PUBLISHED ON 25.09.2018
BY Bert Gogolin

Destinations, Findings, internationalisation, KPIs

Cross-border e-commerce: the story, the language, the billion-euro opportunity

In 1994, Jeff Bezos founded Amazon in Seattle, Washington, USA. Since then, the landscape of retail has changed forever.

Bezos has paved the way for a plethora of technology advances that have accelerated market disruption, leading to an increase in consumer demand, competition and new technologies.

With Amazon, he has changed the way we buy and sell online. But Amazon is not the only company.

The following are the most important dates in global e-commerce history that have changed the relationship between people and products. This is how the occasional shopping experience became a 24/7, global, cross-border experience:

1994 – Amazon founded
1998 – PayPal founded
1999 – Alibaba founded
2000 – Google AdWords launched
2004 – Facebook founded
2005 – Amazon Prime launched and YouTube founded
2006 – Twitter founded, YouTube Ads launched
2008 – Push notification technology launched,
2010 – Instagram, Pinterest launched
2011 – Bootstrap Mobile-First CSS Framework, launched
2012 – Facebook Ads launched, IBM Watson founded
2013 – Beacons, RFID, Twitter Ads launched
2015 – AR, Instagram Ads, VR launched
2016 – Apple Pay, Android Pay, Alexa Voice Commerce launched
2017 – Launch of Drones
2018 – Launch Amazon fresh Germany

As commerce changed at each of these pivot points, so did the method by which retailers and consumers connected, moving from physical, in-store driven relationships to those initiated and fostered online and globally across multiple channels.

Today, consumers around the world can shop on your website, compare prices on marketplaces, test your product in-store or via video conference, and connect with you on social media – all in the same day.

200%+ increase in cross-border sales by 2020

Retailers who extend their product offering to international customers increase sales by 10-15%. This type of cross-border trade is expected to grow twice as fast as domestic e-commerce – by 25% annually until 2020.This will lead to an annual e-commerce turnover of 62 to 67 billion euros (2018, estimated).

The year 2020 is just around the corner, and brands that want to optimize their international potential must act quickly.So let’s start from the beginning and answer a few basic questions.

What is cross-border trade?

Cross-border trade is the online sale of goods to consumers in different countries.

Where in the world is e-commerce growing significantly?

The acceptance and penetration of e-commerce in international markets are key indicators of whether you should invest effort and resources in certain countries.

How are acceptance and penetration calculated?

WeAreSocial, in partnership with HootSuite and GlobalWebIndex, calculates market adoption and penetration for cross-border commerce based on the percentage of the national population that has purchased something online in the last month.

Outside of the United States and Canada, here are the top 5 countries in terms of “Active Ecommerce Penetration”:

The United Kingdom – 76% of the population
South Korea – 72% of the population
Germany – 72% of the population
Japan – 68% of the population
United Arab Emirates – 62% of the population

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Share of online sales. Here are the top 5 countries for mobile commerce:

South Korea – 55% market penetration
United Arab Emirates – 47% market penetration
Thailand – 41% market penetration
China – 40% market penetration
Singapore – 40% market penetration

To change these numbers a bit, let’s take a look at the top countries with the fastest growing mobile commerce consumer base, which even includes the US and Canada:

Indonesia – grows by 155% year-on-year
Japan – grows by 101% year-on-year
Philippines – Growth 85% year-on-year
India – grows by 68% year-on-year
Mexico – grows by 64% year-on-year

As more and more emerging markets are exposed to new technologies and easy Internet access, e-commerce will also grow in these areas.

What are my cross-border trading options?

The quick and easy way

First things first: you can easily plan for international sales:

Create a country or region-specific shipping zone
Assignment of a logistics provider to this zone

However, you will find that billing is in the local currency and that language translations are not immediately available.

To achieve these last two aspects, you need special, region-specific websites.

Understanding localization

Localization is the modification of marketing strategy, images, website copy and even product variants to best suit the needs of a geographic region and the culture of its people.

This is often necessary because culture, consumer behavior and customer expectations differ from region to region.

The most successful international websites are region-specific for this reason – updating product images and writing copy that appeals to regional audiences, rather than using ideas from the home country that often fall flat abroad.

We’ll have more on this later in the guide – but you can skip ahead here if you like.

The region-specific route

There are two options for cross-border selling if you are serious about devoting time and resources to increasing sales in a new region.

Localized, branded websites
Marketplaces

To decide which option is best for your brand and to be successful globally, you need to understand the behavior and mindset of your brand in the regions you are expanding into.

Globally, 45% of shoppers make most or all of their domestic purchases via a marketplace, compared to 24% via a single shop site.

The situation is similar for international purchases: 46% via marketplaces and 22% via individual shop websites.

This data might point you in the direction of choosing a marketplace to launch internationally, but it’s also important to understand exceptions by market.

For example, a marketplace-exclusive product offering should be avoided in Australia, Canada, France, Hong Kong and South Korea. Local shoppers have shown a strong preference for websites over marketplaces in these areas.

All in all, depending on where you are launching your international presence, you may want both a marketplace and a webshop presence.

PRO TIP

Similar to the EU and the US, consumers in developed countries and territories like these use websites to assess the trustworthiness of a brand before making a purchase, either locally or in a marketplace.

Important cross-border trade terminology

Before we go much further, as we travel through cross-border trade, it is important to understand the key terms that will be discussed.

3PL: 3PL stands for “Third Party Logistics” and is a provider of outsourced logistics services. Logistics services include everything related to the management of how resources are transferred to the areas where they are needed.
APAC: APAC stands for Asia Pacific (abbreviated APAC, Asia-Pac, AsPac, APJ, JAPA or JAPAC) and is the part of the world in or near the Western Pacific. The region varies in size depending on the context, but typically includes much of East Asia, South Asia, Southeast Asia and Oceania.

Cross-border trade: Online trade between a company (retailer or brand) and a consumer (B2C), between two companies, often brands or wholesalers (B2B), or between two private individuals (C2C), e.g. via market platforms such as Amazon or eBay.
Digital wallet: A digital wallet refers to an electronic device that allows a person to conduct electronic transactions. This can include purchasing items online using a computer or using a smartphone to buy something in a store. A person’s bank account can also be linked to the digital wallet.
E-commerce: commercial transactions that are conducted electronically via the Internet.
Last mile delivery: The last mile is a metaphor that describes the movement of goods from a fulfillment center to their destination. In other words, the last mile is the final stage of your product’s journey before it arrives at your customer’s doorstep.
Localization: The adaptation of a product or service to the needs of a language, culture or the “look and feel” of the desired population.
M-Commerce or Mobile Commerce: The buying and selling of goods and services via wireless handheld devices such as cell phones and PDAs. Known as next-generation eCommerce, mCommerce enables access to the Internet without having to find a place to connect.
MENA: The term MENA is an English-language acronym for the Middle East and North Africa region. The term MENA covers an extensive region stretching from Morocco to Iran, including all the countries of the Middle East and the Maghreb.
O2O (Online-to-Offline): A website or mobile advertisement that entices someone to make a purchase at a physical establishment. Groupon is the first example, offering discounts for venues such as restaurants and theater tickets.
Social commerce: Social commerce is a sub-sector of e-commerce that includes social media, online media that support social interaction, and user contributions to support the online purchase and sale of products and services. In short, social commerce is the use of social network(s) in the context of eCommerce transactions.
Tariffs: Customs duties, taxes on imported goods.
Total cost of goods: A cost of goods sold price is the total price of a product once it has been received by a buyer. The cost price includes the original price of the product, all transportation costs (both domestic and ocean), duties, taxes, insurance, currency conversion, packaging, handling and payment fees.

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Bert Gogolin

I’m probably one of the first people you’ll see from Gosign. Because I take care of the strategy and the sharp profile of your company to the outside world.

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Cross-border e-commerce: the story, the language, the billion-euro opportunity