Borders are literally non-existent in today’s world where buying and selling between countries has been made so much easy through e-commerce. Technology has transformed and blurred the line that existed earlier in cross border transactions and continuous investment is being made by many e-commerce majors to ensure customer satisfaction and high reach of various products and services.
Global e-commerce sales is projected to reach US $6.5 trillion by 2023, which will be approximately 22% of total global retail sales. A study on western Europe, found that cross-border e-commerce accounted for 95 billion of the total e-commerce revenue in 2018 and that cross-border trade made up 22.8% of the total online sales in Europe.
More than 2.1 billion shoppers are expected to purchase goods and services online by 2021. E-commerce as a whole has already shifted away from the West and will continue to do so despite the slowdown in the global economy. While most companies who sell online have a good grasp on their local markets, managing cross-border e-commerce sales presents a set of challenges that must be overcome and managed.
The challenges of cross-border e-commerce sales can be classified into the following:
Logistics is a primary challenge in cross-border e-commerce because it is a significant cost (approximately 7% of online sales) and time consumed in the purchasing process. Amazon has set a standard of quick delivery within 48 hours and customers now expect the same from online e-commerce platforms. Online sellers need to be careful in choosing their delivery partners, considering the reputation, shipping network coverage and shipping costs. It is not enough that the product shipped by the seller is good; a safe, prompt and cost-effective delivery has a major impact on the overall customer purchasing experience. The responsibility of the seller does not end with handing over the product to the logistics partners. Customers view delivery as a responsibility of the seller rather than that of the logistics company. Hence, sellers need to select the right partner. It is even more imperative because there may be occasions when customers may wish to return the goods, which could be due to errors from the supplier or customer’s side, such as, wrong product model, wrong color, wrong size and so on. Sellers need to ensure they have good relations and coverage with the logistics partner to make shipping returns convenient to the customer.
The most dominant payment mode for global e-commerce sale transactions is credit card payment. Almost all e-commerce payments in Europe are through major credit cards such as Visa, MasterCard, and American Express, with the exception of Germany. In Japan, Konbini, a local payment method, accounts for a sixth of e-commerce payments.
With the rise of online transactions, fraud risk is prevalent and due to various security restrictions, such as address verification's by the payment merchants, these measures dissuade customers from purchasing goods from international online retailers. 13% of online consumers refrain from buying if a foreign currency is displayed so sellers need to ensure that a local, secure and convenient payment system is set up for customers to utilize.
One aspect that e-commerce has minimal impact on is regulations of foreign countries. Cross border e-commerce requires that international online sellers follow the regulations and documentation procedures of the country of destination. Some countries have quality and packaging requirements, high custom tariffs, stringent custom procedures and consumer laws that sellers need to adhere to. Despite the rapid technology development in e-commerce platforms and logistics, import-export documentation is still yet to catch up, particularly in developing countries as most documentation is done manually. Duties and export procedures may add and make the products of international sellers expensive. Certain countries may have legal systems which are weak to enforce laws and or complicated systems causing judicial delays, consequently affecting recourse to the seller, if any.
Global e-commerce sellers need to be ready to consider local factors when entering a foreign market. Sellers commonly face language and cultural barriers and fail to understand consumer habits. While there are many off-the-shelf translation software's, sellers need to take care that the website supports a number of languages and that the translation communicates what is intended. Marketing campaigns also need to be carefully worded. To cite a well-known international marketing mistake, Coors, a beer manufacturer from the US, launched its "Turn it loose" campaign in Spain and translated the slogan literally. When translated into Spanish, the expression was interpreted as "suffer from diarrhea"! Consumer habits play an important role and Amazon is one of the leaders when it comes to localization. The home page or landing page of Amazon is different for each country, based on the preferences and purchasing habits of consumers. Amazon India prominently displays the latest mobile phones for Indian consumers. In the US and Canada, the page focuses on today’s deals for a range of products. Content and product catalogs need to be updated periodically to capitalize on seasonal and/or holiday trends, or changes in consumer preferences. Sellers also need to develop search engine optimization (SEO) tactics in a foreign country. Although there are several challenges in international e-commerce, there is a lot of market potential for sellers which they cannot afford to ignore. One only needs to look at Alibaba’s successes as a platform for mainly suppliers in China expanding overseas and from the company’s listing in the US. Through careful planning and execution of resources, global e-commerce sellers can achieve growth in international markets, capitalizing on emerging technologies and lower overheads.
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