Key Drivers in Cross Border E-Commerce

Physical retail will still exist, but it will need a good reason to exist” – Dunkin’ Brands

Online moves into the real world

The Cross-Border E-Commerce

The Internet allows consumers to shop online globally, purchasing products and services that may be unavailable or prohibitively expensive in their home countries from websites in other countries and from marketplaces that host multinational merchants. This phenomenon, known as cross-border e-commerce or international e-commerce, is growing as advancing technologies help reduce problems associated with international payments, long shipping times and language barriers – making it possible to shop online anywhere and everywhere by laptop and smartphone.
The potential of cross-border e-commerce and the practice of buying and selling goods across international borders, is huge. With an increasing appetite for it and cross-border mobile commerce, retail e-commerce sales are expected to approach $2.4 trillion in 2017.

The Big 4

The four most active cross-border e-commerce channels — both in terms of cross-border purchases and cross-border sales — are the US, the UK, Germany and China.

Here is some interesting statistic:

  • For German online shoppers, the UK is the most popular cross-border shopping destination (43%), followed by the US (33%) and then China (24%). German online merchants, on the other hand, sell mostly to France, Austria, Italy, Spain, and the Scandinavian countries.
  • 71% of UK online merchants offer cross-border delivery, with the US being the biggest cross-border trading partner (both imports and exports).
  • Cross-border purchases by China’s online shoppers grew from less than $2 billion in 2010 to more than $20 billion in 2014. With the Chinese middle-class expected to grow to 630 million by 2022, this trend is only going to increase.

Cross-Border E-Commerce Drivers

Technology plays a major role in the cross-border e-commerce and it is not the only force at work. New business models are appearing that will have a profound influence across the e­commerce and wider retail value chain. At the same time, consumer behaviors and expectations are evolving.

  • Desire for shopping experience – Consumer e-commerce today is largely driven by price and convenience: a good deal on products that are delivered quickly. A smaller but growing number of consumers are starting to want more from e­commerce, for example, wanting the ability to discover unique goods they will not find in big-box retail chains. By 2027, these fundamental desires will still exist, but consumer expectations of the e-commerce experience will have changed drastically, along with the shopping experience.
  • Mobile centric Retail experience – Mobile devices are already a key platform for digital content and communications, and the same is becoming true in the retail and commerce domain. This is being driven by the huge growth in smartphone sales volumes, which will reach 2.05 billion by 2020.
  • Mobile’s internet correlation with the cross-border – 54% of UK consumers have, at some time,
    bought something online from another country, the highest proportion of any country in Europe. The majority spent up to $76 per cross-border transaction. High levels of mobile commerce in Europe are giving way to an age of tech-savvy, multichannel consumers.
  • Blurring Boundaries – New entrants to retail will typically start from an online pure-­play perspective, moving to test out physical retail space with pop­ups and then networks of collection/ showcase stores. For many customers, one visit will be enough to build the trust necessary to make future purchases without needing to physically see and feel each new product. Many consumers will want retailers to provide an environment where shopping is an event experience. This will translate into interactive, highly engaging online and real­world retail environments where augmented reality (AR) plays a key role. The provision of distinct and tangible shopping experiences, online and real-world, will become a key means to enhance and differentiate a brand’s value proposition.
  • Augmented reality (AR) – It is very possible that going forward, augmented reality (AR) rather than virtual reality (VR) will have the greatest impact on the retail experience. Тhe definition of AR describes normal views of reality that have been enhanced by digitally generated information or graphics superimposed on that view. AR can blur the boundaries between the physical and digital worlds and with it the boundaries between online and in-store shopping. AR will give online customers an in­store experience, addressing the fit­and­feel issue that can deter consumers from making online purchases, particularly in apparel.
  • Moving from a 2D to 3D customer perspective – The range and depth of customer data insight will proliferate over the next 10 years. There will be more digital services, platforms and devices than ever before capable of generating data insights, including social media and messaging apps, location-based services, and online and mobile payments. On the devices front, smartphones, tablets and connected TV ‘s will be joined by wearables, medical appliances, connected cars and multiple embedded touchpoints in smart homes and cities. Speaking about wearables, there is a lot of excitement about wearable technology, and although the ecosystem is still emerging, the number of wearable devices coming to market is increasing.

The Conclusion

The Cross-Border E-Commerce is getting smoother, faster, and cross-border payments are becoming cleaner, thanks to their drivers, which act with full engines. This shift, contrary to popular belief, has not been driven solely by increased consumer demand, but mostly by merchants. Historically, a foreign customer brought more complication and liability to a business than their custom was worth. Merchants were unenthusiastic to cater to a global customer. Now, merchants largely see cross-border ecommerce as a profitable venture.

References

  1. Staff, A. and Najberg, A. (2015, October 25). FAST FACTS: CHINA AND CROSS-BORDER E-COMMERCE. Retrieved from http://www.alizila.com/fast-facts-china-and-cross-border-e-commerce/.
  2. Unknown. (2016, September 15). Are You Ready for Cross-Border E-commerce? Retrieved from https://www.morningtrans.com/are-you-ready-for-cross-border-e-commerce/.
  3. McDermott K. (2015). KEY-BUSINESS DRIVERS AND OPPORTUNITIES IN CROSS-BORDER ECOMMERCE. B2B Content Writer at Payvision. Retrieved from https://hollandfintech.com/wp-content/uploads/2015/11/key-business-drivers-and-opportunities-2015.pdf.
  4. Unknown (2016). Ovum Report: Future of E-commerce – The Road to 2026. Retrieved from http://www.criteo.com/media/4094/ovum-the-future-of-e-commerce-the-road-to-2026.pdf.

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