Updated April 2017
Consumers have become increasingly savvy when it comes to comparing goods and services online and knowing where to buy what, and often look outside their own country’s borders to get the best deal or that specific service that is not available in their country of residence. Therefore, online merchants are expected to sell and deliver their merchandise across the world, resulting in the global expansion of their business. A lot has been written on this subject and, as always with (relatively) new phenomena, there is a lot of contradicting information out there. That is why we have put together a list of what we feel is paramount for any merchant to know when thinking about expanding their business across borders.
1. Cross-border e-commerce makes up 21% of the total global online trade
This year, the ecommerce sales are expected to grow to a whopping $1.4 trillion. Cross-border
e-commerce accounts for roughly 21% of that. Time to get yourself a slice of that pie, we say!
2. 12 countries make up 80% of the world’s cross-border shoppers
Successful online merchants know when to enter into newly emerging markets. Successful payment service providers know what these emerging markets are. Canada is the world’s leader when it comes to cross-border shopping; 37% of the world’s cross-border shoppers reside here. The other countries that are responsible for the aforementioned 80% are Australia, the UK, Hong Kong, Germany, Singapore, Japan, Brazil, Switzerland, United Arab Emirates, Kuwait and France.
3. E-commerce thrives in struggling economies
During 2010 and 2011, the Greek online market has been continually growing by 40-50% and both Spain and Italy show a respective growth of 18% and 16% annually1. This surprising trend has not only been seen in Europe, but all over the world. According to the findings of the Credit Suisse Research Institute’s Emerging Consumer Survey, the “total annual online retail sales across our surveyed markets – Brazil, China, India, Indonesia, Mexico, Russia, Saudi Arabia, South Africa and Turkey – could reach up to 3.5 trillion US dollars and impact companies across multiple sectors, including retail, finance, security and technology.”
4. Payment preferences on a global level
Cross-border online shoppers still prefer to pay with a credit card. But since credit card transactions are prone to fraud and not very anonymous, a plethora of alternative payment methods have been developed over the past few years. PayPal is the most popular alternative payment method by far on a global level and it allows consumers to complete transactions in their own currency. Moreover, it has a very popular buyer protection policy, which makes people feel safe when shopping online. On a local level, other alternative payment methods are sometimes preferred. Make sure you offer the preferred payment method in the country you are targeting to maximise your chances of succeeding.
5. One size doesn’t fit all
Do your due diligence before targeting markets outside your own country’s borders. Cultural differences as well as economic or social discrepancies can and will ruin your chances of becoming successful abroad. You need to know the market you are targeting in and out before entering. If, for example, your company name has the number 4 in it, consider changing it before expanding to China or Japan; there the number 4 sounds the same as the word for ‘death’ and is therefore considered unlucky and will hinder your expansion.
6. Attracting local partners will help you with your globalisation
Having a knowledgeable, local partner that will help you in the targeted region is every bit as important – if not more – than doing your own extensive research. A local will know about the culture, social structure, payment preferences, local business customs, consumer preferences, logistics and infrastructure, legislation and lots of other things that you won’t be able to read between the lines of the most elaborate report. A local partner can also help you to customise your product and marketing strategy if necessary. Engage a local (company) and prosper.
7. Physical goods also dominate cross-border e-commerce
It’s a known fact that physical goods represent a larger percentage of general e-commerce volume than non-physical goods like music files, plane tickets and software. This holds true also for cross-border e-commerce. Physical goods dominate this field as well2:
- Clothes, shoes & accessories – $12.5bln
- Health & beauty products – $7.6bln
- Personal electronics – $6.0bln
- Computer hardware – $6.0bln
- Jewelry, gems & watches – $5.8bln
8. Multilingual customer service enhances customer loyalty
Consumers respond well to being addressed in their own language and will value your company higher when you put in the effort to do so. Don’t just run your web site’s content through Google Translator, hire local translators and proofreaders to make sure that your content is the best it can be. However, if you were to be expanding to 50 countries for example, it would be very expensive and time consuming to localise your content. In that case choose one of these 10 languages that are most used online:
- English (948,608,782 users in 2016)
- Chinese (751,985,224 users in 2016)
- Spanish (277,125,947 users in 2016)
- Arabic (168,426,690 users in 2016)
- Portuguese (154,525,606 users in 2016)
- Japanese (115,111,595 users in 2016)
- Malay (109,400,982 users in 2016)
- Russian (103,147,691 users in 2016)
- French (102,171,481 users in 2016)
- German (83,825,134 users in 2016)
9. The future is mobile
In the fast-moving world of cross-border shopping, mobile transactions via smartphones and tablet devices are rapidly gaining ground. In 2013, the combined cross-border mobile shopping markets of the USA, the UK, Germany, Australia, China and Brazil was already worth $36.4 billion, accounting for more than a third of all cross-border online shopping in these markets. By 2018, their total value will have increased nearly threefold to $106.4 billion. Across the surveyed markets, almost eight out of 10 (76%) cross-border shoppers said they wanted to make more mobile purchases, transactions and payments in the future3.
10. The most obvious steps in cross-border trade are easily overlooked
It seems laughable, but you would be surprised at how many merchants have failed their cross-border ventures because they overlooked some of the most obvious steps. For example, if you want to offer your goods or services abroad, make sure you offer international shipping on your web site. Also confirm that you are ready to receive cross-border payments and that you adapt your products and services to appeal to your targeted audience. Last, but certainly not least, offer only relevant local information (if you are targeting Spain, refrain from talking about all your events in Australia, but make a special offer for a Spanish national holiday) and adapt your web site’s interface to local customs (when expanding to Arabic-speaking countries, don’t forget that they read from right to left instead of left to right.)
TL;DR – cross-border expansion checklist
For those of you that didn’t have time to read the whole list and are only interested in knowing what to look out for when expanding your business across borders, follow the checklist below before entering a foreign market and nothing should stand in the way of your imminent world domination:
- Find local partners
- Adapt your products and services to the target location’s preferences
- Localise your marketing strategy
- Know and comply with local legislation
- Offer only information that is relevant to the target location
- Offer customer support in the local language
- Keep the shopping interface of your web site consistent with local expectations
- Provide cross-border payments in local currencies and with local popular payment methods
- Establish local logistics and delivery processes
- Offer international shipping
Want to know more? Learn how to find the right payment service provider for your cross-border expansion here.
1. International Developments In E-Commerce Report, p. 3, IMRG, 2013.
2. Modern Spice Routes – The Cultural Impact and Economic Opportunity of Cross-Border Shopping Report, p. 7, PayPal Media, 2013.
3. Modern Spice Routes – The Cultural Impact and Economic Opportunity of Cross-Border Shopping Report, p. 15, PayPal Media, 2013.