The plans of e-commerce giants such as Alibaba, Amazon and eBay have long been centred on international, cross-border retailing, which offers increasingly more potential in a world of more Internet-savvy consumers, better postal networks and the strength of online marketing. Unsurprisingly, these major players are driving acquisitions and investments in international retailing infrastructure, with business transfer agents receiving requests for global transactions in emerging markets. Tech adoption, particularly in mobile and payments, is set to propel global demand for cross-border online purchases going forward.
While domestic Internet retailing remains a dynamic and well-established segment, the offshoot market of cross-border e-commerce is seeing even more rapid expansion in many parts of the world. Based on the simple model of selling physical goods internationally, cross-border retailing is being driven by increasingly tech-savvy consumers who are searching for greater value and choice not available domestically. Rising Internet penetration and adoption of online payment tools among consumers, especially in emerging economies, continues to offer greater opportunities in targeting new markets. Nonetheless, there are also sizeable challenges to the industry, such as weak postal networks, currency differentials and unfavourable tax legislations.
International retailers feed demand for product diversity and value
The key to understanding the rise of cross-border Internet retail is to comprehend the frequent lack of affordability and assortment across specific categories of goods in many countries. Mature e-commerce markets such as the USA and UK (the world’s first and third largest markets by value, respectively) are competitive and client-focused, thereby able to offer a large array of goods domestically. By contrast, markets that are still underdeveloped or have limited domestic e-tailers are unable to offer consumers a vast array of brands and discounts.
In developed countries, Amazon is the stand-out performer in cross-border trade, with the e-commerce giant guaranteeing fast international delivery conditions and a huge catalogue of goods from its US-based third-party merchants. However, China is the dominant player in serving lower-income emerging country consumers, with stores such as AliExpress and LightInTheBox offering cheap and cheerful, unbranded items.
Emerging-market consumers embrace technologies and feel secure buying from abroad
Aside from value and choice, considerations that all consumers prize, the biggest driver of the global cross-border e-commerce market is the growing adoption of digital products and services, particularly in emerging markets. A growing online population has been key. In 2014, More households have PCs, smartphones and tablets from which to make online purchasing decisions.
However, while more Internet users boost all forms of e-commerce, a growing confidence in paying for goods online has been especially vital for cross-border purchases. In many developing markets, such as Russia, China and India, paying by cash-on-delivery for local online purchases remains the norm. For international purchases, this is often impossible due to the complexities of accepting and moving cash, and the need for a pre-payment online. As a result, encouraging more consumers to use their bank cards and online currencies such as PayPal has been paramount to increasing sales volumes.
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