Cross Border Commerce: Obstacles and Optimizations

By: Ted Rogers
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Explosive ecommerce sales in 2020 has many brands scrambling to revise their key priorities for 2021 to include digital transformation and global commerce growth.

What once may have been deemed a daunting feat and only fitting for large organizations, global expansion is now accessible for companies of all sizes, anywhere in the world.

Knowing the obstacles and opportunities for expanding into new markets, and how to assess those to build a strategy for your brand, can make all the difference in your global success.

Brands have seen explosive growth of cross border ecommerce in the past few years, and even more potential lies ahead.

It is estimated that by 2022, cross border ecommerce sales will reach $627B, up from $284B in 2017, and account for 20% of total ecommerce sales.

57% of worldwide online shoppers make purchases from overseas retailers.

Online sales accounted for 101% of all gains in retail in 2020. This means sales through all other channels declined—for the first time in history, ecommerce sales accounted for all retail sales gains.

Ready to learn more about the importance of growing your online channel and how to optimize for global expansion? These numbers suggest a historical revolution, and it would be downright concerning if it weren’t causing you to rethink your business strategy and the potential to expand your business globally.

Let’s dig in.

What happens during a boom?

As with most economic shifts, the rapid expansion of ecommerce in 2020 drove incredible opportunities for brands that were well positioned to support customers online and left other brands scrambling for ways to meet customer expectations.

A key factor for whether your brand is falling short or growing during this economic shift may be whether you’re considering cross border commerce expansion. 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, now is the time. 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 4.6 billion people around the world—that’s 59% 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 91% 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 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 the preferred payment methods
  • Having confidence in your brand’s handling of sensitive data, and being assured that 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

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.

Five Steps to Cross Border Success

1. Use web traffic data to understand demand

This may seem like an obvious point, but organizations often look to market growth rates to determine their number one priority. However, it is beneficial to start where you already have demand, as that will turbocharge your success. For example, if you are a European-based business, but are seeing a high volume of traffic on your website from Japan, you may want to consider this as an initial market opportunity.

2. Determine which countries will allow your product to be sold

In order to sell products across country borders, you must understand import requirements and how they 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.

3. Provide customers with clear information on duties and taxes

Generally, when selling cross border, you or your merchant 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 experience.

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.
  • 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 fulfilment 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 your 2021 goals.

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