The Cross-Border Commerce Boom – What will Matter in 2018!

Now we can buy anything from nearly anywhere in the world just by clicking a button on our smartphones. Yes, cross-border commerce is actually booming, and one can expect the juggernaut to continue in 2018 and beyond until the foreseeable future.

Smartphones have made shopping easier. One can expect more shoppers coming out of their self-imposed abstinence from online shopping owing to minimal security concerns nowadays. A Forrester study revealed that cross-border commerce is expected to double by 2021 with staggering revenue of $424 billion expected by that time. Cross-border sales shall include 15% of online purchases too. China’s cross-border market is expected to grow to a whopping 40% in 2021 and the country can easily fuel growth in the domain.

The McKinsey report revealed that most wealthy people in China, buy foreign clothes and gadgets that are mostly not available in China. Baby formula is quite popular here.

Why? Because cross-border shopping helps them in deriving better prices, and good protection from counterfeit goods too. Now that is a major point!

The Leader in Cross-border Commerce and the Future Prospects

The US is touted as the world leader of cross-border commerce trade – including imports and exports. The country has a trusted cross-border market worldwide and known for its product quality too. A DHL survey revealed that 75% of respondents who make foreign purchases selected the US as their ideal destination for online shopping. Now that says a lot about the US as a major cross-border commerce.

How does it augur for other countries though? Pitney Bowes recently disclosed its Global Online Shopping Survey that reported 66% of shoppers who shopped the web locally have made purchases from other countries in their recent past. Singapore, Australia, and Hong Kong are top countries with most number of cross-border shoppers. On the other hand, Japan has grown its cross-border confidence tremendously in the recent years.

Smoothening the path of commerce locally!

Although the predictions are fantastic and rightly so, cross-border e-commerce is far from easy, for retailers owing to huge competition and diverse trade laws in every country. A 2016 survey by Paypal revealed 30% of consumers from different countries buying from the US, abandoned their cross-border purchase midway since they were unaware of the taxes or customs fees involved in the purchase. Here is what every cross-border commerce provider should know:

  • The exact kind of taxes and fees incurred through cross-border sales
  • Right communication to local customers in the country about the products.
  • No customers should get lost along the way, so multiple processes should work in harmony – the ordering process on site and payment methods along with calculation of taxes and alignment of government regulations
  • Communication of returns should be in clear words including the fulfillment clauses and delivery mode.
  • The return process should look seamless. For the seller, problems arise from the fact that each of the parties involved has a different level of understanding, motivation, and sense of urgency when it comes to getting the goods from one country to another.

Getting fulfillment right is the key to successful cross-border commerce and retailers know it. According to the Chinese Cross-Border Sellers survey by The Payoneer, 71% said fulfillment is highly important and logistics play a major role in this respect.

If 2018 is the year you plan to initiate cross-border commerce, ensure that the products are available locally with a good distribution in place in an international market. Also, ensure that your logistics partner is clear about the bigger picture. While consumers are driving the demand for cross-border e-commerce, get the right add-ons for your e-stores and the right domain experts to everything runs smoothly at the local level.

How E-Retailers Manage Inventory and Fulfillment Across All Outlets

 

Few retail brands have managed to build empires by making the most of both local and cross-border commerce deals. Global brands do not dominate by fluke. In fact, they have to weave an intricate web of strategy, manage the system and even bring about perfect execution. They are required to deliver goods to consumers exactly when they need it.

Managing inventory effectively and efficiently is one of the prime concerns of all retailers, regardless of time zones or channels. Even if common challenges like language, currency and geographical distance are put aside, it is important to manage the inventory considering cultural differences and overall brand perceptions, making it a complicated affair.

Retailers who deal with cross-border commerce need to understand the complications and recognize consumer needs holistically and geographically too.

Regional Perceptions

Just because a brand boasts of a strong presence in one part of the world, it does not necessarily translate into quick popularity elsewhere.

For example, a U.S. based retailer might be known to offer quality brand products at low prices. But distribution issues crop up along that forced the retailer to hike prices in another country. The brand promise changes in this regard, and affects the retailer’s identity too.

Successful global brands develop strategies that support their brand promise universally while considering the varied challenges offered by these markets. They may need to chalk out another brand promise or modify its original one based on the new geographical markets.

Real-Time Insights and Transparency

Real-time visibility and insights into the inventory is challenging for most cross-border operations compared to local operations. This is because of wide customer preferences, cultural differences, geographical diversity, and much more. Retail fulfillment does not work in the sense of a one-size-fits-all model, and hence real-time data is pivotal for inventory management. Leveraging Shopify, some ecommerce solution providers have successfully delivered add-ons that aid in ensuring real-time sales insights on more levels than one.

Retailers need to optimize logistics and processes with latest tools and technologies.

  • Lidl, a European retailer consolidated its routine operations across 10000 stores in 26 countries with a robust, centralized IT system to process large data sets in real-time.
  • The synthesis of this data helps the company to fine-tune their supply chain management and also anticipate consumer preferences in any region.
  • Additionally, the central system ensures timely product availability and profitability across borders too. 

Inventory Optimization to Fulfill Demands

Beyond the required visibility into inventory, every cross-border retailer needs to optimize their operations, as one style does not fit all. Brands need to optimize inventory to sell the products effectively across multiple regions at acceptable price points too. How can one manage this?

Size, color, and style pose significant challenges especially when retailers are keen to leverage inventory across multiple geographies.

Brands optimize inventory and refine product assortments based on buying behaviors witnessed in each region. Inventory that does not sell well is promoted elsewhere or to the online channel to prevent extra stocks and price reductions. The sale is likely to happen through, if the inventory is shifted to the region where it sells well. This is tricky in terms of cross-border commerce.

For example,

  • A consumer in Ohio could order a hoodie that is stocked in Vancouver in Canada.
  • The distribution center then ships the product to the customer’s house or a pickup store in the local region.
  • But the shipment is crossing borders and hence as per compliance regulations, the retailer has to include import and export documentation, along with accurate product classification before the sale can be made.

Varied brands now take recourse to automation to expedite the product clearance through customs, and also avoid noncompliance in any measure. This automated implementation reduces costs of cross-border commerce drastically. An automated customs management system enables retailers to classify products and then calculate taxes and duties involved in selling their products beyond borders. The solution could embed import and export documentation aligned with the strict compliant standards.

Streamline your Payment Processes

When setting up cross-border commerce, retailers need to understand transaction taxes for every country with a robust system in place that can ensure that consumers are conveyed about the charges involved transparently including conversion of their local currency, taxes involved and varied cross-border fees.

A brand can meet currency challenges by stating product price in multiple currencies and languages. This is a best practice that can address the labeling problems as well as address some cross-border commerce challenges.

Conclusion

Brands must also evaluate market position when opting for cross-border commerce to any country. Those who are doing well in the U.S. may also face huge challenges when expanding into countries like Australia, India, or even China. Brands need to pay heed to local brand perceptions, implement visibility of inventory, optimize sales processes and also ensure compliance for all sorts of cross-border transactions for maximum success.