What is cross border e-commerce? And Why?
Cross border e-commerce means selling goods internationally, no matter if it's B2B (business to business), B2C (business to customer), or C2C (customer to customer). By the end of 2020, the annual sales of cross border e-commerce are predicted to be $900 billion, twice the growth of domestic e-commerce.
With advances in technology, it has become much simpler to practice cross-border e-commerce nowadays. Through a combination of online policies and improvements in logistic networks, branded stores can directly face customers and ship to consumers at the local level, which is very different from the traditional way in which you need to have several distributors or agents to access the cross-border market.
For brands with international ambitions and a deep enough pocket, growing your business internationally is a huge opportunity. That being said, there are still many challenges with cross border selling. Here we will discuss four aspects you could consider before you “cross the border!”
Do your products meet the needs of the target market?
One thing to keep in mind when selling in different markets is the cultural and geographical difference. While your products are selling well in your home country, they may not be as popular else where. In Southeast Asian, for instance, there are no four seasons and the temperature is close to 30 degrees Celsius all year round, so there will be low demand for winter gears.
Another example is that American or European apparel brands may not be popular in Asian because Westerners and Asians have very fashion tastes, and body shapes. Even though your products come with different sizes, there are still adjustments to be made to satisfy customers in different countries.
For fashion businesses, sizing could be a potential headache between different countries, especially if the average citizen physique differ. So the selection of size chart tools is even more important. Kiwi Sizing creates a size recommender and converter for you to serve clients from all over the world, who use all types of measurement, to help them find their most fitting size, decrease return rate, and reduce operational cost.
We highly recommend conducting interviews with local residents and potential target audience to learn more about how they would perceive your brand and products.
Do you have an operational strategy for foreign markets?
Cross border e-commerce requires international operations, not only in English but if you want to enter the Japanese market, you'll need to use Japanese to make it easier for your brand to resonate with the local population. Localization is key in successful cross border e-commerce. Another key in successful cross border e-commerce lies in localization. In addition to product selection to fit the local demands, it is also necessary to personalize the brand based on target market, whether it's price, style, marketing, etc. For example, what is the most widely used social media? What are some important local holidays and their cultural significance? It's critical to understand these in order to tailor your strategies locally.
Another key factor to understand the personalities of consumers in each country. For example, customers in Southeast Asia are sensitive to prices, so sales go up aggressively when there’s promotion provided. In some countries, employees have to receive their paychecks by the 10th, so you can implement your marketing campaign at the beginning of the month based on this policy since they would have more budget to spend. On the other hand, customers in some countries care more about branding and shopping experiences. As a brand owner, you do have to immerse yourself in the culture and understand their people to acquire these insights and present the brand as close as possible to the local market.
Do you have a convenient payment method and banking plan?
Receiving payments is one of the most important aspects of cross border e-commerce, and of course, the most complicated. For example, Thai consumers are more likely to pay cash or with a local card in a convenient store, so if you don’t integrate this feature, it could significantly reduce their desire to buy from you.
You should also pay close attention to the currency and exchange rate fluctuations, as well as understand the profitability of cross border e-commerce, how to remit back to the main market, how much the transaction fee is, etc. Don't neglect these small details because you think your sales are not that big, or you may realize that you don't have much profit after calculating the cost. Thus it’s critical to find a suitable payment processing company in the target market to work with.
Fortunately, if you are building your storefront on some international e-commerce platform, a lot of the local payment methods would be built-in and comes almost for free. This would be another criteria to consider when you are building your storefront.
Do you have a reasonable logistics model?
As you can see from the chart above, logistics can be difficult and challenging for all cross border e-commerce operators, but as long as you find a good partner, they basically will help with customs clearance. What sellers need to think about is which logistics model is better for them.
On top of increasing profit and sales, it is even more important for sellers to reduce their shipping costs. At first, you can choose the single item delivery to consumers, even though the shipping cost will increase, but it can be helpful to test the acceptance of the target market in the early stage. When the consumption grows, you can then consider overseas storage to reduce the shipping cost of a single item. With past sales data and experiences, you can better estimate the amount of inventory needed, and ship batches of goods by sea to save tariffs and reduce shipping costs.
The return policy is a big issue for cross border commerce as well, and according to Digital Commerce 360, poor fit/ incorrect sizing is the most common reason for returning an online order. Getting return or changing sizes can cost you extremely high shipping costs between different countries. We know that return rules are set by the seller and identified on the website, but how to protect both parties’ rights and satisfy customers’ expectations is still a point to note. Choosing an ideal sizing chart and recommender for customers to pick the accurate size for the first time can be beneficial to both of you.
Although cross border e-commerce is associated with huge business opportunities and the threshold for investment is getting lower and lower, we hope that through the above four aspects, you will have more senses to examine this market. And after choosing the target market, it is also recommended to put more effort into understanding the local culture to get a higher return to your investment.
Remember, as you operate the business, you also must continuously understand the import policy of the foreign country. Each country has its regulations, and sometimes when the political environment changes, the policy may change as well.
To reduce the return rate after a successful sale, we also recommend that you use Kiwi Sizing AI Size Recommender as a size chart tool. It will recommend the most suitable size of products for customers to reduce return rate, help you decrease the cost of the return, and to create a positive cycle of your e-commerce business.
- Official Website：https://www.kiwisizing.com/
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