Cross-Border Growth: What Every Seller Needs to Know

In recent months, e-commerce, particularly the third-party marketplace, has become the driving force for retailers as footfall in-store rapidly declines — with digital sales expected to rise a staggering 18 percent in 2020.

Todays "virtual malls" have all delivered soaring revenue growth during the third quarter, fueled by the transformation of consumer shopping habits. E-commerce giants such as Etsy, Amazon.com, and eBay all blew past expectations, reporting 119, 37, and 25 percent revenue growth, respectively, as expanding communities of third-party sellers flock online to maintain sales and capitalize on lucrative global growth opportunities. In fact, 1.1 million sellers were expected to join Amazon alone by the end of 2020.

International online sales, supported and facilitated by the online marketplace, rose 120 percent year-over-year in October, as consumers shopped earlier for Christmas — pulling sales forward and away from traditional sales events such as Black Friday and Cyber Monday. To take full advantage of this opportunity, businesses and independent merchants focused on a global e-commerce strategy and tapped into new high-growth markets.

Diversifying Supplier Networks

In order to ride the next wave of disruption, merchants must diversify the countries from which their products are sourced. Although China is the sourcing capital of the world, its economy was the first hit by the pandemic. Its stringent lockdown measures disrupted those merchants that had solely relied on its trade, as they faced prolonged periods of stock shortages which brought many businesses to a halt. This has led to the dismantling of global supply chains, exposing the reliance on a few markets for fulfilling manufacturing and sourcing requirements and providing additional countries with a unique opportunity to adopt a more proactive role.

Although merchants want to maintain a good relationship with their supplier, and are hesitant to jeopardize this by reaching out to more, they must realize the resilience that diversification adds to their business. Diverse supply chains can also encourage healthy competition between suppliers to drive down prices. IT service management company, Hackett Group, found in a recent survey that those with a diverse supply chain had lower overall operating costs, and spent 20 percent less on buying. This leads to a higher return on investment by being able to offer more competitive prices, improving quality of service, and leading to satisfied customers.

Understanding Foreign Market Trends

Sellers that neglect global trends later regret it. Especially now, when the market experiences daily changes due to COVID-19 impacting consumer habits and behaviors.

Social commerce, in particular, is changing the way consumers in China purchase items — with the market estimated to increase to 2,419.4 billion yuan in 2022. This trend, however, is slowly starting to crack in the U.S., with new initiatives like Instagram’s Shops and Shopify’s competitor Shop.

“Revenge spending” is also a new trend to emerge from the pandemic, with many Chinese and Indian consumers expected to overindulge in retail therapy due to stringent lockdown measures. Market research firm Agency China anticipates ongoing international restrictions will cause a meaningful shift in Chinese consumers sourcing and buying luxury items online, with many turning to resell marketplaces like Vestiaire Collective for limited-edition products or unique designs. The overall resell market is growing 21 times faster than traditional retail over the past three years, and is set to overtake fast-fashion in 10 years.

Merchants should also regularly monitor and research those foreign markets with increased e-commerce demand and consumer usage. In China, for instance, 85 percent of total e-commerce transactions occur on marketplaces, according to eMarketer. In India, that figure is 83 percent, and in Japan it’s 70 percent. The stringent lockdowns in France has also boosted online sales by up to 21 percent in April, suggesting it's a high-growth area in Europe.

Overcoming Regulatory Hurdles 

Expanding into cross-border commerce will naturally require sellers to be aware of — and strictly adhere to — global regulation. Most countries require some type of business or personal bank account to operate within their economy. Merchants should therefore look to utilize a virtual bank account — one that's registered and regulated by reputable financial institutions — to eliminate the hassle of collecting business documents, flying to the country where they want to operate, and applying for a bank account. This will save merchants a lot of precious time and money when they’re accepting payments in multiple currencies and have multiple suppliers around the world.

Expanding cross-border without the right support or knowledge of the market can also be costly, particularly when certain countries have different tax laws. When selling in Canada, United Kingdom or the European Union, for example, value-added tax and GST can eat significantly into a merchant’s earnings. Luckily, developments in technology are assisting e-commerce sellers to overcome hurdles so they don’t have to manage international taxation themselves.

By leveraging a trusted payment provider, merchants can make VAT payments in the foreign market’s currency whenever they want, at the best market rate — without having to convert it twice. This means they use earnings from international marketplaces to pay VAT and remain compliant before those earnings are even converted to their desired currency, allowing online merchants to keep as much of their hard-earned profits as possible.

Moving Forward 

Today, selling products internationally is more available than ever before. This availability, however, doesn't make it a straightforward task. Merchants will be able to ride the booming global e-commerce wave and expand cross-border, but only if they strengthen their supply chains, diversify their sourcing and selling network in high-growth areas, understand key trends disrupting the market, and partner with a trusted payment provider to overcome regulatory hurdles.

Kenny Tsang is the managing director of PingPong Payments, an innovative payment service provider for cross-border e-commerce sellers around the world.