For consumers and businesses around the world, from emerging markets such as Nigeria to advanced ones such as the United States or Germany, going online to shop is becoming a way of life. That trend will lead to global e-commerce sales more than doubling to nearly $4 trillion by 2020, according to research company eMarketer.
What is even more remarkable is the growth in cross-border purchases. With more businesses buying online to get lower prices and better supplies, as well as consumers shopping cross-border to find cheaper products or something they can’t get at home, advisory firm Forrester expects cross-border online sales to make up 15% of all online commerce by 2021.
The Rise Of Chinese Merchants
While it used to be difficult for e-commerce businesses in China to take advantage of this growth and sell overseas, selling abroad has become far easier. The result, Alibaba and Accenture expect, is that China will become the world’s largest market for selling products online by 2020.
Admittedly, the vast majority of cross-border sales are business-to-business (B2B). Research led by Tsinghua University found that B2B cross-border e-commerce made up 88.5% of total sales, dwarfing business-to-consumer (B2C) cross-border e-commerce.
Regardless of who’s buying, the types of merchants making those sales are changing. While the vast majority of sales may have been made by large merchants in the past, more than five million small and medium enterprises (SMEs) in China now account for 60% of total foreign trade in the country. And they’re anxious to sell overseas, since a cutthroat market in the country has reduced their margins and they can often get better prices abroad.
All this growth, though, doesn’t mean that cross-border sales are easy. Buyers abroad still need a local language website, as well as payment options they’re familiar with, and they worry about whether their merchandise will actually arrive. At the same time, Chinese sellers have concerns about the logistics, pricing, security, and financing for their sales.
New Options Solve Sellers Challenges — Implementing Cross-Border E-Commerce
Many of those challenges are being resolved quite quickly, as a multitude of online platforms and marketplaces are helping merchants to sell abroad. Alibaba set up the Alibaba Business School in China to train merchants how to sell overseas, for instance, while PayPal similarly provides consulting and technical support to help merchants. These and other platforms can assist with everything from setting up an online store and promoting products to dealing with international warehousing and delivery.
The logistics for exports have become far easier as well, despite what might seem to be a complex ecosystem of regulations and delivery options. And that’s important since the logistical challenges of international shipping and returns can undercut companies’ ability to win orders if they don’t deliver goods well.
While some smaller companies do send goods abroad directly via ordinary courier or mail services, they can run into difficulties, because parcels may encounter problems with customs declarations, inspections or tax issues. Companies such as Alibaba’s logistics arm, Cainiao, are offering new options, however, that take away the headaches of shipments. Cainiao aims to ensure that parcels sent cross-border can arrive in 72 hours, and it is working with partners that have opened warehouses abroad to fulfill and even track the orders.
A small-yet-growing number of purchasers in a fast-moving digital world are increasingly concerned more about speed than price, however, and are willing to pay more for faster delivery. Courier companies have catered to this demand by offering premium, time-specific shipping options with faster delivery times and convenient returns.
Retailers are also under pressure to offer payment solutions with multi-currency pricing, trust and security, as buyers are hesitant to make a purchase if they have to wend their way through unfamiliar payment options. We’ve experienced this firsthand, and it’s why merchants are now partnering with payment service providers to present easy-to-use purchasing journeys for buyers in any country and ensure that the payment experience reflects what purchasers experience at their local retailers.
Payment processors leverage their deep understanding of regulatory compliance and data security, as well as proprietary technology and infrastructure, to provide better payments solutions for merchants selling abroad. They can then handle overseas bank accounts that support low-value transactions, as well as the secure payment channels that buyers demand.
The result is that businesses and consumers overseas are increasingly achieving the full benefits of buying cross-border. Foreign consumers previously had to pay several times the cost to buy Chinese goods, with an item that cost about 50 yuan (US$7) to produce sometimes priced at nearly 200 yuan by the time it reached U.S. retailers. But the same item may now be priced as low as 60-80 yuan.
The Next Step
While it may have been challenging for Chinese e-commerce merchants to sell overseas in the past, a vast range of new services is helping them deliver their merchandise easily and get paid quickly. The overseas market is huge, and Chinese merchants that take advantage of it can see their business shoot upwards faster than they might expect.
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