Worldwide B2C ecommerce sales will increase by 20.1% year-on-year in 2014 to reach $1.5tn, according to eMarketer. This is massive. Of course, that figure isn’t all cross-border, it’s just total sales online B2C.
However, it’s clear that as the Far East begins to spend heavily on ecommerce, with China in particular growing at an incredible rate, and fulfilment and pricing is optimised, more cross-border ecommerce is inevitable.
As well as the most popular online overseas shopping destinations (shown on the PayPal map below) there are many other countries getting in on the act. PayPal data from 2013 showed that consumers in Argentina, Russia and Israel were among the top five fastest growing export markets (up to 168% year on year growth).
UK and Europe
A Channel Advisor multichannel study indicates that 95% of online sellers are involved with marketplaces like Amazon. Partly, the reason is to increase international sales.
Almost half (43%) of UK retailers reported that 21%-30% of their online sales come from international sales via marketplaces. 54% of UK respondents highlighted Amazon as the “best opportunity to sell internationally”.
The Office for National Statistics points to growing numbers of UK shoppers purchasing from the EU.
The proportion of UK adults buying from sellers from other EU countries is estimated to have increased from 12% in 2008 to 23% in 2014.
Estimates of the proportion of UK adults buying from sellers from the rest of the world haven’t increase as much, however, over the period 2008 (18%) to 2014 (21%).
Despite these impressive numbers, the rest of Europe lags behind with only about 10% of all EU consumers buying cross-border.
Keep an eye on APAC
This is the region of most interest, in terms of speed of growth.
APAC accounts for around a third of worldwide B2C ecommerce sales according to eMarketer. In 2014, B2C ecommerce sales are expected to reach $525.2bn in APAC, compared with $482.6bn in North America.
China is responsible for 60% of APAC spend and is due to overtake the US in B2C ecommerce sales around 2016.
Arbitrage in APAC
According to Asia Pathways, the blog of the Asian Development Bank Institute, exchange rate fluctuations play a role in APAC transactions. Consumers in the region are taking advantage of exchange rate movements to shop abroad when the exchange rate is favourable.
This is possible because international logistics chains are highly efficient and prices adjust relatively slowly to exchange rate movements.
Asia Pathways reports a 1% currency appreciation triggers an increase of postal inflows by the magnitude of 0.6%.
Local currency payment
Offering local currencies is something retailers are more aware of than ever.
A 2012 study from Digital River World Payments reported only 32% of US companies online offering local currency payments.
However, even without a local buying price, people are purchasing cross-border if the conversion makes sense. Anyone who regularly shops online and has been on holiday to see cheaper prices elsewhere can be tempted.
Anecdotally, my wife recently bought a pair of Dr Martens shoes from the US (to the UK) online, because it was a few pounds cheaper even after shipping and the finish on the shoes was slightly different. And that’s a British brand that used be made exclusively in the UK (though is now manufactured mostly in China and Thailand).
This might not be environmentally conscious, but retailers are aware of remaining competitive in local markets and this creates bargains for some international shoppers. It’s something that retailers may need to get on top of, if it’s incurring additional cost or less revenue.
Consumer protection needed
In line with increased cross-border spending online in the UK, Citizens Advice indicates that: “Consumers International wants an update on the United Nations Guidelines on Consumer Protection to ensure that simple, effective redress is available for consumers living in the digital age.”
Additionally, “agencies such as the EU are proposing harmonising returns policy provision in all states and new legislation on online dispute resolution.”
With disputes in Russia over import tax only recently being resolved, amid the threat of a continued Fed-Ex pull-out, it seems the global community is set to grow tighter to ensure the effectiveness of cross-border ecommerce.
Amazon and fulfilment
Amazon not only acts as a local marketplace for many retailers who sell within countries overseas, rather than shipping to them, the tech giant also takes care of fulfilment cross-border for many retailers.
Amazon’s Q2 2014 revenue increased by 23%, partly because of a $540m increase in fulfilment spending. That’s not just cross-border, however the numbers internationally are impressive.
International net sales totalled $7.34bn in Q2, up 18.2% from about $6.21bn in 2013. International accounted for 37.9% of sales, down proportionally from 2013, perhaps due to increased taxation in Japan.