Cross-border e-commerce is defined as international e-commerce according to which, suppliers sell their products to consumers living in other countries and jurisdictions. However, consumers who trade with suppliers online and share one common language, border or currency, do not perceive it as cross border trading (e.g.trading within European Union).
Internet, smartphones and digitisation in general, play a major part in our everyday lives and most people nowadays, use these devices to make online purchases. Currently, there are 1.79 billion digital shoppers worldwide and this number will increase to 2.14 billion by 2021.
But let’s talk more about numbers.
E-commerce is growing 250% faster than traditional retail. In particular, the revenue of e-commerce was estimated at $1,785,733 million in 2018 and by 2023, this amount is expected to show an annual growth rate of 8.9% reaching $2,734,414 million. In addition, user penetration was around 55% in 2018 and it is estimated that it will reach 62% by 2023. Finally, the average revenue per user is $633.69 and the largest segment of the e-commerce market is Fashion with $524,872 million in 2018.
45% of global online shoppers tend to purchase products from overseas stores. This is because internet has made it easier for all of us to browse different products, to make easy and fast online payments and to engage in conversations about these products on social media.
But the most important benefits of cross border e-commerce shopping are that we can find products that are not available in our countries and we can buy them at any time and any place.
There are some established markets within the e-commerce market that are called e-commerce hotspots. Such markets are the UK, the USA and Germany. However, there are other markets that are emerging and developing to a very strong and important part of the e-commerce market such as China, South Korea and Indonesia.
In order for you to understand how e-commerce works in different countries, we decided to present information about two different types of e-commerce markets, an established one such as UK and an emerging one such as China. In this way, you will be able to understand how these markets work and how they contribute to the global cross border e-commerce market.
UK- The leader of European E-commerce Market
UK is one of the biggest and most powerful e-commerce markets worldwide. It includes not only British people but also many internationals living and working to the UK. The UK is a technologically advanced country using IT to every process and cutting down costs from operations. British shoppers have many different low shipping costs options to choose from when it comes to the delivery of products.
Additionally, shipping your goods from UK to countries where no VAT charges apply, such as USA and Australia, it means that you can offer them at more competitive prices than local merchants. This is the reason why the UK is also leading the market for import and export cross border e-commerce with 71% of online suppliers offering their products to countries outside UK.
British shoppers are technologically savvy and they have a keen interest on shopping online using their mobile devices. More specifically, the mobile share of e-commerce sales in UK reaches up to 52% while smartphones account for 71% of e-commerce traffic. 48% of British online shoppers make purchases with non-UK retailer with their favourite online destinations being USA, Germany and China.
UK buyers feel very comfortable sharing their card details and making online purchases with their cards as a method of payment. It has been stated that credit cards are the most popular payment method with 40%, followed by debit cards (34%) and PayPal (21%).
Finally, Brexit is quite a determinant for the UK’s economic and political situation, but we still do not know the exact terms of the UK leaving EU. What we know is that global cross border e-commerce will reach £28 billion by 2020 and UK will hold the 60% of that market. Many suppliers feel that, since the referendum, there was an increase in sales from global online shoppers mainly due to the pound being weakened in the previous months. Since UK has been the leader of the e-commerce market in Europe, we believe that it is unlikely to change after the UK leaves European Union at 29th of March this year.
China- A Promising Market
China belongs to emerging but highly promising e-commerce markets, always improving its logistic processes and embedding new technologies. China is one of the leaders in global consumption with approximately 8% of the global consumption and that amount keeps rising. Further, there are 717,310,00 Chinese people that use a smartphone, while smartphone penetration reaches 51.7%. In addition, the internet penetration is at 52.2% with more than 721million internet users.
Chinese consumers are well-informed, technology savvy who belong to the 80s and 90s generations. They like Western brands and luxury products that have a heritage and long history. Apart from being brand conscious, Chinese people pay attention to the price and they belong to the collectivist customer segment, meaning that they strive for maintaining their social status thus, they are willing to pay higher price for a renowned brand name. The top products that they enjoy purchasing from abroad are household essentials, alcohol, consumer electronics and office supplies.
The top countries that Chinese buyers prefer for their digital shopping are USA, Japan and UK and the top e-commerce websites in China are Tmall, Suning etc. Moreover, the most popular payment methods are third-party systems such as Alipay and WeChat Wallet.
All in all, China is about to take a leading position in the global cross border e-commerce market. Consumers are becoming more and more wealthy, loyal and high-frequency buyers of e-commerce.
Challenges of Cross Border E-commerce
Language is an important determinant in cross border e-commerce. Common language minimizes the differences and the barriers and it is cost-effective for the retailers as they don’t have to adapt their websites and pay for translations and local proofreaders. Fraud in another challenge of e-commerce that we need to overcome. You always need to be prepared and informed about the best payment services in the country that you want to operate to.
Logistics and regulations can be very complicated when it comes to cross border e-commerce. If you work tightly with your freight forwarder, you can get multiple options and alternatives always tailored to your needs.
At Haulystic, we understand your requirements and our primary goal is to create value for our clients. We assess every situation accordingly and plan a supply chain strategy that fits your business.
We take care of custom clearance and we provide end to end pipeline consultancy and management for your products.
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