According to a 2019 report by Accenture, cross-border e-commerce represented nearly 20% of global e-commerce. Also, cross-border e-commerce grew nearly twice the rate of domestic e-commerce, clocking 29% CAGR.
The boom in e-commerce is driven by several factors: trade liberalization and globalization, reflected in the creation of treaties and agreements such as the China Free Trade Area and European Free Trade Agreement; development of e-commerce technologies; rise of digital payment systems; expansion of internet resulting in improved connectivity; growth in smartphones; improvement in infrastructure and logistics; and improvement in lifestyle with rise in income levels, reflected in higher demand for foreign goods.
But the key factor to which the surge in e-commerce is attributed is the change in online purchase behavior and consumption pattern following the pandemic. As Covid-19 brought much of the economy to a grinding halt, cross-border e-commerce provided some respite amid the rampant uncertainty. In fact, according to a report by McKinsey, from Q2 2020 itself, we see double-digit growth in e-commerce as the initial logistics hassles were addressed. A joint study by PYMNTS.com and sticky.io conducted at the peak of the pandemic showed that close to 55% of consumers made purchases of non-perishable items or consumable products through D2C channels.
Now as the pandemic subsides, cross-border e-commerce operations are back to normal. This is due to two reasons: a) the resilience of these operations in the face of crises such as the pandemic, and hence, their criticality in continuity of business; and b) the change in consumer behavior that is unlikely to roll back, considering the convenience of online purchases and technological developments to facilitate the same.
Therefore, it is very important for retailers and consumer goods manufacturers, as they look to strengthen their operations after the severe disruption they suffered, to have a robust cross-border e-commerce strategy. This will not only provide a hedge against dependence on brick-and-mortar stores or third-party retailers, but also help in cashing on the significant pickup in demand for goods in the international market.
How to build a successful e-commerce strategy?
It is common knowledge that the best way to approach any foreign territory or market is by building a local connect. Localization, therefore, should be at the heart of the strategy. This implies that you identify with the people, and build a psychological connect.
Based on this core, you can devise a strategy around:
Understanding points of demand: Begin with identifying where the potential for demand is located. This will entail studying geographies and regions, people and their culture to understand the extent of appeal of your product. It will also include understanding the competitive landscape to know the competitors, their extent of operations, and the products they offer.
Analyzing data and insights pertaining to the target market, promoting your brand on social media before entering the e-commerce space are effective strategies to make the mark. Yet another aspect of studying or understanding the market is that it helps in choosing the right partner or vendor in case you don’t have the wherewithal for building your own cross-border strategy.
Studying the market to understand regulations: Before entering any market via e-commerce, you must understand the taxation policies or other product regulations applicable in that region. This will ensure smooth shipment of products.
Another aspect of this is to comply with relevant data protection rules to prevent any breaches. Ensuring confidentiality of information is key to winning trust and goodwill.
Connecting with the potential buyers: Once you have identified the regions or markets you want to target and your target audience, you need to connect with them. Talking to them will help you understand their culture, taste and preferences. Accordingly, you may need to tweak your website or the way your product is presented on it. You can optimize your website by using regional language or integrating customer-friendly tools. If they connect with the product, they will frequent your website.
Offering various modes of payment: Your target audience may be comfortable with more than one mode of payment: cards, cash, digital payment, etc. Make sure to offer all. Convenience attracts potential buyers and retains them too. Moreover, it indicates the brand is sensitive to requirements.
Another aspect of this is to offer a currency of their choice, not the currency of your home country or only the major currencies of the world. It is advisable to go with a mix of local and prominent international currencies to facilitate purchases.
Implementing a judicious pricing strategy: One of the key reasons customers are attracted to online shopping is that products are cheaper. Incorporating discounts and offering schemes – or, having a dynamic pricing strategy – is a great way to win customer loyalty. Also, openly display the cost of products so that there are no hidden costs and customers are aware of the taxes or duties applicable.
The market has changed – forever. In the aftermath of the pandemic, consumer habits and purchasing patterns have evolved significantly, giving a boost to online sales. Technological advancements are only facilitating e-commerce. Given the opportunities in e-commerce, companies will do well to have an effective cross-border e-commerce strategy. This is critical to expand operations, access new markets and increase the customer base. In short, cross-border e-commerce is emerging as a key growth area – not aligning objectives with it could prove costly.