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From multi-channel retail to cross border e-commerce: When ambitions take flight

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There was a time, not too long ago- when eCommerce was considered traditional retail with wings..(somehow makes me remember the Red Bull ad). And then came the sometimes misplaced expectations of growth, breaking star studded valuations etc. The dust then settled and thence came the realization that there is no silver bullet, multi channel needed to evolve- it did..& then some.

From multi-channel retail to cross border e-commerce: When ambitions take flight
Traditionally B2B centric 3PLs also are adapting to the opportunity by undertaking e-commerce fulfilment and expanding their reach: with last-mile fulfilment at one end and crossing borders at the other

The advent & growth of online marketplaces, huge investments & more recently consolidation, has been a game changer for both : Small/mid sized brands , who can leverage these platforms for new revenue streams & Big players forging strategic partnerships , undergoing Offline to Online; Online to Offline transformations. Traditionally B2B centric 3PLs also are adapting to the opportunity by undertaking eCommerce Fulfilment & expanding their reach: with last-mile fulfilment at one end & crossing borders at the other.

The customers too, are an evolved lot. They now shop for brands & not channels, what was showrooming for them is now web rooming. For them, the line between Online & Offline is increasingly getting blurred & more so – the line separating geographies.

With surging demand Global brands & products are increasingly featuring in both offline shelves and online catalogs. eCommerce is gradually moving towards transforming the world as one- unified market- “In-store Global. Online Local”. To make these customers happy, there is pretty much nothing that Retailers (Online & Offline) have not or are not trying. Crossing geographical borders via eCommerce hence, is not new but the growth- is.

The time is right and the time is now. And right now, Global B2C cross-border e-commerce is set to double over the next five years to reach $424 billion by 2021, with Asia, Europe and North America accounting for 40%, 25% and 20%, resp. Cross-border sales will take an increasing share of online commerce, rising from 12% in 2015 to 15% in 2021

From multi-channel retail to cross border e-commerce: When ambitions take flight

Cross border e-commerce landscape – sizing the opportunity:

China, Europe & US, in terms of eCommerce prospect base, tick all 3 checkboxes viz. Sizeable, “digitally equipped” customers -who love to shop. And while these locations are also the markets for growth in Cross-border e-commerce, India & SE Asian countries are catching up-fast. With internet penetration, growth in eCommerce, these countries are both the consumers & a growing supplier base for the same.

From multi-channel retail to cross border e-commerce: When ambitions take flight
Data consolidated from different sources – indicating region/country growth numbers in domestic and cross border e-commerce
From multi-channel retail to cross border e-commerce: When ambitions take flight
Most popular cross border e-commerce categories. Data complied and compared across various sources

Electronics, Health & Beauty products, Apparels & books seem to be the most popular purchase categories world over, apart from travel /events.

The primary reason for customers to go shopping across borders is the need for products not readily available in home country. Some surveys indicate the need for genuine/branded products eg. watches as one of the reasons people from India, SEA buy cross border. Better products ( in terms of quality- eg. from USA, Europe) & better prices (eg.from China) are other such triggers. In some cases, under-developed /nascent domestic market for eCommerce could be the motivation.

Few motivators for a business selling Cross-Border to locations (see figure 2) are:

  • Direct approach from local customers through web/phone enquiries
  • Easy to do business with – Stable Regional regulatory & economic conditions
  • Opportunity to cater to a Niche market or category of products
  • High growth potential category – Customer Need : Product Fit : Market size
  • Ability to speak local language, Regional Partners/Local Experience
  • Traditionally popular Export destination

In a broad sense, there have been three approaches towards their Cross Border efforts:

Strategic: Markets, Partnerships, Investment needs clearly identified & defined. Cross Border is a strategic intent. eg. Retailers with a Offline to Onine (O2O) strategy

Opportunistic: Primarily driven by partnerships, existing customer base and/or reach. Choice of destinations & investments may also depend on the same. For some R(e)Tailers, this includes selling on Regional Online marketplaces and their regional partnerships acting to facilitate this.

Reactive: Location choice a factor of demand eg. from a B2C site. Low risk- Low investment approach. While selling on Marketplaces, the choice is more often than not , the inventory stock models.

Barriers & possible ways around them:

So if there is need & the market is great, why are people not buying more- Cross-Border? Greener pastures come with fences & challenges.

Local product availability, under-developed/nascent domestic eCommerce markets are some motivators for these customers to buy from other locations. Reasons also include : Trust (while buying branded merchandise eg. Watches) , Product quality & Price (eg. from China).

Trust, for these customers are germane to the Brand awareness & recognition, Channel of sale ( Buying from partner store Vs Online shop of the Brand VS an Online Marketplace ), word of mouth or user reviews; availability & accuracy of information on website or point of sale ; availability /acceptance of payment modes & assurance of returns, customer service.

From multi-channel retail to cross border e-commerce: When ambitions take flight

We recently concluded a webinar titles “eCommerce Fulfilment: From First Mile to Cross Border”, in association with Economic Times Retail & DTDC. The webinar talked about how eCommerce fulfilment today, is the cornerstone of strategic approach to leverage new revenue streams. And, how Online Marketplaces & 3PLs play a major role in helping R(e)Tailers in their cross border efforts. You can view it here.