Cross-border ecommerce is a form of international trade that involves buying and selling goods and services online across international borders.
These cross-border ecommerce transactions occur on digital platforms, online marketplaces, and websites. They are facilitated by payment processors that can handle currency conversions, as well as shippers that can transport products to different countries. These logistical considerations make it possible for ecommerce businesses to thrive across the worldwide international market.
Benefits of cross-border ecommerce
- Market expansion
- Diversification and risk mitigation
- Increased revenue potential
- Economies of scale and cost efficiencies
By embracing cross-border commerce, businesses can capitalize on global opportunities, expand and diversify their customer base, and potentially achieve sustainable growth across international markets. Here are four specific benefits of a cross-border ecommerce strategy:
Market expansion
International ecommerce opens access to a global customer base, allowing businesses to reach new customers beyond their local market. This is particularly helpful for businesses facing domestic market saturation, where gaining market share is difficult, expensive, or unprofitable.
Diversification and risk mitigation
Operating in multiple foreign markets reduces dependency on a single market or economy, spreading risk across different regions and local currencies. Cross-border selling gives your ecommerce business a buffer against economic downturns in any one market.
Increased revenue potential
Expanding into global markets can lead to increased ecommerce sales and business growth. You can tap into regions with higher demand from online consumers and less competition. You also may have the potential to increase sales with lower customer acquisition costs.
Economies of scale and cost efficiencies
Scaling operations across borders can lead to cost efficiencies through bulk purchasing, streamlined logistics, and optimized production. This means a global cross-border ecommerce presence can result in lower per-unit costs and wider profit margins than your business could achieve by limiting operations to your own domestic country.
Challenges of cross border ecommerce
- Shipping costs and logistics
- Currency and payment issues
- Regulatory and legal compliance
- Language and cultural differences
- Customer trust and brand identity
Although an online business can greatly benefit from expanding into international markets, the effort does pose challenges. As you consider orienting your ecommerce website toward the global market, pay attention to these potential issues:
Shipping costs and logistics
International shipping involves numerous complexities, including customs regulations, import restrictions, varying shipping costs, and longer delivery times. Retailers must navigate potential difficulties with tracking, warranty claims, and returns, all of which can impact customer satisfaction.
A significant challenge is complying with international import restrictions, as products prohibited in certain countries may be returned at the border. Moreover, tax compliance, particularly duties and import fees, presents a major hurdle. The number one pain point in international selling is surprise duties at delivery.
While businesses can opt to charge duties at checkout and remit them to government authorities, this process is complex and often avoided, shifting the burden to the buyer. This is particularly problematic during last-mile delivery, the final leg in a parcel's journey to the customer. To mitigate some of these challenges, selling via international ecommerce marketplaces like AliExpress can help connect retailers with shipping vendors in target countries.
Currency and payment issues
Handling foreign currencies, multiple payment methods, and cross-border transaction fees also pose hurdles to entering a new market. You’ll have to navigate everything from currency conversion rates to the elevated risk of payment fraud. Enter the process knowing that your cross-border business will have to adapt to different payment preferences while ensuring secure transactions.
Regulatory and legal compliance
It takes considerable time and effort to navigate the various legal frameworks, tax laws, data privacy regulations, and trade restrictions across different countries. For instance, a foreign government may have one set of regulations for online sales between a corporation and an individual, and a different set for transactions between two private persons.
Some countries have specific requirements for ecommerce businesses. For example, the United Kingdom, Australia, and Norway require foreign sellers to register and file taxes in their jurisdictions.
This level of complexity often necessitates that retail websites hire local experts who are well-versed in the laws and codes of new markets, ensuring compliance and smooth operations in each country they serve.
Language and cultural differences
The best way to enter new markets in other countries is to learn about the local tastes, preferences, and culture. This understanding should inform your approach to marketing, customer service, and product descriptions on your ecommerce platform, which may need to be available in multiple languages.
Think about region-specific content. You can customize your site content or product catalogs based on the visitor's geographic location, so that customers get the stuff they're looking for. When it comes to localization, you'll probably need specialized expertise, so hire a localization team to help you get up to speed.
Customer trust and brand identity
It takes time for potential customers to warm to a new brand. Complications can arise in cross-border purchases in terms of customer service, returns, refunds, and warranty claims, all of which can have an impact on customer trust and loyalty.
How to be successful in cross border ecommerce
- Start with market research and targeting
- Pursue a localized strategy
- Optimize logistics
- Set up secure international payment solutions
- Comply with local laws
- Invest in customer service
- Practice continuous evaluation and adaptation
1. Start with market research and targeting
Conduct thorough market research to identify high-potential international markets. Analyze consumer spending, preferences, local competition, and regulatory landscapes. Target specific regions or countries where there's stable or rising gross domestic product, potential demand for your products, and less competition for ecommerce sales.
Make use of your existing data by checking out which regions already have an interest in your business. Check your website analytics to see which countries or regions you're getting organic traffic from. It can give you a lot of insight into markets where your products are already well known, so you can potentially expand into those markets.
2. Pursue a localized strategy
Customize your strategy for each target market. This may include modifying product offerings, pricing, marketing, and providing a customer experience that values the local language, culture, and expectations. Tailoring your approach to your customer base can help you build goodwill with your desired audience.
3. Optimize logistics
Streamline logistics, inventory management, and shipping processes for your international customers. Use Shopify Managed Markets to eliminate the need to find reliable international shipping providers or understand customs regulations yourself.
Managed Markets handles these complexities for you, offering exclusive discounted rates for international shipping, package tracking on every order, and express shipping that delivers worldwide in one to five days. It also takes care of customs pre-clearance, ensuring your packages travel seamlessly through customs without hold-ups or surprise fees.
Transparency helps you avoid unexpected charges on delivery. So, give shipping costs and delivery times upfront. If you take care of these things, especially the often-problematic surprise duties, you'll have a much better international customer experience.
4. Set up secure international payment solutions
Offer a variety of secure payment methods for each market. Shopify Managed Markets simplifies this process by automatically activating local payment methods for over 150 countries. It allows global customers to check out confidently with payment options they recognize.
Managed Markets also handles currency volatility, guaranteeing exchange rates to protect your profits against fluctuations, especially for international returns.
5. Comply with local laws
Ensure compliance with international trade regulations, tax laws, data privacy rules, and consumer protection regulations in each market. Legal compliance is crucial for any ecommerce store, and it may require legal expertise or advisors versed in international laws.
With Managed Markets, compliance concerns are largely taken care of. As a built-in merchant of record, it handles VAT, duties, and local taxes, which are prepaid by your customer at checkout and remitted on your behalf.
As part of Managed Markets, you're also protected from fraudulent purchases, and it filters your product catalog based on regional import and carrier restrictions, so you stay compliant.
6. Invest in customer service
Provide excellent customer service for your global consumers, tailored to each market's needs. Offer multilingual support, understand cultural nuances in customer communications, and address concerns promptly to build trust and loyalty. Assume that online buyers will have choices about where to take their business; give them reason to do their online shopping with you.
7. Practice continuous evaluation and adaptation
Regularly monitor performance metrics, customer feedback, and market trends. Adapt your strategies, product offerings, and operations based on insights gained from running an online store.
Sell cross border with Shopify
Cross-border ecommerce opens a world of opportunities for businesses seeking global expansion. While challenges like shipping logistics and regulatory compliance exist, tools such as Shopify's Managed Markets ease these hurdles.
By conducting thorough research, localizing strategies, and prioritizing customer service, businesses can successfully tap into international markets and boost revenue.
Cross border ecommerce FAQ
Does Shopify support cross border ecommerce?
Yes, Shopify is set up to handle cross-border ecommerce. You can use your Shopify sales channel to increase your brand visibility and client base without incurring hidden costs that squeeze profit margins.
What is an example of cross-border ecommerce?
An example of cross-border ecommerce is when a buyer in the US purchases handmade crafts directly from a small artisan's online store based in India. This transaction involves the sale and shipment of goods between different countries via a digital platform, with the artisan using Shopify Managed Markets to handle international payment processing, customs documentation, and regulatory compliance.
Why should you consider cross-border ecommerce?
Cross-border ecommerce expands your market reach, potentially unlocking new online customers and revenue streams beyond domestic borders. Breaking through could result in exponential growth for your business.
