Cross-border shopping is quickly overtaking e-commerce, as shopping internationally becomes common practice for shoppers worldwide.
What is Cross-border Shopping?
Cross-border shopping refers to the buying and selling of goods and services across international borders.
However, when we take several factors into account, the popularity of cross-border shopping does vary.
Cross-border shopping is easily facilitated with globally reaching alternative payment methods but should really be considered a combinative result of best practices for checkout conversions that can be demonstrated through a return on investment in foreign markets.
The best illustration of this comes with a lesser talked about form of cross-border shopping. Sometimes known as ‘touristic shopping’, domestic markets such as the UK will cater to alternative payment methods such as Alipay and WeChat pay to fulfil consumer demand met by Chinese consumers shopping at the point of sale for items they cannot find in China. Chinese shoppers will shop across borders in-store; in order to purchase luxury items and avoid accidentally purchasing counterfeit goods domestically.
In e-commerce, however, cross-border shopping caters to a broader range of needs:
Prices: Consumers will shop on a site because the prices for items are cheaper than those in their country.
Availability: The item they wish to buy is not available in their own country.
Avoiding counterfeit items:Items in their own country have a reputation of being fake - especially if the manufacturer is popular but not native to that country.
Discovery: The consumer wants to discover new items that are not common in their country or continent.
Cheaper shipping: Some countries will offer cheaper shipping rates due to the size of their individual or regional marketplaces - ( this excludes potentially damaging customs surcharges).
Increasing the cross-border stronghold
Accounting for more than 1/6th of online transactions worldwide, cross-border e-commerce increased by more than 14% in 2019 - holding more than a 23% share of total online sales in Europe alone.
Popular destinations for cross-border consumers in Europe include Ikea, H&M, Nespresso and Zalando; whose credibility as global merchants were ranked by their ability to cater to consumers in their native language and currencies, as well as provide a variety of payment methods with quick logistical fulfilment.
As such, there are some considerations to be made when deciding whether to go global with cross-border shopping:
Where the consumer is shopping from:
Cross-border shopping is more popular in European countries such as Germany (69%) than it is in other countries such as the USA (32%), the UK (29%) and China (44%).
This leaves us to consider whether this is down to consumers finding what they want domestically or whether there are points of friction preventing them from shopping internationally.
A considerable point of friction for merchants comes from inconsistent information surrounding the compliance required for upcoming and existing payment standard regulations such as PSD2, SCA and AML laws, which vary in enforcement across the EU and world.
A study conducted by Stripe found that amongst 500 e-commerce businesses within Europe, only 33% were currently compliant with regulatory standards - with the majority not fully understanding how it applied to them.
It’s obvious that in supplying goods or services to a global audience, there needs to be relevant payment methods in place to facilitate this.
In making these offerings, a merchant needs to understand which payments are most commonly used in which countries (and regions) and why.
On average, the leading e-commerce sites will offer around 9 payment methods in 54 currencies. This does additionally come with the added cost of integrations and risk assessments that your payment provider should help mitigate.
In becoming a global merchant, you should consider optimising your customer journey by allowing consumers to shop in their native language and offering not only a preferred payment method but a local currency for them to pay in.
The main way of facilitating this is to enable IP recognition on your site to boost conversions.
Offering different payment methods may require numerous checkout flows and redirects that can not only add to your internal efforts as a business but the end-to-end processes that the merchant must go through.
Weigh up any redirects and number of elements in your checkout when offering a payment method that may cause friction.
How your audience shops:
Whilst the majority of cross-border sales are completed at the desktop (68% in Western Europe) - if your current service is offered through or performs better via m-commerce - then cross-border shopping may not be for you.
Customs and Tax:
Whilst nothing changes on your end when facilitating a cross-border service, your customer may be subject to tax and customs handling when receiving their goods - resulting in a loss in retention and loyalty - and possibly disputes (a concern for 51% of consumers).
The top-ranking cross-border commerce sites will usually have locally based distribution centres to help counter concerns about slow delivery times (47%) or issues in the supply chain. Ensure that you account for your delivery times and cost at the checkout when selling internationally.
How to get started:
Going global is more than your payment method. Trading off between what can be a significant increase in conversions and brand authority and the cost to your business requires some deep consideration.
On the whole, consumers across the globe are contributing 10% of their online expenditure towards international shopping a month. Whilst global pandemics and impending exits from the European Union pose threats to the consistent rise in cross-border shopping; the right strategy could allow the majority of businesses to scale globally with finesse.