Global trends in cross-border commerce

Understanding the trends in global commerce ensures brands can navigate and capitalise on them, explains Natashia Redfern, VP UK Country Sales Director at ESW.

Global ecommerce continues its meteoric rise. According to Reportlinker, the market in 2021 was valued at US$14.30 trillion, and is likely to reach US$52.06 trillion by 2027 at a compound annual growth rate (CAGR) of 26.55% between 2022 and 2027. Part of that whole market, cross-border ecommerce, according to Statista, is expected to reach US$2.25 trillion by 2026, up from US$579 billion in 2019.

Growth was spurred on by the pandemic, when stores were closed, but the subsequent return to physical retail does not appear to have hindered the continued growth of cross border. However, understanding some of the other factors driving this growth is important for brands and retailers looking to exploit it. For instance, according to ESW’s Global Voices Consumer Pulse 2022 survey of more than 14,000 global consumers, over half of cross- border shoppers are Millennials so it is important to understand how they behave and adjust accordingly. Gen x and Boomers account for 30% and 20% of the market respectively. Millennials also shop more often than other groups – 1 in six shopped cross border 11 or more times in 2021.

In terms of where these shoppers live, China, South Korea and UAE had the highest percentage of cross-border shoppers, and their shoppers were younger than in other countries. And in terms of what they buy, cross-border purchases are mainly in the clothing and luxury categories followed by footwear and cosmetics. Clothing made up around 50% of fashion and leisure/casual wear, with around 30% athletic wear, formal attire or underwear/lingerie.

Reportlinker adds that Asia Pacific is the world’s largest ecommerce market and is expected to remain so. China is the leader in the region, due to its size, proportion of digital technology users, online innovation, and strong social and mobile commerce adoption. With this growth has come also greater competition, so retailers and brands have been innovating to win more business. Innovation has had a mixed track record over the last two years, due mainly to the backlash against buy now, pay later technology (although brands are now exploring the possibility of accepting cryptocurrency as payment) and superfast delivery companies, but the rate of innovation generally is certain to be sustained. The focus is mainly on how to continually improve and personalise the customer experience. The broader availability of 5G technology enables brands to improve the online experience using virtual and augmented reality (VR and AR) as well as engage in hyper-personalisation.

They will also need to track data more frequently and to much greater depth, using Artificial intelligence (AI) to extract the value from ever-larger data pools. Hyper-personalisation also demands greater localisation; consumers want global brands but they want a local experience, and that means local payments, checkout, fulfillment, and returns experiences, all in their language.

Effective returns management is of particular importance to engender trust for future purchases. Prepaid labels and instant refunds once the return has been scanned at the pickup or drop-off point, are all pain points retailers can remove. With a smarter returns strategy, retailers can also win back profit that is often lost in ‘dead’ returns. For instance, if stock is in transit, it is not available to resell and will affect inventory management and tie up goods for resale. Real time monitoring of the returns pipeline will help ensure stock isn’t held for too long in returns centres and unavailable to sell again. This is also where once a brand reaches a certain scale in a foreign market, having a certain amount of locally based inventory can start to make sense.

Personalisation is also about exploiting existing channels that are becoming more popular with consumers, notably social media. Our research shows that YouTube is a leader across generations, with more than 50% of Gen Z (55%) and Millennials (53%) citing it as a driver of discovery. Millennials are also relying on Facebook (47%) and Instagram (46%). With the rise in demand and greater connectivity with the customer have come more cybersecurity threats, and ecommerce is the most vulnerable industry. Brands are not only unable to do business during DDOS attacks, but customer trust is lost. These brands are trying to achieve a balance between excluding bad actors and letting genuine customers in.

For brands and retailers entering new markets, the bar on customer service has risen so high that going it alone is not an option; working with a specialist partner that has local knowledge, experience and presence, brands can enter new international markets in a matter of weeks, many times faster than if they attempted to do so on their own – all while engaging directly with customers and retaining ownership of all the data collected during the shopping process.

Ultimately, cross-border commerce is now sufficiently well-developed that there is no shortage of resources in terms of research, media and consultancy to help companies make the best decisions, as well as third parties that can provide all the local resources required to help them build a local DTC business that will give consumers as much confidence as local players.