As a retailer, you have confidence in your ability to create, market, and deliver products to customers — these are the core tenets of your brand identity. However, that confidence can fade when you begin opening the door to international markets. Global ecommerce can be confusing, as there are many rules and regulations to keep in mind. Fortunately, you can find international ecommerce success by building a brand that understands product demand, consumer behavior, and selling regulations specific to your chosen country.
When brands begin to explore cross-border selling, many believe that logistics will be similar to domestic opportunities, just on a larger scale. To an extent, that is true, but cross-border ecommerce (CBEC) can also demand specialized logistics. Retailers expanding cross-border ecommerce shipping options must understand the fast-paced, nuanced, and demanding logistical complications that come with market expansion.
Common Misconceptions About Cross-Border Ecommerce
Cross-border ecommerce logistics is both a science and an art. Let’s break down a few of the misconceptions that stand between brands and international market opportunities.
Inventory management might be a breeze for those who operate in one market. When expanding internationally, however, it becomes a weighty decision where retailers often have to pick between:
● A central hub that handles package distribution, putting an emphasis on controlled storage but likely involving higher costs.
● A distributed network of stores and warehouses that are closer to the customer but come with the challenge of managing a larger physical footprint.
In some cases, that decision will be obvious, but for many brands, it involves carefully considering sales volume, transportation costs, customs and duties, and customer expectations. Entering into a decision without substantial consideration of these details is fruitless.
Another risk retailers might face is navigating customers’ online shopping preferences within a global market. When considering cross-border ecommerce shipping, the required shipping costs can be more daunting for consumers — up to 65% of European consumers abandon their shopping cart if the shipping costs are too high. Understanding when to provide complimentary shipping, how to display those costs, and how to price items while meeting profit margin goals are difficult decisions to make. These challenges escalate when you add return and exchange considerations into the mix.
Challenges in Cross-Border Ecommerce
The question of mobile payments demonstrates the complex landscape of CBEC. In many places, issues surrounding decentralized finance and cryptocurrency remain unsettled. If countries take a more careless approach to regulation, then a few conglomerates could take over that region. However, if governments heavily regulate decentralized finance, there could be more local and regional champions and a much more complex landscape to operate a business in.
It’s likely that the capacity to process payments and increase sales volume will continue to increase. Similarly, we can expect that the legal, tax, and administrative challenges will also grow increasingly complicated. As such, now is the time to find cross-border ecommerce logistics partners that follow, understand, and engage with these issues to ensure they stay up-to-date with industry requirements.
Logistics Solutions Are a Top Priority for Brands
Emerging markets increasingly participating in international trade often have an appetite for new products and, conversely, are excited to expand globally. With each new country participating in a market, unique questions arise. Does the retailer need to remit value-added tax (VAT)? Are there any currency exchange rate issues? Do the citizens in the chosen country provide a local payment processing app like Swish in Sweden? What are the logistics networks like in different countries?
The earlier retailers ask these questions and begin understanding what’s possible with CBEC logistics, the sooner they can build their strategy with a trusted partner and efficiently manage international growth.
Cross-Border Ecommerce Fundamentals to Build a Strong Logistics Infrastructure
Predicting the future of an ever-changing cross-border ecommerce landscape is complex. Fortunately, there are four key aspects of global ecommerce that you can implement in your cross-border logistics strategy to build a solid and successful logistics infrastructure:
1. Inventory management
Deciding how to store and manage inventory costs takes time and effort. Large brands will lean toward a decentralized storage model, while smaller retailers might adopt the hub approach. Finding the balance between costs and customer delivery expectations requires understanding local customer preferences, logistics capabilities, and storage and fuel costs.
2. Tax administration
With CBEC, taxes are owed to the location of a product’s end destination. This means that for each jurisdiction your brand operates in, you could owe a local sales tax, also known as value-added tax. Countries within the European Union have made this somewhat simpler by instituting one-stop shop (OSS) rules designed to simplify tax compliance and decrease the administrative burden of tax compliance. Even utilizing OSS requires in-depth consideration of the pros and cons of your brand’s cross-border ecommerce strategy.
3. Payment processing
Consumer preferences for payments should be a priority, but you must also consider the privacy, legal, and currency exchange factors and the fees associated with each processing solution. It’s essential not to confuse payment service providers like PayPal or Stripe with a Merchant of Record. While a payment service provider only focuses on payment solutions, a Merchant of Record can take care of the entire order process, including processing payments, complying with regulations, and mitigating financial risks. Believing that VAT, for example, has been addressed through a payment service provider can lead to unpleasant surprises with tax filings, whereas working with a Merchant of Record will ensure the process is completed as expected.
4. Customer care
You must put deliberate care into all decisions that affect the customer experience. For example, you should simplify your return and exchange policy, paying close attention to which party will bear the costs of customs and duties if the product needs to be returned. The potential costs involved for returns and exchanges must be considered carefully, and your decisions should be clearly communicated to customers to avoid harm to your reputation.
As a retailer, you are the expert on your products and home market. However, when expanding beyond your country’s borders, the rules surrounding trade quickly become murky and challenging even for seasoned pros.
Fortunately, you can work with Go Global Ecommerce to put these complicated issues in the hands of a trusted partner. Contact our team today to see how we can create a cross-border ecommerce strategy perfectly tailored to fit your needs.