Taking your business international is a common ambition for many businesses around the world, but getting there can sometimes seem impossible. Through effective cross-border trade, eCommerce businesses can expand into new international markets, and discover new avenues for growth through taking their business global.
At Glopal, we partner with different expert businesses who help drive international cross-border trade for brands, worldwide. One such partner; Visualsoft, has enabled 1000's of retailers to achieve eCommerce growth with their all-in-one eCommerce platform solution and wanted to explore the opportunities and challenges of cross-border trade in today's world.
Visualsoft recently sat down and interviewed Glopal's Chief Product & Marketing Officer, Herbert Knibiehly, to discuss the evolution of cross-border trade and what are the opportunities and challenges presented to brands in today's global market.
Let's dive into the interview with Herbert.
What is cross-border trade?
Simply put, cross-border trade is selling your goods and services to customers outside your country. For example, if you own a clothing store in the UK and sell to customers living in the US, you are trading cross-border. Merchants use different channels to sell their products to international customers. Today, one of the fastest-growing retail channels in cross-border trade is eCommerce. More recently, the pandemic has fueled eCommerce growth as consumers made the shift to online shopping for their retail needs.
What are the benefits of cross-border trade for retailers and merchants?
There are tremendous benefits for retailers to expand internationally. Generally speaking, it creates additional revenue streams from selling into new hitherto untapped markets.
It’s common for merchants to hit a saturation point in domestic markets as consumer demand tapers off. Market saturation occurs when a product has reached a maximum volume due to increased competition. Growth stagnates once that happens, and the acquisition costs can drastically increase.
Expanding into international markets can provide new avenues of growth with lesser competition and significantly lower acquisition costs. There’s no denying that today the opportunity cost of not going international for merchants is exceptionally high. With global eCommerce sales growing at a staggering CAGR of 26.2% (2X of domestic eCommerce), retailers need to emphasise an international direct-to-consumer (D2C) approach to benefit from this high growth.
However, an effective cross-border strategy is essential for successful global expansion, which takes into account linguistic and cultural nuances, consumer preferences, and local laws and regulations, to name a few.
What opportunities and/or challenges are created through cross-border trade?
Cross-border trade presents limitless growth opportunities to merchants. Expanding into new international markets can open retailers to a world of customers. The most significant opportunity is additional sales by way of new customers.
As I mentioned earlier, acquiring new customers becomes increasingly expensive when domestic markets become saturated. To squeeze additional growth thereon may require creating additional demand for your goods, investing in product enhancements or taking away market share from the competition. However, these strategies require significant outlays, which ultimately reduce profitability.
As a merchant, entering new markets where demand for your products is well-established and competition is lesser is a great way to increase revenues. In addition, advertising costs in many countries outside mature eCommerce markets such as the US, UK, Canada, and most of Europe are significantly lower, resulting in high margins.
Cross-border trade is not without its own set of complexities and challenges. If these are not well-understood, they can result in costly failures and significant damage to a retailer’s reputation. It is essential to keep in mind that international buyers expect similar shopping experiences as they would from domestic merchants. To deliver that experience, merchants need to localise their stores accordingly for different countries.
Localising an online store involves site-wide translations, currency conversions and supporting local payment methods.
High-quality translations are the bedrock of a successful cross-border business. Imagine if you were selling to customers in Japan in a non-native language such as English or French, you would not be able to push many products. Similarly, data suggests that two out of three shoppers from English-speaking countries will not purchase from your store if it’s not in English. Furthermore, customers should be able to see product prices and make purchases in their domestic currencies. If you’re selling to customers in the UK, they need to be able to browse your products in GBP and not US Dollars.
Support for popular local payment methods is essential to afford a seamless shopping experience to international buyers. One out of three cross-border transactions will not convert using international payment methods. That’s 30% of lost revenues and unimpressed customers that may never return.
It’s unrealistic to assume credit cards as default payment instruments everywhere in the world. In Germany, for instance, Giropay is one of the most popular payment methods. Similarly, Alipay in China and Ideal in the Netherlands are preferred local payment instruments. So if you’re selling in these countries and not supporting popular means of local payment, you’re losing a critical mass of customers.
Hence it is imperative to work with a reliable and experienced localization partner to create an effortless international shopping experience that builds trust with international buyers. Glopal works with retailers worldwide to help them launch their stores in over 100 countries and more than 20 languages.
Another challenge for merchants is to ensure compliance with local trade laws and regulations. Handling taxes and duties and customs documentation can become increasingly complex and costly. Cross-border experts such as Glopal can help retailers with their compliance needs saving them endless paperwork while eliminating operational complexities. Ultimately, buyers know exactly how much they are paying without worrying about any surprise tax bills.
As a shopper, shipping costs and delivery timelines are critical in influencing purchasing. Shipping costs can considerably increase the price of international orders. A well-thought-out shipping and fulfilment strategy is the cornerstone for improving conversions from international shoppers..
An effective shipping strategy involves negotiating the best rates with multiple carriers, finding an optimum warehousing strategy, and partnering with appropriate international fulfilment centres. Most retailers engage external partners such as Glopal to handle all their shipping and fulfilment needs to deliver a hassle-free and cost-effective experience.
Has cross-border trade evolved in the last decade with worldwide factors (Brexit, COVID-19, and inflation)?
Businesses need to adapt to ever-changing market dynamics and uncertainties constantly. The last few years have changed the world as we have previously known it. So let’s start with the impacts of Covid-19 on etailers which shook the entire globe and cross-border ecosystem.
The pandemic forever changed buying behaviours around the world. Lockdowns and travel restrictions spurred cross-border consumption. Furthermore, when brick-and-mortar stores closed their shutters, consumers turned to online shopping. eCommerce, which was once considered a medium of choice for younger people, was fully embraced by older demographics, thus creating a surge in demand. As a result, the global eCommerce market has witnessed explosive growth in the last two years. Though initial supply chain issues slowed down cross-border sales, the second half of 2020 saw a remarkable bounceback.
While the Novel Coronavirus was making headlines, Brexit was causing disruptions to supply chains. The withdrawal of the UK from the EU has had significant implications on trade flows in the region. Merchants worldwide had to ensure compliance with new regulations and changes to the VAT rules, which added further complexities to their cross-border operations. Goods moving between the UK and the EU were now considered imports and exports and subject to 20% import VAT. As a result, International fulfilment became a challenge for many retailers during the Brexit transition as customers faced surprise tax bills and delayed shipments. Since then, many businesses have partnered with cross-border specialist companies such as Glopal to simplify the process of compliance and reduce the cost of fulfilment.
As governments were trying to keep economies afloat, inflation reared its head due to falling interest rates and global supply-chain issues.
While inflation has plagued economies everywhere, people have also accumulated more savings with considerably higher discretionary income, which they would otherwise spend on travelling and vacations, in-store shopping, hoteling etc. Moreover, the additional disposable income resulted in people spending more on cross-border shopping and eCommerce. Thus higher inflation has not had its usual effect on spending, which is typically dampened during periods of high inflation.
What service does Glopal offer to enhance the process of cross-border trade?
Glopal offers a complete cross-border solution to merchants. Our goal is not only to help businesses simplify and effectively manage their international operations but also to expand their international footprint. Glopal is the only cross-border growth platform in the market today that helps retail brands instantly launch their stores in over 100 countries and more than 20 languages and grow sales.
Our end-to-end cross-border solution comes with marketing automation to drive international growth, localization to improve conversions from international visits and compliance and logistics to generate repeat sales and increase customer lifecycle value.
Want to learn how your brand can take advantage of the ecommerce opportunity? Why not learn more about our free international expansion program that's designed to help brands such as yourself launch into new markets worldwide. Learn more below
If you need help or advice growing your eCommerce brandand unsure which platform is right for your business, Visualsoft have an amazing team specialised in building, growing and scaling online businesses through their innovative platform solution. You can get in touch with Visualsoft today, here.