Why Is Cross Border E-commerce the Future of E-commerce?

International e-Commerce is called cross-border e-commerce, when consumers buy online from merchants, located in other countries and jurisdictions; it is a phenomenon that has quietly gained huge momentum as customers purchase products from outside their borders.

The last 2 years e-commerce has seen distributed eCommerce websites – Twitter and Pinterest, and recently conversational e-commerce has emerged as a contender for the future. Conversational e-commerce is seen as a potential use case for customer service which involves the use of technology to help with communication.

These are fads whereas cross-border e-commerce has potential to be the future of e-commerce.

It is an online trade business (retailer or brand) and a consumer (B2C), or between two private persons (C2C), e.g. via marketplace platforms such as Amazon or eBay.

Risks for cross-border e-commerce:

Generally, there are 3 main risks which influence cross-border e-commerce:

1. Fraud – arguably the biggest challenge faced by merchants who allow the customer to purchase from them outside the borders of their country. Thus picking a good payment service which is aware of local customer behavior goes critical.
2. Regulations – Local government and taxation need the thorough examination and could potentially negatively impact the business.
3. Logistics and reverse logistics – it is important and can negatively impact the perception of your business by local customers. Consistent and predictable logistics is a requirement for a business that wants to capitalize on cross-border e-commerce.

By 2020, over a 2 billion e-shoppers, or 60 percent of target global population, would be transacting 13.5 percent of their overall retail consumption online, equivalent to a market value of US$3.4 trillion.

Situations:

The Internet enables consumers to shop globally, by purchasing products and services across their border, driven by a common language, a common border, special offers, or simply because the product or service isn’t available in the consumer's own region. The increasing popularity of tablets and smartphones, allows consumers worldwide to compare prices, connect with other consumers via social media, to discuss products and services, to select a web shop independent of its location and to transfer payments via their PC, laptop, mobile phone or tablet at any place, anytime, anywhere.

Merchants and payment service providers profit the opportunities, presented by global e-commerce; banks have come to realize, that offering acquiring services to successful stakeholders engaged in online trade, can be more profitable than selling banking products. Online retailers service providers have hardly been affected by the economic crisis; in an age when international expansion through global online trade has become big business.

Challenges

Expansion through cross-border e-commerce can only be realized after online Merchants have overcome a number of challenges.

A solid partner in the targeted region can help the merchant analyze and understand local business customs, consumer preferences and cultural differences, which affect decisions around inventory management and product marketing. Marketing strategies will have to be customized, to reach a different audience in a foreign market and a different infrastructure might require local logistic and delivery services. A”One size fits all” approach might prove to be a pitfall. Merchants which offer free or cheap delivery attract more consumers.

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Consumers prefer to pay in local currency; global expansion requires multi-currency conversion and settlement in currencies defined by major card schemes, including interchange rates. Banks in the other jurisdictions have to be compliant with local legal requirements. Partners which have acquired expertise in the technical, innovative and legal aspects of online sales can help merchants to manage transactions over one secure payment gateway.

Opportunities for cross border ecommerce

INDIA:

Cross-border shopping is typically more premium-end brands, so the ticket size would be higher

In the survey, around 62% of those surveyed only shopped domestically,36% shopped domestically and cross-border while 2% shop only cross-border. That number would be higher, but for concerns about shipping and customs duties that would be levied on the products. And 53% of those who bought products in other countries used the address of a family or a friend in another country.

Earlier cross-border payments are difficult and should be managed to ensure that customers are not surprised by additional government levies when items arrive at their final destination, understanding local taxation and ensuring that the customer pays accordingly is crucial otherwise the purchase will be returned and create an aggravated customer that will harm business and brand.

Cross-border E-Commerce Drivers

Technology plays a major role in the cross-border e-commerce and it is not the only force at work

New business models are appearing that will have a profound influence across the e-commerce and wider retail value chain. At the same time, consumer behaviors and expectations are evolving.

• The desire for shopping experience – consumer e-commerce today is largely driven by price and convenience; a good deal on products that are delivered quickly, for example, wanting the ability to diver unique goods they will not find in big-box retail chains.
• Mobile-centric retail experience – mobile devices are already a key platform for digital content and communications, and the same is becoming true in the retail and commerce domain. This is being driven by the huge growth in Smartphone sales volumes, which will reach 2.05 billion by 2020.
• Moving from 2D to 3D customer perspective – the range and depth of customer data insight will proliferate over the next 10 years. There will be more digital services, platforms, and devices than ever before capable of generating data insights, including social media and messaging apps, location-based devices, and online and mobile payments. Speaking about wearable’s, there is a lot of excitement about wearable technology, and although the ecosystem is still emerging, the number of wearable devices coming to market is increasing.

Future:

• RAPID GROWTH: examine the predictions that by 2020, chinas cross-border e-commerce transaction size will be account for about 37.6% of its total import and export and its cross-border e-commerce retail turnover will be the annual average increase of about 37%.
• IMPETUS: understand why technological progress, consumption upgrading, industrial basis and credit guarantee are the four major growth impetuses.
• TOP TEN BUYERS AND SELLERS: learn the top origins of commodities purchased by Chinese consumers as well as the top countries inquiring and witnessing the newest buyers for Chinese products
• BIG DATA: see the data and analysis ECI between China and major economies.
• POLICIES: understand the developments of China's cross-border e-commerce retail policies and the opposing perspectives that view e-trade either as an inevitable trend for the future or a new kind of “unfair” trade.

In summary – cross border e-commerce is here to stay and needs to be considered accordingly as a growth strategy for an e-commerce business. It needs investment and should be done in a staged manner for maximum impact.

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