Cross-Border Commerce: Opportunities, Obstacles, and Optimizations

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When you look at the world of ecommerce, there’s no denying that a lot has happened in just a short amount of time.

Skyrocketing ecommerce sales during the pandemic forced many brands to revise their priorities as they looked to tap into global ecommerce growth. And though the record sales of the pandemic period may have rolled back a bit from their peaks, the promise of cross-border ecommerce is here to stay.

What once may have seemed a daunting feat only fit for large organizations, global expansion is now accessible for companies of all sizes, anywhere in the world. Even still, the reality of cross-border ecommerce is rife with complexity. Knowing the obstacles and opportunities for expanding into new markets, as well as how to assess those and build a strategy for your brand, can make all the difference for your global success.

In this guide to cross-border ecommerce, we dig into exactly that. Understand the basics of cross-border ecommerce – its benefits and opportunities, as well as its obstacles. Then, explore steps you can take to build a winning cross-border commerce strategy.

The State of Cross-Border Ecommerce

Cross-border ecommerce, as its name makes plain, refers to the online buying and selling of products across borders. These international transactions have only been made easier and easier in our increasingly digital world. And in recent years, the practice has shifted from being a luxury of the largest organizations to a hotly pursued goal of most any ecommerce business.

Yet for all the explosive growth seen in cross-border ecommerce over the past few years, even more potential lies ahead.

After pandemic-driven growth, the global market of B2C cross-border ecommerce held an estimated value of $785B in 2021. However, by 2030, the market is expected to grow ten-fold, reaching an incredible $7.9 trillion.

The Benefits and Opportunities of Cross-Border Ecommerce

The shift toward international ecommerce is clearly on. And as with most economic shifts, the rapid expansion of ecommerce has driven incredible opportunities for brands already well-positioned to support customers online. Others have been left scrambling for ways to meet customer expectations.

With the growing number of online shoppers around the world and growth in global ecommerce overall, cross-border commerce can offer businesses significant benefits, such as:

1. International growth
2. Increased revenue
3. Increased sales of low-demand domestic products
4. Access to more customers
5. Business sustainability
6. Brand awareness

Even prior to the COVID-19 pandemic, cross-border commerce was growing at double the rate of domestic ecommerce.

If you’ve been fearful or hesitant to build out a cross-border expansion strategy for your business; Digital River’s experience and expertise in helping brands sell globally can help you turn obstacles into opportunities and realize your brand’s global potential.

Assessing Cross-Border Obstacles

Recent reports cite more than 5.1 billion people around the world—that’s 64.4% of the world’s population—are now using the Internet. In addition, mobile has become the most important channel for internet access as mobile internet users account for more than 92% of total internet users.

More people shopping online means more opportunity to sell your products, regardless of where they are located. However, cross-border success won’t be realized by simply building an online store. You must create an experience for your customers that seamlessly guides them through a purchasing process that is familiar.

Providing a truly localized shopping experience removes common barriers that keep shoppers from buying. This includes:

• Using the local language throughout the buying experience
• Seeing the price listed in the local currency
• Being able to purchase using preferred payment methods
• Having confidence in your brand’s handling of sensitive data, and being assured  it will be a secure transaction
• Clear policies related to shipping, delivery, and returns
• Charging appropriate taxes and duties so that there are no unforeseen costs

How to Choose Where to Sell Your Product Cross-Border

The first step in enabling cross-border commerce and creating these seamless experiences for your customers is to understand where to focus.  You must understand which markets are the most important to your brand, if there are unique considerations for your products, and the buying experiences shoppers in these markets expect.

It may seem an obvious point, but organizations often look to market growth rates and metrics like GDP, population and consumer spending to determine priority markets. However, starting where you’re already in demand can turbocharge your success and give you a platform to build from. That’s why when assessing potential expansion opportunities for your brand, web traffic data can provide a unique angle of analysis. For example, if you are a European-based business but are seeing a high volume of traffic from Japan, you may want to direct your attention toward the opportunity in this market.

In turn, you will also need to determine which countries will allow your product to be sold in the first place. To sell across country borders, you must understand important requirements and how they specifically apply to your products. This includes the country of origin for the final product and the materials from which it was constructed.

Great resources exist across major carriers such as FedEx, UPS and DHL that can help you understand country-specific guidelines and guide your international shipping strategy. In addition, you can find primers on a huge variety of global markets in our Country Guide.

Five Steps to Cross-Border Success

Once you know where you will be expanding, the real work of cross-border ecommerce begins. Follow these five steps to support your cross-border success.

1. Determine pricing strategies for new markets

Beyond the task of which products you’ll sell and where, developing a successful pricing strategy is integral to ensuring that your business can both compete and drive maximum profits in new markets. Consider the following common approaches to pricing strategy to get started:

• Cost-based pricing: Analyze the cost to make, distribute, store and market a given product in a given geography. With these costs in mind, set a price based on the resulting goal for profitability. Cost-based is a common approach, given that it does not require significant research and analysis of new markets and their customers.
• Competition-based pricing: Assess the range of similar products offered by your competition within a given market.
• Value-based pricing: Survey customers in a given market to understand the value they place on certain product uses and benefits. With sufficient data and understanding of target personas, you can set the price of your offerings according to customer expectations.

2. Build up an in-market presence

As you prepare to sell, establishing an infrastructure in and around your new market is critical. However, it’s also a step that’s wholly dependent on your overall go-to-market strategy. Consider whether you will require an in-market presence in these key areas:

• Marketing: Selling in new places often requires an important repositioning of products. Understand just the level of local expertise you will need to ensure that your offerings are positioned in a way that’s authentic and accompanied by assets that address the needs of local customers.
• Marketplaces: Though not appropriate for all offerings, regional marketplaces like Alibaba, AliExpress and Rakuten can be a critically important venue for international growth.
• Support: Always-on customer service is important to delivering efficient and satisfying customer experiences. But customer expectations around support can vary drastically from market to market. Determine whether it will be necessary to approach customer service in your new markets with a “boots on the ground” approach or if you can utilize your existing infrastructure to deliver winning experiences.
• Selling and logistics: Sometimes, you don’t need to establish a presence yourself but can instead rely on a partner who has local expertise and relationships. For instance, Digital River’s single integration enables brands to tap into a leading logistics network and simplify selling, tax and compliance in over 240 countries. This is the sort of partnership the supports expansion without adding complexity or risk.

3. Provide customers with clear information on duties and taxes

Generally, when selling cross-border, you or your Merchant of Record are the exporter and your customer is the importer. This means your customer is responsible for duties and taxes required for import. If these are not calculated correctly at the time of the transaction, the carrier will be required to collect from the consumer upon delivery, which can result in refusals and customer dissatisfaction.

It’s important to provide a clear calculation of final duties and taxes required for import using a landed cost tool. Clearly presenting this information and allowing consumers to pay these fees upfront during the checkout process will improve conversion rates and overall customer satisfaction.

4. Determine the right fulfillment strategy for your business

Shipping across borders is one of the biggest challenges of global ecommerce and requires deep knowledge of trade compliance, cross-border customs clearance and commerce trade rules, import and export rules, fluctuating shipping rates, and more. It’s important to solidify your shipping strategy early to keep costs down and manage customer expectations.

There are a few common fulfillment methods to consider:

• Direct Fulfillment requires you to be in charge of shipping your goods out to your customers yourself. This gets trickier as you grow and begin to sell globally.
• Third-Party Fulfillment utilizes outsourced warehouses to help you ship both domestically and cross-border. An experienced third-party logistics (3PL) solution has the infrastructure and expertise to help you ship into new countries. They can often negotiate rates on your behalf and help you integrate with local logistics providers should you choose to warehouse products closer to your cross-border customers. The right logistics solution, however, won’t just enable cross-border shipping, though. They will also provide the flexibility of in-country shipping to ensure localized experiences of the highest quality whenever and wherever possible.
• Drop-Ship Fulfillment does not require your business to keep products in stock. Instead, a store sells your products, then passes orders to a third-party supplier, who then ships the order to the customer.

No matter which fulfillment method you choose, it’s crucial to understand all regulations and compliance nuances specific to your products and the new regions you plan to sell into. But it’s also crucial to provide efficient order fulfillment to get your customers their products on time and provide a positive experience.

70% of shoppers are unlikely to make another purchase from a brand following a poor delivery experience.

5. Localize the customer experience to improve overall conversion

Localization can mean a lot of things to different people, but it most certainly means that your products and the purchase experience will represent the local language. And not just translated. It is imperative to use culturally appropriate words and images.

Localization also means understanding the desired shopping and checkout experience. Key considerations during the checkout process include displaying local currency and offering preferred payment methods. While credit cards may be the dominant global payment method, providing local preferred payment options can significantly improve conversion. In the European Union, direct debit is preferred by more than 16% of the population, while digital wallets are preferred by almost 60% of Asia-Pacific population, and installment payments, such as Klarna, are becoming popular in the U.S.

76% of international shoppers say they prefer to purchase in their own currency. Providing local payment options decreases cart abandonment—that’s a big reason to prioritize this for your brand’s ecommerce experience.

On top of local currency and payment methods, adding local acquiring will allow you to accept card payments from your customers in their local currency through a local bank network. This is known to improve your authorization rates and increase conversion. Developing and maintaining local acquiring requires a local entity and expertise. Your best option is to find an experienced partner that can do this for you, so you can focus on your core competencies.

Crossover to Cross-Border Commerce

There’s one final step (and it’s a big one!) in your cross-border commerce journey. You must ensure you can securely complete your customers’ transactions. A trusted partner, like Digital River, can support your payments, tax, fraud, and compliance needs with a localized checkout experience powered by our Global Seller Services.

We’ve helped hundreds of brands remove the obstacles that plague retailers, and we use that expertise to give you the Onshore Advantage™ needed to achieve cross-border success. Our solutions help you give consumers the familiar, and local, feeling they need to confidently purchase from an international ecommerce retailer.

There’s no telling where commerce will go next. But with the right preparedness and forward thinking (armed with the five steps above) you can grab a piece of the “explosive growth” and realize even your business’s loftiest goals.

Want to learn more? Connect with us today to learn how Digital River can help you achieve your cross-border commerce goals.