An attractive proposition for companies that have already experienced success in their own markets and want to explore new opportunities, cross-border trade gives companies access to entirely new customer bases that are located in other countries.
With more than 50% of global online shoppers making purchases on foreign websites, cross-border business-to-consumer (B2C) e-commerce continues to gain traction, according to Research & Markets, which says cross-border online shopper penetration is the highest in Australia, China, Canada, and Mexico.
Who’s Buying What?
The top product categories purchased in international online commerce include clothing, electronics, beauty products, and health products. When developing a cross-border approach for these (or any other) product categories, companies should keep these key points in mind:
- Consider an e-commerce-first approach. Growth is expected for cross-border B2C e-commerce sales through 2023, Research & Markets reports, with the key drivers being lower prices and better product availability. As e-commerce continues to expand — it’s on track to hit $4.9 trillion in worldwide e-commerce sales in 2021, up from $1.3 trillion in 2014 — there will be plenty of opportunities to launch cross-border trade initiatives.
- Shipping times are getting shorter. As the logistics capabilities of e-commerce companies and delivery providers improve, consumers can receive their international online purchases faster, helping to mitigate the top barriers to cross-border shopping: long delivery times and costly shipment options.
- No physical presence needed. Because online shoppers are increasingly looking outside of their country’s borders for purchases, expanding internationally no longer requires a physical global presence. Shopify, for example, advocates a simple way to begin testing foreign markets by prioritizing online advertising or social media abroad using an international approach to Google ads, product listing ads, and geographic targeting on social platforms like Facebook and Instagram.
- Customers want stuff that they can’t get in their own countries. For example, a consumer in the UK may find a piece of clothing advertised online from a U.S. seller for cheaper than what she or he would pay in her own country, even with shipping factored into the price.
- Don’t ignore the details. When shipping overseas, be sure to factor in the duties, taxes, and tariffs associated with these shipments. When shipping to Canada, for instance, you’ll have to choose between Delivery Duty Unpaid (DDU) and Delivery Duty Paid (DDP) shipments. These “incoterms” identify the party responsible for paying the duties and taxes, with DDU signifying the buyer/receiver as the payer, and DDP placing the company/seller in the position of paying all duties, clearance fees, and taxes.
- Pay attention to the taxation. One important consideration when shipping small orders from the U.S. to Canada is de minimis, or the value of goods that can be shipped into the country without any duties or taxes being assessed on them. This fee was recently raised to $40 (Canadian), but the new agreement also raises Canada’s duty-free shipment threshold to $150. As a result, tax is now collected for goods valued between $40 and $150 (for orders worth more, both duty and taxes apply).
- Cross-border customers know what they want. According to PayPal, when asked why they shop from merchants located outside of their own borders:
- 72% of shoppers are looking for better prices
- 49% want access to items that they can’t get in their own countries
- 34% enjoy discovering new and interesting products
- 29% are seeking higher product quality
- 76% want to be able to pay in their own local currency
- 62% check currency rates before paying in foreign currencies
- Buyers are hungry for U.S. goods. PayPal also says that, for global shoppers as a whole, the U.S. remains one of the most popular cross-border destinations, with 21% of all online shoppers buying from U.S. sellers. The top categories for these purchases are clothing/apparel, footwear, and accessories (for 68% of shoppers); consumer electronics, computers/tablets/mobiles and peripherals (53%); toys and hobbies (53%); and jewelry and watches (51%).
Taking your business cross-border means putting products in front of millions of new potential customers and then giving those buyers items that they either can’t get domestically or are priced better than anything else that’s available in their own countries. With e-commerce, the Internet, and social media converging to flatten out the world, the opportunity to sell across borders has never been better.