Cross Border Ecommerce: The Ultimate Guide
Consumers are already very familiar with cross-border ecommerce, but for many online sellers it’s a different story. Despite the huge promise cross-border ecommerce offers, the perceived barriers often prevent sellers from taking the plunge. And they’re missing out on a huge opportunity.
In this article, we’re going to dive into the details of international ecommerce. We’ll look at typical selling models, challenges, benefits, and ways you can secure successful international sales from the start.
What is cross-border ecommerce?
Cross-border ecommerce is when consumers purchase products online, from brands and retailers outside their home country. 3 out of 4 consumers buy something cross-border each year, and its popularity is rising.
Of course, it's no surprise that cross-border ecommerce is so popular - after all, ecommerce is already a global phenomenon.
Marketplaces have broadened the selection of sellers available to consumers, with access to a global selection of products and brands. As a result, international marketplaces are becoming a launchpad for ambitious brands to reach more customers around the world.
How big is international ecommerce?
Cross-border sales are taking a bigger share of online sales each year. In 2022, international ecommerce made up 22% of all online sales. A big chunk of this comes from B2B marketplace sales (think Alibaba, for example) - B2B ecommerce is estimated to be about 63% of total online sales.
Focusing on just the retail segment, cross border ecommerce will be worth US $4.8 trillion in 2025 - growing to nearly US$6 trillion by 2027.
These figures show that international ecommerce (for both B2B and B2C) will exceed US$3.5 trillion in value by 2027. As cross border ecommerce has grown by 50% in the last 6 years, the figure will probably be even higher.
For brands and retailers looking to unlock new sources of growth, international ecommerce is a logical option.
The benefits of cross-border ecommerce
Cross-border selling offers huge benefits for sellers. The most obvious is a much bigger market reach – and this means massive sales growth potential. For example, let’s imagine your brand currently targets consumers in the US; this means you can reach a maximum of 289 million potential buyers in 2027.
The benefits of cross-border selling include:
- Market expansion. As illustrated above, each additional region can massively increase sales potential. A US brand expanding to China and Latin America can increase their customer base by 594%.
- Potential for less competition. Especially for unique brands and products. A great example is Apple, which expanded into Japan in 2003 after saturating the US market. Despite the established position of domestic electronics brands in Japan, their unique offering enabled the brand to gain traction internationally.
- Leverage differences in buying power. You can get better margins in high-GDP countries, or where the wealth gap is large. Looking at a nations’ GDP growth is an important consideration when assessing international expansion.
- Outsmart seasonality. Sell seasonal goods (e.g., fashion) in both hemispheres, and get better sell-through, in combination with higher margins. International selling is a recommended way to clear seasonal stock at good prices. Australian retailer MySale has built its business on this premise.
- Build your brand. Use your chic appeal in overseas markets to build brand identity and loyalty. The popularity of your brand in other countries may surprise you – 65% of Chinese consumers and 49% of Australian consumers have an overwhelmingly positive view of US brands, for example.
- Cut out the middleman. Sell direct to the consumer (DTC), without relying on distributors for your brand reputation. By becoming the distributor for your own brand globally, you gain full control over your branding, content, and customer experience.
- Control over methods. Freedom to use more sustainable methods distributors don’t offer. This might include sustainable delivery methods, or environmental certifications, which are increasingly demanded by consumers.
- All the advantages of DTC. These include better margins and direct contact with consumers.
Challenges of cross-border ecommerce
Selling goods internationally involves some challenges to ensure everything runs smoothly. Typical difficulties associated with international ecommerce include:
- Understanding the market. This has legal and cultural dimensions to it. For example, in The Netherlands, duvet covers are open at one end. Try and sell these in other countries and they’ll think it’s faulty, resulting in avoidable returns.
- Assortment and content. Align with cultural norms to ensure that your content isn’t offensive, too formal, or too casual.
- Legal regulations. Some products are restricted or prohibited, while others must meet standards for quality and safety. You must be authorized to sell as a registered trader, and/or be a registered importer, and have authority from brands and trademark holders.
- Sales taxes and customs. The taxes you need to pay depend on your setup. You might escape sales tax, but need to pay customs, or vice versa, or both.
- Exchange rates. These can make a big difference to margins, and leveraging exchange rates at the right time can generate extra margins.
- Branding and identity. Does your brand identity work with the target market? Do your values make it hard to justify selling in countries with regimes opposed to human rights or sustainability?
- Distribution agreements. You may be prevented from selling some goods due to exclusivity agreements.
- Payment methods. Secure payment that prevents fraud is essential. Many countries still use cash as a preferred method, but online payments are now almost ubiquitous.
- Last-mile delivery. This is critical. Some marketplaces require certain last-mile providers, and in some regions the coverage is poor.
- Complexity. You need tools that can help manage the challenges of international sales, including the logistics and fulfillment side. This is where marketplace integration software is essential, enabling you to link all your backend systems to one centralized dashboard.
How is cross border ecommerce different to regional expansion?
Cross-border ecommerce is more complicated because there are more moving parts to consider, but it’s just as achievable as selling within your own region.
Compared to regional expansion, selling in new regions is certainly a step-up. Throughout the EU, for example, trading rules are well-aligned for almost every product type, and there’s no customs or import duty to worry about.
Additionally, Free Trade Agreements (FTAs) help businesses trade with less friction within a region, such as the agreement between Australia and Singapore. You can also reach most other countries within a region using the same network of couriers or fulfillment locations.
Looking further afield, you need to start thinking about whether to fulfill orders from your ‘home’ country/region, or use local warehousing and fulfillment in your target markets.
By keeping your stock closer to customers, you can reduce import charges and offer faster, cheaper delivery. Local stock locations also make it easier to maintain supply stability.
Four tips to succeed with cross border ecommerce
Tip #1: Partner up
You can achieve more with the established capabilities and connections strategic partners can give you. Using strategic partners makes it possible to outsource the most challenging parts of cross-border ecommerce while you get established.
Once you have some momentum, you can start to take more hands-on control if needed. However, in many cases, partners are good options for the long-term, as they can secure better deals on things like shipping and warehouse space.
Partners can also help resolve things like licensing (important for regions like GCC) and customs.
Tip #2: Get advice on strategy
Stepping into a new region isn’t something you should do alone, or without advice.
Strategic advice at an early stage can help you understand the true potential of each market and what’s needed to make cross-border selling successful from the very start. This way, you can avoid expensive mistakes and strategic errors.
Tip #3: Start small, perfect it, and expand
It’s generally better to launch with a well-coordinated and small-scale assortment, with stock replenishments made little and often. The cost might be greater to begin with, but this approach can pay off by making your enterprise more responsive to customer demands in each region.
Tip #4: Use FBA/MCF
Amazon recently launched their multi-channel fulfillment service (MCF), which uses fulfillment by Amazon (FBA) to serve customers from other sales channels. This can be a great way to reach customers in regions outside your current area, but which are already covered by FBA.
What’s the best software platform for cross-border ecommerce?
As we’ve seen, selling cross-border requires distinct capabilities and tools. There are several software packages and platforms that are designed to meet (at least) some of these challenges.
Cross-border payment solutions
Nearly half of your customers will abandon carts if their preferred payment method isn’t offered. This makes it vital to accept payments that are regionally preferred, in every country you sell in. While US consumers love paying by card, many parts of the world use alternative payment methods and ewallets. Alipay is a popular choice for Chinese consumers, for example, as is WeChat pay (Weixin Pay).
Some providers will cover almost every region. But, regardless of whether you already use a particular payment processor, you should always look to see which are the most popular payment methods in each country.
Logistics platforms for international ecommerce
There are two main approaches to logistics for cross-border selling: do it yourself, or use a partner who can take care of it for you.
With the DIY approach, you can use international logistics software like Shippit or Sendcloud, which will find the best provider for each package, based on destination and timescale. Solutions like these can be an advantage if they mean you don’t need a separate contract (and applicable MOQs) for each courier.
Partnering with a third-party logistics and fulfillment provider can help you scale quickly. These can cover every possible region, with local warehousing and last-mile delivery solutions. This helps ensure faster delivery, and happier customers. Companies like Dimass can cover the entire process of cross-border fulfillment (including warehousing) worldwide, for example.
Marketplace integration software
As you launch in new regions, it’s important to target local marketplaces. And this means connecting each of these sales channels to your own systems. To maximize growth, the best approach is to link your trusted ERP or WMS, to marketplace integration software. This tactic allows you to consolidate ecommerce management for every channel into a single platform.
With everything in one place, you gain a total overview combined with the capabilities you need for cross-border trade. With a powerful ecommerce platform like ChannelEngine, it’s easy to manage stock at multiple locations, including multi-location fulfillment, hybrid fulfillment, and virtual stock locations.
Partner power lowers barriers to success
By using trusted partners from the ChannelEngine ecosystem, you can extend capabilities and manage specific challenges like strategy, warehousing, and logistics. This is a low-threshold, low-risk way to accelerate growth in new regions, and instantly gain expertise and local knowledge. For brands, our global network of partners may be the key to unlocking your cross-border growth potential.