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Cross-border e-commerce is the exchange of goods and products globally. International digital commerce can help improve market reach, revenue potential, and brand awareness. When adopting cross-border e-commerce, businesses should research international markets and carefully choose which countries to expand to.
By 2030, experts predict that the business-to-consumer (B2C) cross-border e-commerce market will reach a value of almost $8 trillion, up from $785 billion in 2021.1
With the growth of cross-border e-commerce comes new opportunities for businesses to sell goods and services outside their home countries, especially those looking to increase their client base and market share.
However, this rapid growth is not without its challenges. Businesses must consider the global differences in payment methods, respond to consumer needs and expectations, and increase brand awareness to reach cross-border success.
Read on to explore the opportunities and challenges of conducting business internationally and how to develop and tailor a cross-border e-commerce strategy.
Cross-border e-commerce refers to the international buying and selling of goods, products, and services online across country borders. Both physical stores and digital merchants can engage in global e-commerce, including cross-border payouts and payments.
Additionally, these transactions typically divide into three categories:
B2C transactions account for 70% of the cross-border e-commerce market, according to Astute Analytica’s Global Cross-Border E-Commerce Market Report.2
Plus, with the growth of cross-border trade for branded and unbranded goods, international commerce is playing a more prominent role in many businesses’ growth strategies.
Expanding across borders may be a logical step for a growing business, especially those with a limited market share in their country of origin. Cross-border e-commerce can provide various benefits, like those listed below.
Well-designed cross-border marketing strategies can help businesses expand their offerings into new markets, both existing and emerging. Market research allows companies to understand local needs and preferences, cultural nuances, and potential roadblocks.
As a result, brands can adapt products and services locally and regionally, diversifying their customer base and increasing revenue streams.
Some products and services depend on seasonality for success. By expanding e-commerce across borders, businesses can tap into international seasonality, potentially providing a larger timeframe for selling and distributing products.
Plus, holiday marketing and season-specific goods may no longer be irrelevant for most of the year.
Cross-border e-commerce can offer competitive advantages outside a business’s country of origin, such as an expanded brand image and reduced dependency on a single market.
Branching into new and emerging markets helps companies expand general awareness by putting their branding and identity in front of a new set of potential customers. Additionally, repeat customers in new markets can improve word-of-mouth marketing and enhance visibility to new consumers.
Cross-border e-commerce can also be a good opportunity to sell slow-moving or dead stock to a wider customer base. This strategy can help optimize e-commerce conversions by selling low-demand products to the right customers, not just the available ones.
Businesses can also reach more people who would use or consume their goods, enhancing sales.
Businesses aiming to increase transactions may benefit from meeting target customers where they are, rather than expecting them to seek solutions to their needs.
Accessible e-commerce platforms, localized payment options, and efficient checkouts for cross-border transactions can help demonstrate that a business prioritizes consumer experiences rather than their money.
While cross-border e-commerce should put the customer first, this strategy is also a great learning opportunity for businesses of different sizes. Expanding into international markets can help businesses gain cross-cultural insights, helping them to:
While the benefits of cross-border e-commerce are great, international selling can also come with a few challenges. However, the right merchant partner can help businesses mitigate and minimize these concerns.
Different legal, regulatory, and compliance laws exist in countries around the world, especially for companies securely storing payment information for customers. From PCI DSS compliance to GDPR compliance, businesses may have to invest in more security and high-privacy platforms or mandates.
International shipping complexity, including taxes, laws, and import and export regulations, can impact cross-border transactions. A few shipping factors businesses should consider:
These considerations may contribute to a total shipping cost that can be high enough to negate potential profit and e-commerce shipping efficiency. Calculate shipping costs during planning to understand the costs and fees involved in advance.
Language and currency discrepancies, as well as cultural barriers, may be challenging. To support cross-border operations in a range of countries, businesses may need to consider localization strategies such as:
These strategies can be complicated, time-consuming, and resource-intensive. However, researching which countries are more profitable and plausible to do business in can help save costs and time.
Businesses expanding into cross-border e-commerce may experience payment processing issues, especially when dealing with varying currencies and financial systems.
Cross-border fees can be common in currency conversion and goods exchanges, so businesses should research global payment methods before expanding.
Brands may also need to consider additional fees for payouts, fulfillment companies, and other services.
Credit card payments can be susceptible to different types of fraud, especially for businesses out of their comfort zone or country of origin. To help tackle this threat, businesses can invest in machine learning fraud detection technologies or monitor and update risk management strategies.
No matter what product or service a business supports, breaking into a new market can be a challenge. Whether choosing the right pricing strategy or offering something new and useful, businesses may find it difficult to research and gain insight into their new competitors.
Knowing good pricing options, shipping methods, and service specifics requires in-depth competitive analyses of new, established, and emerging international brands.
From multilingual support to post-sales service, many businesses may need specialized cross-border e-commerce services. Companies may need to understand how to handle international issues, including:
Providing stellar services with language and cultural barriers may be challenging, but it’s not impossible.
Before diving into cross-border e-commerce, businesses should pinpoint which international markets they’ll likely succeed in. Build a go-to-market (GTM) strategy and consider these key factors when deciding what countries to sell in:
A range of data – including information from market research, customer contact forms, and social media – can help brands compare these factors.
Selling internationally often involves understanding cross-border e-commerce logistics and the implementation of a coherent e-commerce strategy, which can be accomplished by considering these steps:
Conduct extensive market research to identify the location and value of potential new markets. Where one product may thrive, another may not, so businesses should understand what each market’s consumers need, expect, and want to purchase.
Understand the legal and compliance implications of selling in other countries, including restrictions on the sale of certain goods and services. Commonly restricted items include:
Some goods may require import and export permits or licenses, so being prepared to apply for these documents is important to the success of cross-border e-commerce.
Assess the potential profitability of a global e-commerce operation while considering duties, taxes, and shipping costs. Additionally, businesses should be aware of the potential for fraud or a country’s security requirements when setting up and managing international payment options.
Brands should also match pricing tiers and typical pricing strategies employed by in-country or competitor companies.
From packaging and shipping to everything in between, outsourcing logistics services can be lucrative. Businesses that choose this route should hire a service provider that understands and knows the country’s restrictions and regulations.
However, it’s important for companies to maintain these relationships and meet with third-party providers regularly to ensure high-quality service.
Organizations may need to invest in a version of the website and content that is accessible in a market’s language, offer services in multiple languages and currencies, and pay attention to regional sensibilities. Multilingual and localization specialists can help businesses prioritize customer support that is suited to the new market.
Users can offer valuable insights into how products, services, and processes are experienced. Businesses can test unique features or strategies slowly before implementing them across systems. Cross-border e-commerce strategies may be specific to demographics or geographic locations, and user testing can help brands identify where certain strategies are successful.
Implement data management systems to automatically collect, securely store, and efficiently update data. These systems should be able to handle product and service data as well as customer information.
Plus, automated systems can help businesses use data in post-purchase experiences, personalizing and enhancing customer interactions.
There are various types of cross-border e-commerce platforms available for businesses to invest in. For example:
Choosing an e-commerce marketplace requires a business to consider its needs and those of its customers. Below is a list of some major marketplaces to consider, including the geographic areas they serve.
Cross-border e-commerce has become increasingly accessible with systems and processes already in place to ease the commercial journey over international boundaries. Trusted tools like payment gateways and e-commerce platforms can help businesses tap into new markets, accept various payment methods, and enhance business success.
Accepting international payments through platforms like PayPal can provide flexibility for customers and may improve convenience and loyalty.
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