E-commerce sales are expected to rise this year and beyond as consumers continue to spend online. This is despite the challenging economic conditions that many consumers are currently facing and the pressures that retail sales overall continue to experience.
Last year, $5.7 trillion was forecast to have been spent online, accounting for 20% of all retail purchases. Estimates suggest that this figure will jump to over $8 trillion by 2026, with a 10% growth seen in both 2023 and 2024.1
So what’s driving this continued surge in e-commerce? And what steps must your company take to take advantage of it? Here are three factors to consider to know better the cross-border:
Get to know the cross-border opportunity
Think about re-evaluating your approach to non-domestic markets. If you are able to reach customers in key locations, you will have access to a significant opportunity as e-commerce sales continue to rise worldwide. Globally, cross-border sales are anticipated to grow at a rate of 26% in comparison to 13% in the overall e-commerce market between now and 2030, reaching $5.6 trillion. There’s also a specific opportunity for European businesses to reach customers in neighbouring countries. A third (32%) of consumers in the EU buy from sellers in other EU member states. That represents a solid base to work from, but the fact that 84% buy from domestic sellers also shows the potential to entice even more consumers to buy cross-border.
In addition, Europe itself is forecast to experience a higher compound annual growth rate in its e-commerce market than the global increase (13.9% a year to 2025, compared to 9.6%).
Understand the factors propelling the growth
The growth of e-commerce is being fueled by a number of factors, one of which is behavior. People’s desire for convenience is met by online shopping, which allows them to shop whenever they want and have their purchases delivered the following day. These factors are being observed globally. Alongside this, greater smartphone penetration, especially in emerging markets, is also powering growth.
Mobile commerce is the dominant e-commerce sales channel in many emerging markets, largely because mobile networks are cheaper to develop than physical ones and using smartphones to surf the web is often more cost-effective for consumers than a desktop connection.
So as the proliferation of smartphones grows, the likelihood is that e-commerce will grow too. And there is still considerable headroom. Smartphone adoption rates in emerging markets are still lower than developed economies, and forecasts suggest there will be almost 400m new subscribers to mobile services – most from Asia Pacific and Sub-Saharan Africa – by 2025.
Identify where the main opportunities lie
To take advantage of the potential for cross-border e-commerce growth, it’s a good idea to establish where the biggest opportunities are.
If you’re planning to go global, then look to see where the fastest growing e-commerce markets are and consider whether you should be investing in developing your sales there.
CROSS-BORDER EXAMPLES
E-commerce platforms
International rivals: companies like Amazon and Alibaba make it easier to sell products outside of the country. Customers can purchase mercies from a variety of countries, and this platform manages the logistics, payments, and shipping.
Niche marketplaces like Etsy and Farfetch, which bring international buyers and sellers from all over the world into contact, specialize in specific categories like handmade goods and luxury fashion.
Digital services
Software-as-a-Service (SaaS): companies such as Salesforce and Microsoft offer global software services, allowing users in different countries to sign up and use their software online. Content streaming: services such as Netflix and Spotify offer digital streaming and are available in many countries. These services cater for content from various languages and geographical preferences.
Supply chain and production
Outsourced manufacturing: Companies like Apple design products in one country and manufacture them in another to take advantage of lower labour costs and manufacturing expertise.
Automobile manufacturing: The main automakers, like Toyota and Volkswagen, manufacture products in more countries, assembling and shipping them to many different markets.
Financial services
Bank operations and international payments: financial institutions and banks offer services that make international commerce easier, such as swap services, international money transfers, and international banking solutions.
Cryptocurrency transactions: Cryptocurrency transactions allow for peer-to-peer transactions without the need for traditional banking systems.
Educational services
Online education platforms: Coursera and edX offer courses from universities around the world, allowing students from any country to enroll and learn at a distance.
Recruitment of international students: universities and colleges market their programmes to international students, providing educational services across borders.
CROSS-BORDER CHALLENGES
Regulatory compliance
Customs and tariffs: A comparison of domestic norms and international tariffs
Legal restrictions: Understanding and complying with local laws on online sales, consumer rights, data protection and product standards in different jurisdictions
Logistics and shipping
Shipping costs and times: manage the higher costs and longer delivery times associated with international shipments
Criteria for approval: coordinate logistics across more borders, which could involve multiple transit points and stakeholders. Customs clearance: confront potential problems and complications in the customs clearance process
Language and culture
Localisation: translating web pages, product descriptions, and marketing materials into local and cultural languages
Consumer behaviour: understanding and supporting local consumer preferences and purchasing behaviour
Taxation
Comprehensive tax strategies include managing a variety of tax regimes and focusing on different local taxes, such as VAT, value added tax and others, without taking profit margins into account.
Double taxation: managing double taxation, where both host and home countries use the same redundancy.
Intellectual property
Cross-border protection: protect intellectual property in jurisdictions where IP laws may be less strict or enforcement may be lax.