As of 2023, the US population is about 336 million people. That’s a lot of potential customers. The global population, however, hovers at around eight billion.
While no business will sell to every individual in a given region, this demonstrates a lot of untapped potential for US businesses that don’t sell overseas. Framed another way, US companies that exclusively sell domestically limit their maximum target audience size to around 4.25% of the total world population.
Yet, only a fraction of US companies sell products internationally. This is perhaps because selling internationally requires advanced compliance and logistics management programs—not to mention an understanding of the local language and culture. With proper research and planning, businesses can plan an effective international launch and benefit from access to a larger target audience.
- What is global commerce?
- 3 benefits of global commerce
- 4 challenges of global commerce
- Global commerce FAQ
What is global commerce?
Businesses engage in global commerce by selling products or services to customers beyond the business’s country of origin. It encompasses global ecommerce and products sold through overseas brick-and-mortar retail locations.
3 benefits of global commerce
Global commerce, also referred to as international commerce, allows businesses to sell to a larger and more diversified customer base, which can increase revenue and resilience. Here are three ways it can impact your business:
1. Access to new markets and customers
At a certain point, successful businesses may reach market saturation in their country of origin. Expanding into new markets offers an opportunity to increase revenue and profitability.
2. Reduced dependence on a single market or region
Global commerce can make companies less vulnerable to fluctuations in local and national markets. By selling in multiple markets, global businesses can minimize the impact of economic or political conditions that hurt sales in any one region.
3. Access to economies of scale
By reaching larger markets, businesses can produce and sell their goods in larger quantities, leading to lower per-unit production costs.
4 challenges of global commerce
Selling internationally can also create significant business and operational complications. Here’s a list of common challenges and how to overcome them:
- Complying with local laws
- Understanding language and cultural differences
- Managing logistics, supply chain, and fulfillment issues
- Processing payments and exchange rates
1. Complying with local laws
Businesses engaging in global commerce need to comply with their home country’s laws and regulations around international business, as well as the laws in every country where they do business. This can include employment laws, tax laws, financial reporting requirements, and any other laws that govern the tools a company uses in the course of its business activities.
For example, organizations doing business in China must obtain a Chinese business license and a commercial internet content provider license. They must also comply with the country’s censorship laws (known as The Great Firewall) to host an ecommerce website.
Start by researching regulations that might apply to your business. The US Department of Commerce’s International Trade Administration maintains a list of resources for US-based businesses engaged in global trade, including a series of country commercial guides designed to help US businesses understand the requirements for engaging in international business. Many countries’ governments also maintain English-language resources for international businesses. For example, this Chinese site addresses businesses considering an investment in China.
Shopify’s global commerce toolkit also includes a guide to expanding internationally and contains an overview of rules and regulations for selling in China, Australia, New Zealand, the EU, and the UK.
2. Understanding language and cultural differences
Selling in another country opens up an entirely new customer base, which can present an exciting opportunity to serve clients based on their specific needs, values, and cultural expectations. Without proper research, however, these differences can result in product and marketing failures.
To succeed, businesses need to first conduct research to understand how cultural differences affect the perception of marketing materials. Once you’ve gained an understanding of local cultural and economic conditions, you can develop unique marketing strategies in each country where you plan to do business.
For example, because Guatemala has a more social society than the US, McDonald’s promotes meal plans for four or more people there. Its US promotions—like getting a free medium fries when you download its app—emphasize individual gain.
In addition to doing market research, successful global businesses work with translation experts and local marketing specialists. This can help companies avoid embarrassing translation snafus and leverage a more intimate understanding of cultural attitudes.
3. Managing logistics, supply chain, and fulfillment issues
Global supply chains have experienced significant disruption over the past few years and are likely to continue experiencing turmoil. Investing in robust logistical and supply chain management practices can minimize disruptions.
The following tactics can also help:
- Employ near-sourcing. Near-sourcing refers to sourcing materials and manufacturing products close to its end users. This process can cut fulfillment expenses, environmental impacts, and exposure to supply chain disruptions. If you’re planning a large-scale expansion into a single market, near-sourcing can be an effective strategy.
- Operate an international warehouse. Although it carries significant up-front costs, purchasing or leasing a warehouse overseas can minimize fulfillment costs and speed up deliveries. If you plan to distribute a significant number of products in another country, establishing warehousing infrastructure there can be a cost-effective option in the long run.
- Use supply chain technology. Logistics software like Shopify, inventory management software, and supply chain automation software can help businesses anticipate disruptions and minimize potential impacts on operations.
- Consider a third-party logistics provider. Third-party logistics providers (3PLs) can handle storage, order fulfillment, and shipping. They are also increasingly popular: A 2017 study found 90% of Fortune 500 companies use a 3PL. Since then, global revenue in the 3PL market has increased by 170%, for a 2023 total of $287.3 billion.
4. Processing payments and exchange rates
Global commerce businesses also need to develop user- and business-friendly international payment processing systems. Because most customers prefer to pay in their home country’s currency, identifying a payment processing partner that accepts a wide range of currencies can support international sales.
Consider payment methods accepted too. A specific payment method may be preferred in an individual country or region, so allowing for multiple options can also improve your customer experience and support sales.
An international payment processor can make accepting payments in different currencies easy. Some providers, like Shopify Markets, support international tax and duty compliance. It also automatically converts prices into local currencies based on current exchange rates, converts payments, and pays out in your currency of choice.
Global commerce FAQ
What are some of the factors when expanding into new global markets?
Common global market expansion considerations:
- Managing global business compliance
- Navigating language and cultural differences
- International fulfillment and logistics
- International payment processing
How can my marketing and advertising strategies adapt for global commerce?
To position your brand for global commerce success:
- Conduct market research in every country where you’ll do business
- Partner with local marketing experts to localize your branding and marketing materials
- Avoid translation mistakes by hiring human translators, not translation software
How can I ensure that I comply with international regulations and standards?
The US International Trade Administration maintains a library of country-specific resources to help US businesses sell products internationally and maintain compliance. Consult the ITA and country-specific government websites, then look for a global ecommerce software solution that offers international compliance support, like Shopify Markets.