Cross-border e-Commerce is complex but is fastest growing

What is Cross-border E-commerce?

It is no secret that the world of E-commerce has been booming for a while. Experts forecast that the world of E-commerce will only continue to grow. According to Phaneuf (2022), US E-commerce sales are expected to cross 1$ trillion for the first time in 2022. This goal was not expected to be reached before the pandemic until 2024. The growth is forecasted to reach %1.06 trillion in 2022 (Phaneuf, 2022). See the graph below illustrating the leading countries based on retail E-commerce sales growth in 2022. Even large players such as the US and India Expect a high growth percentage in 2022 (Statista, 2022).

Figure 1(Leading countries based on retail e-commerce sales growth in 2022 – (Statista, 2022))

There are many factors playing into the growth of E-commerce amongst different countries and in General. A strong and continuous factor that contributed to this increase in growth is “Cross-border E-commerce”. What exactly is Cross-border E-commerce?

Simply put, Cross-border E-commerce is the process when selling products online, ultimately crossing borders. For instance, a Dutch clothing store that sells and ships their products to foreign Spain (crossing borders) through their online website is conducting in Cross-border E-commerce. This sale can also be conducted through marketplace platforms such as Amazon or eBay. How prevalent is Cross-border E-commerce exactly? Cross-border E-commerce is increasing prominently within the E-commerce world as the benefits such as Supply Chain Resilience, payment flexibility, market expansion etc. are strongly present. This emphasis on importance can be seen in many countries. For instance, Dutch Cross-border E-commerce has shown to be increasing significantly.

95% of Dutch consumers are shopping online nowadays (Emerce, 2022). The combined sales as a result accumulated to 14.8billion euros. Dutch E-commerce infrastructure has also proven to be increased in quality as they now hold approximately 67.000 online stores whilst maintaining a strong, developed logistical network.

The investment and increase in contribution to cross border commerce amongst different countries over the last years clearly indicates the significance and importance of E-commerce businesses to adopt Cross-border commerce.

Potential risks to look out for

Most Business activity comes with risk. So does Cross-border E-commerce. The main three risks that potentially influence Cross-border E-commerce are listed below (Laubscher, 2021).

  • Risks that come with Cross-border Supply Chain/Logistics. Unfortunately, even a small number of negative events within the Supply Chain/Logistics elements can potentially lead to strong negative effects. Negative customer reviews have strong impacts on customer retention and prospect leads. Negative experiences such as delayed orders could form high negative impacts, especially for starting businesses as they have not yet built up their brand reputation. Many businesses that conduct in E-commerce and have gained momentum therefore make the smart decision to outsource their Supply Chain/Logistics to an experienced Fulfillment service provider. This allows them to relieve a strong portion of potential error and allows them to focus on their core business.
  • Different, changing regulations. In order to properly conduct Cross-border E-commerce your business has to comply with the regulations of the country within the transaction accordingly. Conducting Cross-border E-commerce with many different countries, especially outside of the EU, inherently brings many risks. Changing regulations requires constant, extensive knowledge of what you can and cannot do when selling products. Small mistakes may result in heavily delayed shipments that spiral into accumulating negative effects. Before conducting your Cross-border transaction, try to be sure of the appropriate knowledge needed. Again, scaling businesses make use of external parties such as consultancy parties to ensure the trade/transaction can be done correctly. Others completely outsource their Fulfillment procedures to completely minimize these risks.
  • Fraudulent behavior. Conducting business online unfortunately brings the risk of Fraudulent customer and third-party behavior. Bots (fake customers created by malware) might place tons of fraudulent orders that could offset your Business if you’re not paying attention. Also make sure to use well-established Payment Providers that allow complete transparency. Having multiple payments options, increasing your payment flexibility, and reducing the order threshold for your customers is a good strategy. However, make sure to only use reputable payment options as small payment providers also bring the risk of potentially disrupting your customers’ payments. This could lead to negative effects for your cash flow as you might need to refund several orders.

Cross-border E-commerce should be considered for all scaling E-commerce businesses. Keep in mind the most occurring risks and adjust your strategy accordingly. Would you like to know how more on how to implement Cross-border E-commerce within your business correctly? Talk to a ModusLink Expert today by clicking here!


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