What Every Merchant Needs to Know About Cross-border ecommerce

Recent studies suggest that the ecommerce industry is expected to grow from 18.8% (2021) to 22.6% (2027).

And with the rapid development of ecommerce, businesses are thinking about digital first but also cross-border ecommerce. 

Technology has helped people climb the borders of a country since more and more users are now eager to access products not available in their own country. This has made cross-border sales for merchants not only mandatory, but also quite profitable. 

Expanding internationally has never been easier thanks to the availability of so many tools and software. However, when looking to expand, you need to take certain factors into account.

Today we will discuss the elements that you need to remember before you decide to start selling internationally from your Shopify store.

7 Things To Keep In Mind Before You Start Cross Border Ecommerce

We'll walk you through seven essential factors to consider before starting a cross-border eCommerce venture. By the end, you’ll be equipped with the insights you need to make informed decisions and achieve global success.

#1 Understanding the demand and culture of the target market

You need to conduct thorough market research before you expand internationally. It is essential to understand the demand of your product and how it will be perceived by the people of that particular place.

One thing you need to understand as a business owner is that a product that performs well in your home country might not have the same effect in a different country. Factors such as cultural differences, preferences, or needs all play a huge role in determining the demand for a product.

For example, in Europe, eco-friendly packaging can draw in customers who care about the environment, but in Japan, consumers like beautiful packaging and are willing to pay more for it. Additionally, look into local competitors—how they price their products, promote them, and engage with their audience.

Key tips:

• Use market research tools such as Statista, Google Trends, or Euromonitor.
• Take help from local agencies to understand the cultural nuances of that place.

#2 Legal and regulatory compliance

Different countries have their own regulations related to product standards,  import/export or consumer protection laws. It is essential for you to comply with these rules so as to avoid penalties, bans, or any unnecessary tax obligations.

For example, Due to the European Union's strict regulations for product labelling, certain products—like electronics—must bear the CE mark, which certifies that they adhere to environmental, health, and safety regulations. Research the legal requirements in each market and consider working with a compliance expert to avoid costly mistakes.

Key Tips:

• Equip yourself with international trade agreements like NAFTA, ASEAN, or EU regulations.
• Take help of a legal advisor who specializes in cross border ecommerce to navigate complex issues.

#3 Pricing and currency exchange 

Setting up a pricing strategy for cross border ecommerce can be a tricky affair. In addition to considering the currency exchange value, you also need to think about local competition, purchasing power, and market expectations. Currency fluctuations can also impact pricing, and buyers prefer transactions in their local currency.

For example, if you are based in the USA and you want to sell in Canada, consider the USD-CAD exchange rate. If the currency rates fluctuate, it can affect your profit margin. You can mitigate this by setting up multi-currency pricing or partnering with a payment processor that manages currency conversion.  

Key Tips:

• Try using dynamic pricing software that helps you to adjust prices.
• Allow your customers to pay in their local currency to build brand credibility.

#4 Efficient payment processing and fraud prevention

Payment preferences vary significantly between nations. Providing local payment options can increase customer trust and lower cart abandonment rates. Furthermore, preventing fraud is essential while doing business internationally. Using safe payment gateways with strong fraud detection systems can help safeguard your company from the rise in fraudulent activity that comes with cross-border expansion.

For example, bank transfers are preferred by many customers in Germany, while Alipay and WeChat Pay are well-liked choices in China. 

Key Tips:

• Partner with payment processors like PayPal, Stripe, or Worldpay, which support multiple currencies and local payment methods.
• Implement security measures like two-factor authentication and address verification systems (AVS).

#4 Logistics and shipping solutions 

As an ecommerce owner, you already know that efficient logistics is the backbone  of your business. Factors such as the shipping cost, delivery time, and  customs clearance can make or break your business. It is essential for you to partner with reliable international shipping carriers or use a third party logistics provider to simplify your logistics solutions.

For example, companies such as DHL, FedEx, and UPS offer cross border shipping solutions for ecommerce businesses. Consider offering a mix of shipping options, including express and economy, to cater to different customer preferences. 

Key Tips:

• Clearly communicate your shipping costs and delivery time to manage customer expectations.
• Partner with a 3PL provider for smooth inventory management and faster delivery times.

#5 Handling custom duties and taxes

While custom duties and taxes vary greatly from one country to another, they can significantly impact your profit and pricing structure. Many countries impose import duties on international products and customers might need to pay extra taxes upon receiving their orders.

For example, the EU levies VAT (Value added tax) on goods purchased outside the EU. Some shops use DDU (Delivered Duty Unpaid), where the buyer pays these expenses, while others use DDP (Delivered Duty Paid), which includes these duties in the product pricing to prevent surprises for customers at the time of delivery.

Key Tips: 

• Based on the expectations of your target audience, choose between DDP and DDU.
• Use duty and tax calculators or software solutions to accurately estimate costs.

#6 Localizing website and marketing strategies

It's essential to localize your ecommerce website if you want to reach customers from other countries. This involves creating region-specific content, modifying graphics, and translating content into the local language. Translating text alone might not be sufficient; it's crucial to take into account the audience's preferences, tone, and cultural background.

For example, while Western consumers can react favorably to clear calls to action like "Buy Now," Asian markets frequently react better to more polite phrasing like "Please make a selection." Similar to this, different colors have different meanings. For instance, in China, red is a symbol of riches, whereas white is frequently connected to grief.

Key Tips:

• Invest in professional translation services to avoid misunderstandings or offensive language.
• Study regional tastes and customs to create a successful marketing plan.

#7 Customer support and returns management 

Providing international customers with multilingual and responsive customer service can improve their buying experience. Your customers should be able to get in touch with a support staff that speaks their language and understands their needs if they have inquiries concerning refunds, shipping, or customs.

It's critical to establish explicit return policies since managing returns for orders placed from overseas can be difficult and costly. Some companies choose to partner with local return centers to make the process easier, while others offer refunds instead of requiring the item to be returned.

Key Tips: 

• To handle simple inquiries in several languages, use chatbots or AI-powered solutions.
• To expedite returns, partner with regional logistics companies or implement region-specific return guidelines.

Conclusion

Cross-border ecommerce may be complex, but with the right strategy and resources, you can break into new markets, increase revenue, and grow your business on a global scale. Good luck on your journey to taking your brand across borders!

Author

Chandni Bhavsar

Chandni, a skilled project manager, brings the perfect blend of creativity and technical know-how to Shopify stores. Her approach to ecommerce stores is all about making the user experience feel like a breeze. Passionate about staying ahead of the curve, she not only manages projects smoothly but also loves educating others on the latest Shopify trends, helping them keep their stores vibrant and competitive.