The next great ecommerce opportunity is just coming online — or rather, just starting to transact online. In a movement accelerated by the global pandemic, an estimated two billion people in ASEAN and India are either gaining internet access or shifting from merely using the internet to now making purchases online. According to a recent study by UBS, this shift will open up revenue opportunities worth $70-145 billion by 2025.
While much of that growth is expected to come from apps that provide services (grocery delivery, ride services, etc.), sales of physical goods purchased directly from brands are also expected to rise. Expanding cross-border ecommerce to capture new market share will require brands to successfully navigate the challenges of selling directly to consumers while providing truly localized experiences.
The time is right for D2C cross-border ecommerce
In the ever-evolving global ecommerce space, brands are looking to create sustainable growth outside of their domestic markets. In fact, cross-border ecommerce is growing at nearly double the rate of domestic ecommerce. Much of that has to do with changing attitudes and appetites of global consumers.
Often, today’s consumers don’t care – or aren’t even aware of – where products are coming from. They just know it’s something they want and it’s incumbent on the brand to deliver. In other cases, consumers specifically seek out products from other countries because they believe them to be of higher quality or more authentic. This perspective is common in many regions around the world, including ASEAN.
Beyond consumer demand, there are a number of other factors influencing the growth of cross-border ecommerce as well. Labor shortages, component shortages, and log jams in shipping ports are all creating challenges within the traditional retail space. Selling cross-border helps brands address the challenges of moving pallets of goods from point of manufacture to the retailer, and ultimately to the end consumer. Essentially, cross-border ecommerce can provide a workaround given the supply chain issues that brands are facing today and for the foreseeable future.
Moving inventory into every country with local warehousing doesn’t make sense for all brands. For midsized companies in particular, such an effort may not be operationally or financially feasible. Even some of the world’s largest brands have difficulty making the shift from shipping pallets to parcels. As such, some organizations choose to utilize marketplaces and as a way to meet consumer needs. But this approach brings yet another set of challenges that need to be fully considered before committing to marketplaces as the backbone of a go-to-market strategy.
Owning the customer experience
Marketplaces like Amazon, Alibaba, and others currently dominate much of the ecommerce market in the ASEAN region. The reason for this is simple: trust and simplicity. Consumers have grown to trust the marketplaces for easy shopping and dependable delivery of authentic products. Brands meanwhile benefit from marketplaces handling the complexities of reverse logistics, taxes, regulations, and other back-office operations.
But for all the benefits of selling through marketplaces, ecommerce brands also experience a complete loss of brand control and customer data. Some brands have invested millions of dollars to drive awareness, interest, and loyalty in new markets, but give up the true value of that investment when they send customers to third parties to make purchases. For brands, selling through a marketplace can make it easier to enter a new market, but it also means an inability to optimize the full shopper experience. These brands aren’t able to gain the insights from customer data necessary to optimize offerings, meaning they lose visibility to their end shoppers.
As brands mature in their cross-border journey, the market is seeing greater growth of direct-to-consumer brands supporting transactions within their own websites or media outlets. Brands are building more robust ecommerce sites and starting to recognize the true value of driving consumers to their storefronts and owning the customer experience. Plus, there can be a cost benefit as well. Based on Digital River research, the difference in cost between selling through a marketplace and selling D2C represents, on average, a 4% cost savings per transaction for brands choosing to sell direct.
However, for this approach to be successful, it’s important for brands to make offerings look and feel as local as possible in each new market they enter.
Localization is a top priority
Forgoing marketplaces and finding success selling direct in new markets requires a commitment to localization that goes beyond translating product descriptions into the local language. Successful brands embrace a range of localization techniques, including:
- Providing the payment methods that customers in each market prefer, which change by region and by country.
- Providing pricing in the local currency and not surprising consumers with foreign transaction fees.
- Properly calculating taxes and duties and presenting them to the consumer at the point of checkout as a guaranteed landed cost to avoid surprises at delivery.
- Utilizing local acquiring and payment processing networks to optimize authorization and conversion rates.
The goal for brands should be to maximize the value of every visitor by creating a frictionless customer experience. Although it can be challenging to sell direct or expand globally for the first time, it can also provide valuable strategic opportunities, even if a new market initially represents only a small percentage of total revenue. By leaning on partners that are experts in cross-border commerce to handle the nuances of tax, compliance, payments, and other back-office operations, brands can start selling direct in new markets and truly own the customer experience.
Best practices for optimizing the customer experience
PYMNTS.com recently conducted a study commissioned by Digital River to better understand what the most successful companies are doing to maximize the value of cross-border ecommerce. Part 1 and Part 2 of that study are available for free download.
Here are a few top insights:
- Since 2016, brands have invested heavily to increase capabilities that enhance the customer experience. These include IP recognition to align language and cultural preferences, ensuring the checkout is optimized for that country’s address requirements, and providing access to appropriate payment methods and currency. For the top performing brands, nearly 75% utilize localization technologies such as IP recognition, which is up from only 1% back in 2016.
- In 2017, a prior study showed that the most important aspect of customer satisfaction was being able to check out quickly with fast page load times, one-click purchasing, etc. The PYMNTS.com study shows that most brands have caught up on the basic fundamentals, and the difference makers in customer satisfaction are now aligned with localizing the checkout experience.
- Due to cost and complexities, only 56% of brands are offering free shipping and refund guarantees. This is still an opportunity as cross-border continues to expand and for many will likely lead to the expansion of third-party service providers to fill this gap.
Making inroads with the next two billion
The forward march of globalization means that ecommerce is more accessible and more popular around the world than ever before. As the next two billion start transacting online, brands have an opportunity to build relationships with new customers and establish themselves as leaders in emerging markets.
That means it’s more important than ever for brands to prioritize selling direct and optimize the customer experience to attract and retain shoppers. By focusing on localization in everything from storefront UX to payment systems and pricing, brands can overcome the hurdles of cross-border ecommerce and find success in these new markets.
To learn more about top trends and emerging ecommerce opportunities around the world, download our ebook, Defining the Future of Cross-Border Commerce.