The growth potential of cross-border ecommerce has not gone unnoticed for those in the ecommerce industry. According to reports, cross-border is speculated to reach $1 trillion by 2020. According to research by Accenture, more than 900 million people will be international shoppers by 2020.
Cross-border is an opportunity not to be wasted. DHL has definitely taken notice. The logistics giant has published a report, The 21st Century Spice Trade: A Guide to The Cross Border Opportunity, assessing the vast potential of cross-border logistics and last mile opportunities across the world.
Why are people willing to shop internationally?
Although cross-border ecommerce may seem like an expensive hassle, respondents from DHL’s survey indicate that cross-border is appealing due to product availability and attractive offering, i.e. price. The top selling items for cross-border are fashion and electronics. However, consumers are beginning to search for cosmetics, pet care and sporting goods, which means all product categories now have cross-border growth potential.
Here are the key takeaways from the report
- Cross border ecommerce is expected to grow at 25% between 2015-2020, which is twice the pace of domestic ecommerce retailers and manufacturers.
- Online retailers are boosting sales by 10-15% on average simply by extending their offering to international customers.
- An additional boost for retailers comes from a premium service offering: retailers and manufacturers that incorporated a faster shipping option into their online stores grew 1.6 times faster on average than other players. This is also applicable to SMEs, not just global brands.
- On a country level, demand is more fragmented than supply, with the US, the UK, and China accounting for closer to 30% of all global high-value demand (versus 60% of supply)
What are the challenges with cross-border ecommerce?
Having an attractive offering (including price) stands out as key to convincing international consumers to act. However, maintaining a long-term competitive advantage in terms of website appeal, broad range of payment options, and convenient customer service will be challenging for many e-tailers. The speed of delivery is also another key roadblock that often hinders the growth of cross-border ecommerce, which means that for brands, picking a delivery partner is a key step to driving conversion.
Who can benefit from cross-border ecommerce?
The most obvious contenders for cross-border selling. Multi-billion businesses have the budget to move abroad. Amazon, for instance, has carefully gone market by market since the late 1990s and now generates 40% of sales outside the US. For Alibaba, on the other hand, sales outside China still represent less than 10% of its revenue.
Overall, survey respondents associated with ecommerce giants confirm their role as early movers: they report the largest average share of cross-border sales (15%) among e-tailers.
Pure online retailers
As ‘purely online players’, they can influence online shopping behavior easily. Cross-border selling can give them access to less penetrated market opportunities abroad, where further sales growth may be cheaper to generate even than in their respective domestic market.
They report the lowest cross-border sales share (on average 11% of total sales) today, although by a small margin. They need to build out the digital capabilities that allow them to go head to head with online-first competitors. If they do manage to carve out their own multi-channel niche however, brick and mortar retailers may offer a unique cross-border experience for international shoppers.
What to think about before going cross-border?
- The right product assortment
- The global local website: localization is key
- Warehousing and fulfillment
- Delivery choices: speed is the decision factor and can be an effective conversion tool for brands and retailers
For brands that have the scalability and budget to test out international reception through cross-border ecommerce, they would be joining a growing market with a trillion dollar potential. The DHL report represents only a fraction of the surging industry, but has shed light on the various pros and cons that brands and retailers should keep in mind before expanding beyond their domestic market.
Download the DHL report here.