Cross-border e-commerce growth during the pandemic
Neil Kuschel | CEO Europe, Global-e
December 24, 2020
A RISING OPPORTUNITY
Shopping habits have been shifting away from physical retail and toward e-commerce for some time, but the COVID-19 pandemic has greatly accelerated this movement. Consumers are becoming aware of how simple and convenient online shopping is, so much so that it is predicted that there will be 145.7 million more online shoppers in 2020 than the previous year, totaling an estimated 2.26 billion digital buyers – an increase of 6.9% from 2019.
At the start of the pandemic, a Worldpay from FIS survey of 33,000 people across 12 countries found that 38% of people were shopping more online. Accordingly, the global e-commerce market is forecast to surpass $6 trillion USD by 2024.
The popularity of online shopping extends to purchasing from online stores in other countries. The cross-border e-commerce market is growing at double the rate of domestic e-commerce, driven by consumers seeking brands or products unavailable in their home country and more competitive pricing. Worldpay found that 55% of online shoppers worldwide have purchased from another country in the last 12 months.
E-commerce has gained traction across virtually every product category as consumers continue to avoid physical stores even after lockdowns lift, diverting budgets from leisure activities and travel. Merchants can no longer ignore the need for a comprehensive global e-commerce strategy. Global-e’s figures based on the analysis of more than 350 brands and retailers selling internationally show a 21% year-over-year (YoY) increase in global cross-border discretionary sales during the COVID-19 pandemic in the period from January to June 2020, with Q2 sales alone soaring by over 53% YoY. The global e-commerce market is booming.
REMOVING THE BARRIERS
International e-commerce enables merchants to increase their revenues and customer base, rather than focusing solely on their domestic market or a limited number of key international markets. In order to successfully grow cross-border sales, it is crucial to provide international shoppers with the same seamless online shopping experience that they enjoy on domestic websites.
There are many barriers preventing international shoppers from placing an order, including the inability to pay in their local currency and with their preferred local payment method, the need to pay custom duties and taxes, expensive shipping rates, and complicated and costly returns processes – all of which have a negative impact on conversion rates.
Online shoppers who experience difficulties when trying to purchase cross-border are likely to abandon their cart and search for a more user-friendly website to make their purchase.
DUTIES AND TAXES
Duties and taxes are one of the main barriers to buying cross-border. Being faced with unexpected charges upon delivery negatively impacts the shopping experience and customer satisfaction and will decrease customer return rates.
Retailers and brands that present a final calculation of duties and taxes incurred and enable shoppers to prepay them at checkout give shoppers the full picture of the costs involved, which increases conversion rates. In fact, Global-e data shows that over 80% of international online shoppers who have bought above the local duties and taxes threshold opt to prepay these costs at the checkout when offered. In markets such as Australia, where local value-added tax applies on all cross-border purchases, it is essential to present shoppers with tax-inclusive product prices and inform them that no additional costs will be incurred.
Non-EU brands and retailers selling to EU shoppers should keep in mind that all purchases from outside the EU are subject to duties and taxes; therefore, additional fees are unavoidable in this market. European online shoppers are not accustomed to paying any fees when purchasing from their EU neighbors; therefore, providing them with the final cost of their purchase, including all duties and taxes, and informing shoppers that no additional costs will be incurred, increases conversion and returning customer rates.
KEEPING IT FEELING ‘LOCAL’
Global-e’s research shows that 98% of online shoppers worldwide prefer to browse and pay in their local currency when given the option. Furthermore, local alternative payment methods are commonly used in many countries and preferred over international credit cards. In the Netherlands, for example, iDeal, a local banking payment option, is very popular, while in China, AliPay and WeChat are the preferred payment options for online purchases. Allowing shoppers to pay with the most commonly used options in their market has a significant positive impact on conversion rates.
Markets across the globe differ greatly in terms of currencies, import regulations and taxes, payment methods, and shopper behaviors and preferences. Therefore, merchants looking to capitalize on the growing cross-border e-commerce opportunity should ensure their prices are displayed in the local currency and rounded in accordance with market conventions. They should also adjust their shipping propositions according to common prices in international markets and offer easy return processes tailored to local preferences.
Understanding the market differences and providing shoppers with a seamless shopping experience tailored to their market’s preferences and behaviors is the key to successful cross-border selling. Global-e statistics show that by localizing the customer journey on their current webstore, retailers and brands see an average uplift of 58% in conversion rates across all international markets, with leading markets showing increases of over 250%.
In order to achieve significant international online growth, expand global customer base and increase customer satisfaction and loyalty, merchants must ensure that they provide international shoppers with an enhanced localized experience optimized to their market. This requires thorough local market knowledge and monitoring to ensure that the international offering is up to date with the latest changes in the market, including new consumer behavior trends and changes to import and tax regulations.
THE FUTURE OF RETAIL SHOPPING
The continued increase seen in cross-border e-commerce indicates an accelerated shift to online retail and emphasizes the importance of e-commerce channels to balance the retreat from brick-and-mortar stores that may never return to prepandemic sales volumes.
As retailers seek to recover, rebuild or even expand sales this year, a truly robust and diversified e-commerce strategy is crucial to survival and growth. Focusing an international direct-to-consumer e-commerce model that is localized to each market will enable merchants to counter the long-term decline in high street footfall and open up growth opportunities, while maintaining brand identity and values.
Global-e, a leading provider of cross-border e-commerce solutions, enables retailers and brands to increase international online revenues and expand their global reach by offering customers in more than 200 destinations worldwide a seamless, localized online shopping experience. Global-e’s Smart Cross-border solutions combine advanced technology with extensive local market insights and best practices, to boost international conversion rates and optimize ROI. Their end-to-end solutions support multilingual checkout, 100+ local currencies and 150+ local and alternative payment methods in addition to offering multiple shipping options at attractive rates, convenient domestic returns and local duties, and tax calculation with a prepayment option for a guaranteed landed cost.
With Global-e, hundreds of leading merchants and brands across the USA, Europe and Asia enjoy immediate and continued international online growth while simultaneously boosting customer satisfaction worldwide.
For more information on Global-e’s end-to-end cross-border solutions, click here.