The Cross-Border Conundrum
How cross-border retailers can tackle the most common barriers to customer conversion
Rob Keve, Co-Founder & CEO, Flow Commerce
- Cross-border global e-commerce sales grew 18% in 2018 reaching almost $3 trillion, and are predicted to near $6 trillion by 2022.
- The most popular product categories for cross-border shoppers are clothing (58%), shoes (32%), fashion accessories (31%), consumer electronics (30%) and beauty/personal care (26%).
- Overall, 54% of those who engage in cross-border shopping cite the cost of shipping as a primary barrier, compared to 46% who have not yet shopped cross-border.
Cross-border e-commerce has been important since camel caravans trekked between ancient Egypt and Mesopotamia circa 3,000 BC. Fast forward a few millennia and the growth of international e-commerce has been explosive, spurred by increasing internet penetration and mobile device ownership, the influence of social media, and the ability of consumers worldwide to discover and purchase from global brands with ease.
Contemporary retailers and consumers may no longer need to battle sandstorms and bandits, but there are many frustrations nonetheless. Cross-border shoppers struggle with barriers such as high shipping costs, slow delivery, expensive returns, unclear tax and duty calculations, and security concerns. Retailers face the hurdle of tackling all these issues while improving the user experience for global shoppers to increase conversion and grow international sales.
IGNORE CROSS-BORDER AT YOUR PERIL
Brands that are unable to address the most common issues risk losing potentially massive markets. Cross-border global e-commerce sales grew 18% in 2018 reaching almost $3 trillion, and are predicted to near $6 trillion by 2022. According to a new study by Flow Commerce, sixty-seven percent of the respondents surveyed in the top 11 markets have made a cross border purchase, with the highest cross-border activity in Brazil (86%), Australia (85%), Canada (83%), France (79%) and Germany (74%).
According to the study, there are several demographic differences between the markets surveyed. For example, in India, 61% of women engage in cross-border commerce compared to 49% of men. In South Korea, 33% of households without children make cross-border purchases compared to 60% of households with children. In China, Japan, and South Korea, high-income households shop much more frequently cross-border compared to low-income households (the data in other markets was significantly lower).
The most popular product categories for cross-border shoppers are clothing (58%), shoes (32%), fashion accessories (31%), consumer electronics (30%) and beauty/personal care (26%). Jewelry, music/games, sporting goods, and books/e-readers are also significant categories. But brands who continue using inadequate legacy platforms will likely miss the opportunity to cultivate a global market in these categories, losing out to competitors who can provide a more satisfying user experience.
CONSUMERS FACE BARRIERS TO CONVERSION
As mentioned above, cross-border shoppers — and non-shoppers — share concerns about lofty shipping costs, slow delivery, and a lack of clarity regarding taxes and duties.
Overall, 54% of those who engage in cross-border shopping cite the cost of shipping as a primary barrier, compared to 46% who have not yet shopped cross-border. The second most noted barrier was slow delivery of cross-border orders, where 50% of cross-border shoppers and 38% of non-cross-border shoppers said this was a critical concern.
There are other important regional differences that global e-commerce retailers should take into consideration. Understanding taxes and duties, for example, is particularly important to cross-border shoppers.On average across all markets, 36% responded that high taxes and duties were a barrier and 22% said they often couldn’t understand what the final tax and duty amount would be when shopping cross border. This is important when you consider that 70% of online shoppers surveyed across all markets said they prefer to remit taxes at the point of purchase instead of product arrival. In India, however, half of shoppers would rather remit taxes upon product arrival.
Additionally, 21% of respondents said they don’t trust cross-border retailers. This barrier to cross-border shopping is more significant in different countries. In Germany, for example, site security is one of the top five barriers for both cross-border and local shoppers. For cross-border shoppers in South Korea and Japan, on the other hand, site security is not one of the top five issues and instead 36% of respondents in both markets said language translation is an important factor. In China, 18% of non-cross-boarder-shoppers cited a lack of trust in cross-border retailers as a barrier, compared to 31% in the USA.
Other barriers cited by cross-border shoppers included the currency exchange being too costly to shop internationally (36%) and to a lesser extent, the fact that the local currency isn’t accepted on the site in the first place (9%). Having local payment methods available was also cited as a deterrent by 14% of the international shoppers surveyed.
Linguistic issues can also be a barrier in the customer journey. Overall, more than half of respondents said they would be unlikely to purchase from a website unless it was in their local language, with more than 60% agreeing that product description pages, product reviews, and the checkout process are most critical.
PRIMARY BARRIERS TO CROSS-BORDER SHOPPING
TACKLING COMMON CROSS-BORDER PAIN POINTS
So how do retailers deliver delightful shopping experiences for international customers in light of all these barriers, consumer concerns, and regional differences?
While using a legacy cross-border trade solution, Jewelry pioneer, Charles & Colvard, struggled to create a seamless international checkout experience and lacked visibility into the drivers of conversion. Consumers faced a confusing and disjointed checkout process, as well as expensive shipping and delivery delays.
Charles & Colvard decided to switch to a next-generation technology solution, enabling the company to take control of the customer experience. The move enabled the company to ensure low-cost and efficient shipping to most global markets, localize the shopping experience, offer currency conversion, display accurate taxes and duties, and target marketing to local consumer preferences.
The results? During the quarter ending December 31, 2018, Charles & Colvard’s cross-border sales increased 250% compared to the same holiday period in 2017.
Tentree, an environmentally progressive Canadian clothing brand, also faced low conversion rates due to common cross-border issues including confusing tax and duty information. The company’s legacy system couldn’t calculate duties and taxes at checkout, meaning that international customers were confronted with unexpected charges after placing an order. Shoppers often subsequently canceled orders, causing friction for tentree’s customer service team.
Flow’s next-generation cross-border solution enabled tentree to resolve these issues by displaying accurately calculated taxes and duties to shoppers pre-purchase and allowing customers to pay those fees upfront. Shipping times were reduced from an average of 2 to 3 weeks to 3 to 5 days in certain markets. The new technology seamlessly integrates with tentree’s e-commerce platform Shopify Plus and helped tentree achieve a 125% increase in international revenue, a 50% reduction in delivery times, and a 24% increase in conversion.
Sustainable clothing brand Outerknown also faced several cross-border challenges. For example, they distributed their international products through wholesalers but were unable to track prices in local markets or localize currency at checkout. Legacy solutions couldn’t resolve the problem, and high shipping costs made it difficult for Outerknown to justify their international business. Upgrading to a modern cross-border solution enabled Outerknown to achieve global price parity in international markets, offer free shipping worldwide, and most impressively, achieve more than 100% increase in international sales.
CROSS-BORDER IS A NO-BRAINER
The customer journey is complex and impacted by multiple factors as is. To ensure a successful online relationship with consumers today, all potential roadblocks along the digital buyer journey need to be addressed in advance.
For retailers, selling goods to cross-border shoppers is a potential game-changing business opportunity, and too many brands are missing out on valuable markets.