Cross-border e-commerce: opportunities and calculable risks

All that glitters is not gold in cross-border e-commerce

Despite all the euphoria, cross-border e-commerce is complex and often underestimated. Unlike national e-commerce, it has to deal with real borders, and thus with import regulations, laws and risks that differ, change and are added depending on the destination country.

But no panic: we show you here the realistic opportunities an online shop offers and what you have to pay attention to when operating one. Let’s get started!

The advantages of cross-border online retailing are obvious

This would have been unimaginable just a short time ago: for cross-border selling, whether B2C, B2B, or even C2C, you no longer need physical shops abroad.  All you need is an international web shop and you can be involved in foreign markets and serve your customers there in a matter of seconds.

You reach people who are only a click away from your products. In fact, the growth opportunities in cross-border e-commerce are huge.

Retailers who offer niche products deliberately focus on cross-border online trade. The potential is exhausted faster in the national market, so new markets have to be captured. It’s often the case that a product is more successful abroad than in the home market

Strengthen your brand abroad

The opportunity to make your company, brand and products known worldwide is appealing. Social media, skilfully linked to the web shop, can open up the way for global communication. 

Awareness creates trust. And trust is good for your business. Maintaining the trust you have built up is therefore one of the cornerstones of internationalization.

Benefit from international partnerships

Have you ever thought about an international partnership? A partnership with a local specialist can be helpful. After all, foreign markets are exciting, but they are still in foreign countries.

A little support can’t hurt.

Increasing sales lowers costs

If you internationalize your web shop, you can focus on growth. That means more volume and – hopefully – more profit. If you sell more, you can lower your fixed costs and make more profit.

But more sales have another advantage: you increase your purchasing power, benefit from lower procurement costs and improve your EBIT. You can find out how to push your other KPIs through optimised logistics in our blog.

Internationalization reduces business risk in e-commerce

Cross-border e-commerce reduces business risk. The calculation is simple: if you are active in several markets, you have less cluster risk. If you have a bad month in market X, the good month in market Y balances it out. Shared risk is not necessarily half the risk, but it is still less.

Would you like to take the step abroad? Take a look at your optimised setup:

Bypass middlemen and increase your margins

With a cross-border e-commerce solution, you can bypass your existing foreign middlemen and benefit from higher margins. But this only works if you are able to offer all the logistics and a customer service.

Cross-border retailing is a good entry point into international business. There are two classic options here:

• Setting up your own business establishment
  • This involves setting up a separate company.
  • Advantage: market proximity
  • Disadvantage: large investments (financial and management resources), which means a fixed cost apparatus abroad. 

• Internationalization via distributors, market places:
  • Advantage: fast
  • Disadvantage: you give a large part of your margin, and your control, to the distributor.
    
    

In cross-border e-commerce, you skilfully avoid the disadvantages of these two variants. This solution with lower fixed costs is interesting especially in the start-up phase when order volumes are lower. It is also quick and can be extended to other export destinations.

When the volumes per destination increase, setting up your own business establishment can be worthwhile because of the lower logistics costs.

Allow for risks in the export business

Like everything in life, exporting also has its downside. Quietly set up an online shop, sell your products in the big wide world a short time later and after three months relax as a millionaire in the Bahamas ... You wish! 

Unfortunately, hardly anyone is waiting impatiently for your cool new products. You have to create demand first, and that can quickly become expensive.

In foreign business, predictions are more difficult than with the weather. So expect that the invested capital will be tied up longer than planned. This way you are on the safe side and can minimize export risks. Build up a reserve or increase your marketing budget.

Do not underestimate shop systems

It’s fair to say that cross-border e-commerce is the supreme discipline in e-commerce. However, not all shop systems are suitable for this.  In the export business, functions are needed that are not required at home. These include:

• Export master data (customs tariff number, origin, net and gross weight)
• Multiple currencies
• Payment systems
• Transport solutions 
• Various VAT rates
• Languages
  
  

Also make sure that your online shop looks professional, which is not the case with every shop system.

Test your foreign market potential

Keep a close eye on the initial investment. For those who are still unsure about digital internationalization, international marketplaces are a good temporary solution. You don’t need a lot of start-up capital and you can still offer your products to foreign customers. This way you can test the market potential at low cost.

As shipping professionals, we advise Swiss online traders who want to export abroad to start with the countries close to the border first. For this, we recommend our blog with all the information on exporting to our neighbouring countries.

Determine and calculate your marketing strategy

Unfortunately, the best web shop and the best products are useless if you don’t have any traffic on your website. There are various ways and channels to make a brand and products known.

The easiest and quickest are PPC campaigns (pay per click) such as Google Adwords. Here it’s well worth checking the investment costs in relation to the ROI (return on investment).

It’s best to start with a limited budget and keep checking which keywords bring the most success.

Google Marketfinder is a tool that we find very good and helpful. It allows you to evaluate the potential and marketing costs for a specific export market.

Everything gets copied – protect your products  

Brand and product copies – the nightmare of every entrepreneur. Along with internationalization, there’s an increased danger that someone somewhere in the world will copy your idea.

The further away your market is from your home market, the more difficult it is to protect your product or brand.

But there are solutions here too. You can register your brand or product with WIPO (World Intellectual Property Organization) or the European Union Intellectual Property Office and protect it against imitation.

Optimized logistics is your competitive advantage

Logistics – not very exciting, admittedly.  But it plays a very important role in e-commerce, especially in cross-border e-commerce. Customers have high expectations and top logistics becomes a competitive advantage.

Unfortunately, losing control over delivery is one of the real risks in foreign trade. 

Delivery problems annoy customers. They become dissatisfied and make this known. Bad online ratings  are the result. Delivery problems arise, for example, when the recipient is charged import fees. With our IOSS shipping solution for EU member states, these costs are paid in advance and delivery takes place at the first attempt. Everything you need to know about low-cost shipping abroad can be found in our blog article. 

The same applies to returns. A missing or poor returns solution annoys customers. Here too, dissatisfied customers are dangerous for your business.

Therefore, carefully analyse and check the different logistics providers and their services.  Choose the partner with the best credentials, who suits you and your company best and supports you in turning customers into regular customers.

Avoid sending reminders

Reminder spell trouble. And they are also annoying. Especially in Germany, reminders are widely known and feared by online retailers as a great evil. The legal situation in e-commerce changes quickly and constantly. You can find out everything about the e-commerce market in Germany in our blog.

It’s therefore worthwhile to regularly keep informed about new e-commerce court rulings and to make the necessary adjustments in your web shop.

Correct GTC and data protection provisions are key in order to avoid warnings.

Legal texts for various destination countries can be purchased inexpensively from various e-commerce legal service providers. At the same time, you can consult current e-commerce court rulings in them.

Without tariffing – no foreign trade

If you want to send your products abroad, you must know your customs tariff numbers.  This is important because incorrect tariffing can have financial consequences: foreign customs can make enquiries five years in arrears.

Are you unsure and need support? Specialists or customs themselves can help you to ensure correct tariffing.

Risks and side effects in cross-border e-commerce

This information isn't exhaustive, but if you take these risks into account when doing business abroad, exporting offers you many possibilities and opportunities. Good preparation and precise financial planning will help you to be successful internationally.

Let’s now look ahead and see what opportunities cross-border e-commerce offers a retailer.

Would you like to take your chance and take the step abroad?

Read our Export Guide especially for start-ups and find out how you can best conquer your target markets with our products.