This article originally appeared in Forbes.
Global ecommerce continues to grow and undergo transformation as the Covid-19 pandemic brings a massive shift in consumer habits and a sustained surge in online shopping. As globalization continues to rise, cross-border ecommerce, the online selling of goods to consumers in different countries, has become a core growth driver for e-commerce partners across the space.
According to a recent report from McKinsey, cross-border payment flows totaled $130 trillion in 2019, with revenue generated by that volume up 4% annually. Merchants who operate internationally must be able to localize their customers’ buying experiences, including offering preferred payment methods across all countries to ensure they take full advantage of opportunities outside their home market.
Some industry pundits predict the surge in ecommerce will continue beyond the pandemic, while others say businesses should be recalibrating for diminished growth. No matter which scenario plays out, a solid cross-border commerce strategy is key to maintaining sales growth past the pandemic.
The Importance of DTC to a Cross-Border Strategy
As the Covid-19 pandemic brought much of the economy to a halt in early 2020, cross-border ecommerce proved to be a bright spot compared to the growing uncertainty in other industries. In fact, according to a report from McKinsey, the second quarter of 2020 saw double-digit growth after early logistics challenges were solved. That same report also noted UPS and PayPal saw double-digit growth in their cross-border shipment volumes.
The pandemic not only highlighted the resilience of cross-border ecommerce in the face of disruptions, but it also demonstrated that business-to-consumer (B2C) brands need to have a mature multichannel strategy to support that cross-border strategy. This approach should emphasize a direct-to-consumer (D2C) channel to avoid an overreliance on brick-and-mortar or third-party retailers.
One study during the height of the pandemic found over 54% of consumers were using D2C channels to purchase consumable products or nonperishable items. Another report found 73%-80% of consumers that changed shopping behaviors during the pandemic planned to continue that shopping behavior post-pandemic.
With global ecommerce sales growing, B2C brands can’t afford not to have a strong D2C cross-border strategy.
Building A Successful Strategy
When expanding your ecommerce brand internationally, you need to prepare for the complexity and challenges of cross-border payments. Localization is key when it comes to delivering a successful cross-border ecommerce strategy. A localized approach to processing can increase the number of successful transactions, but based on my experience working at a global ecommerce solutions company, there are several crucial elements that need to be taken into consideration.
First and foremost, speak to the buyer in their own language, and be aware of cultural complexities. This will require you to update your product imagery and the copy on your website to engage local audiences. This gets to the heart of customer expectations by making sure the website looks familiar to them.
Next, offer local currencies. Shoppers expect to pay for purchases in their local currency. It is becoming increasingly common for websites to include both the local currency as well as additional major world currencies (e.g., U.S. dollar, euro or British pound). Consumers are more comfortable and likely to make a purchase when they see a product in a currency they are familiar with, regardless of where that product originates.
Consumers also expect to make purchases with their preferred payment method. Consumer behavior and the method they use to complete transactions can vary greatly from region to region, and the payments space continues to expand with buy now, pay later offerings growing in popularity. Don’t limit yourself to a strategy that only includes one option, such as a credit card. Consumers expect payment options that use local payment networks, their own banks and mobile methods.
Brands selling cross-border will also need to keep up with local tax laws, compliance and import/export regulations. It is crucial for sellers to have a deep knowledge of local regulations to account for even the slightest variances. Failure to understand the nuances in local regulations could result in serious financial penalties and bad publicity.
Another key consideration when setting up your strategy is data protection. Be aware that many countries have adopted their own data protection regulations, and these regulations are constantly evolving. Compliance dates can also change, as was seen with PSD2 in the EU.
Finally, be transparent. Let the customer know what their total cost for the purchase will be so there are no surprises or hidden fees. Displaying all applicable taxes, duties and shipping costs at checkout will help you gain your customers’ trust and loyalty to return for future purchases.
Businesses that can’t afford to build out their own cross-border commerce strategy or lack the expertise to do so can partner with vendors that already have the expertise to successfully navigate the hurdles presented by cross-border ecommerce transactions.
While 2020 brought seismic shifts in shoppers’ buying habits, brands looking to set their strategy for future success can’t ignore the growth opportunities in cross-border ecommerce. Setting yourself up for long-term success will mean a well-executed cross-border commerce strategy, including localized payments, to reach new audiences and take advantage of shifting consumer habits.
Interested in learning how Digital River can help power a successful cross-border strategy for your growing brand? Connect with us today.