population who rely heavily on technology. The value of cross-border e-commerce is likely to rise to US$ 627 billion by 2022, making it a total of 20% of ecommerce as a whole.

Advantages of Cross-Border ecommerce

Looking to the Past

Global economies have significantly receded in 2020 due to the COVID19 pandemic. However, let us look at Greece in 2010 and 2011. During the same period, the Greek online market showed a steady growth of 40-50%. Spain, during the same period, showed an annual increase of 18%. This was in spite of the countries suffering from a major global financial crisis.

According to a survey conducted across Southeast Asian markets by Credit Suisse Research Institute, yearly online retail sales for all surveyed countries could rise to US$ 3.5 trillion and impact the retail finance and technology sectors most significantly.

Payment preferences

Globally, the majority of cross-border online purchasers use a credit or debit card to make payment, However, this method is extremely susceptible to fraud and usually lacks anonymity. Over the years, several payment modes have arrived such as PayPal and Stripe, which are safe and secure methods to make payments all across the world.

ecommerce businesses that are planning to step into cross-border sales would first need to ensure that their services match the behaviors and attitudes towards payments in the country they are targeting. Additionally, several payment modes need to be offered for each market. For example, in Malaysia it’s Grabpay, an e-wallet provider that helps facilitate mobile cash payments via online methods. Another example of an online wallet would be Go-Jek, which is used widely in Indonesia as an e-wallet.

Multi-site and multi-warehouses

A cross-border ecommerce business can have numerous B2B or retail sites, each with its own product catalog. Building and maintaining several ecommerce sites is a fast and cost-effective way of entering new markets and expanding your online presence.

With cross-border ecommerce operations, a company can locate warehouses in many countries. Having multiple locations throughout the globe tends to come with benefits, such as stock relocation and price arbitrage when demand levels vary between markets. Also, certain locations tend to be cost-effective locations for warehouses.

Risks involved with cross-border ecommerce

Like all businesses, small or big, choosing to explore options for cross-border ecommerce business comes with a substantial risk. Hence, it is crucial to assess and understand the nuances of these risks before you dive into this.

Customer’s buying habits

Customer behaviors and habits differ between countries. Hence, a business needs to formulate a strategy on how to operate in new territories. The top two considerations would be payment preferences in the local market currency and how best to deliver customer service. It is always recommended that you find a local partner in that territory thereby helping your platform deliver an experience that best reflects local preferences.

Fraud

Geographical borders are being blurred due to ecommerce attracting a large number of fraudsters. Fraud is one of the major challenges faced by sellers who are welcoming customers from other countries. To counter this, it is advisable to select a reliable payment mode that is accepted worldwide and carries credible backing.

Logistics

Logistics is one of the most important aspects of a cross-border strategy, and if not handled well could provide a negative perception of your business. Logistical challenges such as customers receiving their items later than expected and being unable to track their orders can have a huge impact on ratings and reviews and ultimately the success of your cross-border venture. Often the root-cause of logistics issues is the involvement of multiple parties in logistics. Before a package reaches a customer, it has generally been handled by several different logistics partners, leaving plenty of room for human and administrative error. It is therefore important that your business uses dependable logistics partners.

Regulations

Business owners need to learn and understand the rules and regulations of the markets they will operate in. This requires a rigorous examination of the local government and taxation regulations that relate to the product categories you are operating in.

How to build an effective cross-border ecommerce strategy?

The growing popularity of ecommerce has led to a vast change in the modern consumer’s behavior and expectations. Customers want ecommerce to transcend geographical borders. This change is observed in sophisticated Asian ecommerce markets such as Malaysia and Singapore.

According to a report by Payvision, an estimated 55% of all ecommerce in Singapore and 40% of all Malaysian e-commerce is cross-border.