The Rise of Cross-border Ecommerce and the Role of Marketplaces
While ecommerce growth in the last decade was primarily driven by mobile shopping, it does not seem like this will be the case going forward, thanks to the rise of global marketplaces. These new marketplace models, which connect buyers with sellers regardless of physical location, have lead to explosive growth in cross-border shopping–a key growth driver in today’s ecommerce environment. While in 2016, about 15% of all ecommerce transactions were cross-border, by 2022 it’s estimated by Statista that cross-border purchases will account for more than 22% of global ecommerce. Just like with mobile shopping, companies that fail to embrace this trend will likely find it difficult to adapt to a new competitive landscape.It’s estimated by @StatistaCharts that cross-border purchases will account for more than 22% of global ecommerce by 2022 Click To Tweet
What the Research Shows
Existing market research points to three important cross-border ecommerce fundamentals:
1. It’s All About Trust in Recognized Brands
While domestically, online shoppers might choose a lesser known ecommerce store due to lower price or better product, international ecommerce is very much based on trust in reputable brands. According to the International Post Corporation survey1, 25% of cross-border digital buyers worldwide made their most recent purchase on Amazon. Even though a less familiar brand could be doing fine on its own domestically, partnership with a trusted global retail platforms might be necessary to attract cross-border buyers.
2. Payment Security and Cost is a Key Concern for Both Buyers and Sellers
While managing an online store in a single currency through the use of a simple credit card checkout form was completely acceptable just 10 years ago, today’s shoppers have much higher requirements. The best way for ecommerce players to create trust around their payment process is to be as local as possible–present prices in the local currency, support local payment methods and, where possible, rely on established payments brands that customers trust. Just like there is no single type of ecommerce customer, there is no easy answer to how your checkout form should look–customers in Japan prefer credit cards, Chinese customers are leaning towards ewallets and Europeans like ACH debit systems (which also differ country by country).
3. Fintech Companies are Critical in Simplifying Cross-border Ecommerce
As McKinsey noted in their annual Payments Map research, the cross-border B2C and C2B payments space–which has long been dominated by banks–is seeing a great deal of fintech-driven innovation thanks to the the growth of marketplaces and cross-border ecommerce. This is a logical development since very few banks provide truly global coverage (i.e., banking services spanning multiple countries) or connection into popular local payment methods. Managing multiple bank partners can be very complex and costly, so most marketplaces tend to outsource funds-in payments (funds flowing in from buyers at checkout) and funds-out payments (payouts being issued to sellers) to specialized fintech players.
Here at Hyperwallet, we believe cross-border marketplace commerce is still only in the beginnings of its evolution, and that it will continue to grow faster than domestic ecommerce for many years to come. However, if the history of ecommerce growth has taught us anything, it’s that competition is fierce. Market share is often divided early in these sorts of evolutionary cycles. The next few years will be critical for marketplaces that want to become true global players. Hyperwallet has helped hundreds of marketplace expand around the world, so if this strategy is something your company is currently considering, we would be happy to help.
Finally, for more information, please refer to Hyperwallet’s Marketplace Expansion Index which explores in-depth 36 of the most attractive countries for gig economy startups, ecommerce marketplaces, and social selling companies.Millennials want two features from #directselling opportunities: flexibility and technology. Click To Tweet
1 IPC cross-border e-commerce shopper survey 2018