Cross border eCommerce: All you need to know

Cross border eCommerce is a global market that’s only getting bigger. In fact, the global cross border eCommerce B2C market is expected to reach a value of $7938.01 billion USD by 2030.¹

Increased internet access and globalization have grown cross border eCommerce.

In this article, we’re looking at what cross border eCommerce is. We'll also cover a strategy for breaking into the market, and the benefits and challenges of doing so.

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What is cross border eCommerce?

Cross border eCommerce is the process of selling goods and services online on a global scale. This can be B2B, C2C or B2C trade.

The key point of cross border eCommerce is that the sales channel is only online. A physical store is not necessary.

What is an example of cross border eCommerce?

An example of cross border eCommerce would be a business in the US selling to consumers in Europe. The business wouldn’t need a physical store or presence to do this - only an online store. All they need is an online store and an eCommerce fulfilment service to process and ship orders.

Read on to dicosver:
What are the challenges of cross border eCommerce? What are the benefits of cross border eCommerce? How do I start a cross border eCommerce business?

What are the challenges of cross border eCommerce?

Despite low barriers to entry, cross border eCommerce has its challenges. Let’s look at the main challenges of cross border eCommerce in detail.

International restrictions and regulations

Rules and regulations can cause challenges when trying to expand into international markets.

Intellectual property laws, tax regulations and consumer protection laws can differ. Familarizing yourself with these and staying compliant is crucial to conducting legal transactions. Not doing this can cost you hefty fines and penalties.

Certain products are also prohibited in foreign countries or subject to specific regulations. Ensure your products are allowed and meet any local requirements.

Having a local team of in-country legal experts is your best bet to avoid compliance issues.

Cross border eCommerce shipping

Shipping your cross border eCommerce products can prove challenging.

Foreign countries have different import, export and taxation laws. These can end up costing you much more than you calculated in the beginning. Extra levies or custom duties could turn a profitable transaction into a loss.

Finding a balance between speed and cost can also be a challenge with eCommerce shipping. Customers like fast shipping and delivery times, but this can increase your costs.

Negotiating rates and discounts for high-volume shipments with shipping companies is wise. Making your product packaging efficient can help in reducing costs per unit.

Using a third-party fulfillment service can help in reducing the complexity of shipping. They handle the entire order fulfillment process. Fulfillment By Amazon (FBA) is an example of this. They also handle customer returns and other issues, freeing you up to deal with other tasks.

Being transparent with your customers is key to customer retention and good reviews. Setting realistic delivery timeframe expectations will avoid disappointment.

Cross border eCommerce fraud

Cross border eCommerce means accepting payments online.

This means it’s likely that you'll need to accept credit cards. This comes with the risk of credit card fraud. Fraudulent payments result in chargebacks, losing your business revenue.

To prevent credit card fraud, you’ll need strong anti-fraud software. For example, Address Verification Service (AVS). AVS checks prevent fraud by comparing the billing address to that on file at the cardholder’s bank. Encryption and PCI DSS certification are also key to preventing fraudulent payments.

What are the benefits of cross border eCommerce?

Cross border eCommerce has some real challenges. But it also has the potential to grow your business.

Let’s look at the benefits of cross border eCommerce.

Expand your business

Cross border eCommerce opens your products to a larger pool of customers. This will boost your sales and revenue, expanding your business.

For example, in 2022, Italian fashion company Gucci made the majority of its sales in Asia.⁴

Reach an international market

An international market allows you to sell your product where there is higher demand.

Domestic demand for your product may be seasonal. Or demand could be low because of domestic competitors. Cross border eCommerce can help you avoid this problem. It gives you access to global, year-round high demand.

For example, let's say your business sells ski equipment in the US. Cross border eCommerce could allow you to continue selling in summer internationally.

Discover new opportunities from international markets

International markets come with new opportunities for growth.

Having a global presence increases visibility and awareness of your brand. This can identify your business as a market leader, boosting its reputation and sales.

Selling in international markets can also expose you to increased competition. This forces your business to become more efficient, leading to greater future success.

How do I start a cross border eCommerce business?

The cross border eCommerce market holds significant potential for growing your business.

With increasing globalization, eCommerce isn’t going away. In fact, the market is growing rapidly.

But it’s not straightforward without a clear strategy. Here are six steps for leveraging a successful cross border eCommerce business.

Conduct market research

The first step to success in cross border eCommerce is conducting market research.

Begin by identifying foreign markets where there is a demand for your product. While doing this, you need to research your foreign competitors and their prices.

The International Trade Administration is a great place to start your research. Their Country Commercial Guides and Foreign Market Researchpages can help your research.

It’s best to expand into one foreign market at a time, rather than attempting to go global immediately. This allows you to understand the market you’re entering with better accuracy. This strategy will improve your chances of success.

Part of market research is assessing the culture and how your product could fit into it. Being sensitive to cultural norms and expectations is key to your success.

Another part of market research is informing yourself about international laws and regulations.

Foreign countries have their own set of trade and consumer protection laws. Knowing these laws and how they will affect your business is important for success. Failure to follow regulations can cause significant losses in revenue through penalty fees.

Keep in mind that a lack of competitors in a foreign market could be an indicator of heavy regulations.

Having good relations with foreign partners simplifies navigating international laws and regulations.

Consider logistics

Shipment and delivery can be a challenge in cross border eCommerce. Partnering with a third-party logistics (3PL) provider can help ease this process. It can even save you in costs along the way.

A 3PL solution handles the order fulfillment process. This can range from product storage and shipment to returns management.

A 3PL provider can also be fluent in local export/import regulations and taxes. This helps you navigate international markets.

Create a profitable pricing strategy

Once you know your foreign competition, regulations and tax laws, you’re ready to set your prices.

You’ll need to calculate the costs of taxes, import duties, distribution and shipment. You’ll also need to look at competitor prices to know what it takes to become price competitive.

Once you’ve considered these costs, you can arrive at a price for your product. At this point, you can see if cross border eCommerce is profitable in that foreign market.

Conduct testing and research user experiences

Before making the full step into a foreign market - with all the costs and risks - it’s key to perform user testing.

Because your products are successful in the US doesn’t mean they’ll be a hit in international markets. Cultural differences, expectations and foreign competition can prove a challenge. You may need to adapt your product or online store when engaging in cross border eCommerce.

Your customers in your target market need to use your site and products. Doing this will allow you to develop your products. You can also adapt your online store to maximize customer acquisition and sales.

Record and repeat your strategy

As said before, it’s better to expand into one foreign market at a time instead of immediately going global.

Doing this increases your chances of success by increasing your market-specific knowledge. It also allows you to develop and refine a roll-out strategy.

You’ve already experienced all that’s involved in cross border eCommerce. This means you’ll be ready to expand into other international markets.

The strategy suggested here gives you the core steps that are necessary for success. Details and specifics will change for each foreign market. But the fundamental steps remain the same. Having a strategy like this will make global expansion far easier for your business.

Display local currencies in eCommerce stores

Displaying prices in your customer's local currency is key for customer acquisition. This can prevent cart abandonment.

Accept local payment methods

Offering local payment methods (LPM) can significantly increase sales in foreign markets. Not having these on offer can lose you potential customers.

In India, the eCommerce market is projected to reach a value of $163 billion USD by 2026. There, credit and debit card adoption is only 0.66% per capita.² ³

Instead, preferred payments methods are e-wallets, mobile payments and e-RUPI.³

Likewise, in the Baltics, credit card penetration levels are low. Only 16% in Latvia and Lithuania, for instance. Yet, 25% of online shoppers in these two countries made cross border purchases in 2021.³

In both cases, being able to offer local payment methods (LPMs) will help increase sales. Researching the LPMs of your target market is a good strategy. Selecting an international payment gateway provider provider can also be a key to success.

Having a business account with multi-currency functionality is key to reducing conversion costs. It allows you to accept multi-currency payments without having to open many different local accounts.

Look for a provider with transparent pricing and the mid-market exchange rate when conversions take place. For example, the Wise Business account offers the mid-market rate, and no hidden fees.

Receive eCommerce payments with Wise Business

🔍 Key features

Wise Business is not a bank, but a Money Services Business provider and a smart alternative to banks. It’s quick and easy to set up an account and get started.

With a Wise Business account, you can hold over 40 currencies in one place. You’ll also have access to local account details for up to 10 different currencies, enabling you to receive international payments like a local. This makes it easier for customers to pay in their local currency, and also saves you from having to pay cross border fees.

Overall, Wise Business is cheap to use. And where there are fees, you’ll know about them beforehand.

Please see Terms of Use for your region or visit Wise Fees & Pricing for the most up to date pricing and fee information.

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Wise Business is great for businesses looking for a cost-effective and easy to use business account that supports many currencies and gives you access to local account details.
Access to mid-market exchange rate No hidden fees Access to local account details Account that can hold up to 40 currencies Send to over 80 countries

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Sources:

1. Cross-Border B2C E-Commerce Market Size & Share Will Attain USD 7938.01 Billion by 2030 Growing at 26.19% CAGR - Exclusive Report by Facts & Factors
2. Indian e-commerce market to reach $163 billion by 2026: Report
3. Local Payment Method Trends in Fast-growing & Emerging Markets
4. Gucci: revenue share by region worldwide 2022 | Statista

All sources checked June 22, 2023.