Overcoming Challenges of Cross-Border E-Commerce
By: Shahzad Bashir
Gone are the days when cross-border purchases and trading were considered a long and arduous process. Nowadays, cross-border E-commerce has escalated to new heights, thanks to a boom in cross-border trade and the prevalence of technology.
According to statistics, cross-border E-commerce is estimated to cross $4 trillion by the end of 2022. Cross-border E-commerce, defined as the selling of goods online to other parties situated in another country, accounted for over 22% of E-commerce shipments of physical products in 2020. Compare this statistic to 2016, when this share was only 15%!
As more brands continue to expand on an international level, many of them are seeking out new methods to take advantage of the highly lucrative global e-commerce market. The opportunities presented by this global e-commerce market are endless–owing to technology, the internet, and a lowering of trade restrictions across borders.
However, for businesses seeking to reap the benefits of cross-border e-commerce, there are still some challenges that they must overcome. Along with overcoming these challenges, companies should also craft cross-border e-commerce plans to take advantage of the global customer base.
Table of Content
- A lack of Cultural Awareness
- Currencies and Payment Methods
- Linguistic Barriers
- Cross-Border Taxation
- Hidden Costs for Customers
- Roadblocks in Cross-border Shipments
- Local Promotions and Marketing
- Returns and Exchanges
Top 8 Challenges of Cross-border E-Commerce
Here are some of the most common challenges facing cross-border e-commerce:
1. A lack of Cultural Awareness
This is perhaps one of the most important challenges faced by brands wanting to explore international e-commerce markets. A lack of cultural awareness not only creates a barrier of understanding between a brand and customers but can also potentially harm a brand's name and image.
Not many brands take out time to properly research a target market’s culture and norms before entering it with their product and service offerings. As the result?--they fail to make an impact on target consumers’ minds and end up being rejected outright.
The cultural aspects that an e-commerce brand needs to consider and research before entering a new market are preferred shopping habits, preferences, religion, family structures, norms, traditions, and purchasing behavior of the residents.
2. Currencies and Payment Methods
When selling abroad, currencies and payment methods are clear and common obstacles faced by e-commerce brands. As currencies are open to wide fluctuations at times, it becomes a hassle for consumers if they have to calculate the exchange rates every time they make a purchase.
According to statistics, one in four customers is likely to abandon his shopping cart if the price is displayed in a foreign currency. This implies the need to make sure products’ prices are displayed in the currency of the target market.
A company also needs to make sure the payment systems offered by it are valid and usable in a target market. Often, consumers want more than one payment method to make a purchase on an international e-commerce platform.
Offering them a variety will ensure customers have more than one option to choose how to buy a product. These different methods may include digital/mobile wallets, credit and debit cards, bank transfers, and cash on delivery.
3. Linguistic Barriers
Languages can be one of the most important challenges of cross-border e-commerce in the rapidly evolving world of today. According to a survey from Common Sense Advisory, it was found that 40% of digital customers would not prefer to buy a product in another language, while 65% of the customers prefer content displayed in their own language.
Languages may be a difficult hurdle to overcome by global e-commerce companies, but with the right tools and help from qualified translators, this task can be achieved easily. Nevertheless, localizing into a target market’s language can have a profound impact on a company’s cross-border e-commerce sales.
4. Cross-Border Taxation
Foreign exchange taxes are not a new concept–especially for companies wanting to expand into other markets with their e-commerce offerings. However, it is interesting to note that the economic uncertainties caused by the COVID-19 pandemic led to many countries taxing their foreign exchange payments.
Moreover, many countries, such as Argentina, raised these foreign exchange taxes due to a severe drop in exchange rates in the years after the pandemic. Consequently, in light of these hefty taxes, many customers and governments hesitate to promote foreign e-commerce businesses, which can potentially harm a company’s reputation and sales in the new market.
5. Hidden Costs for Customers
While taxes may impact customers in some areas of cross-border purchases, almost all cross-border e-commerce purchases are subject to the risk of hidden costs for the customers. These hidden costs are common as they are a part and parcel of e-commerce sales in a new market.
When a customer makes a cross-border purchase, many players are involved in the transaction, although it may look like only the local bank and the merchant’s bank is involved.
In reality, the other players involved may include a payment processor, a card network, an issuing bank, and an acquiring bank. This means that when a customer pays for a product, he may have to face different foreign exchange costs, which lead to a hike in the total purchase price.
6. Roadblocks in Cross-border Shipments
Cross-border logistics present another challenge in global e-commerce sales. The three shipment stages and the challenges they pose are:
• Pre-shipment Stage
The challenges of pre-shipment for cross-border e-commerce comprise choosing a shipping line, obtaining quotes from freight managers, communicating with buyers, and sorting paperwork. The pre-shipment stage faces the risk of cost burdens, due to manual negotiations, negotiations consuming communications between the parties.
• Shipment Stage
The shipment stage includes challenges such as export transportation, costumes clearance, document handling, and shipment tracking. Here too, manual processes may add to a lack of visibility in transactions and shipments. Moreover, an absence of a centralized shipment process may affect the supply chain network of companies.
• Post-shipment Stage
The post-shipment stage includes the failure or difficulty in clearing an exporter’s payment due to external factors such as payment methods, a delay in shipment reaching the customer, and clearance issues from the customs departments.
7. Local Promotions and Marketing
Once an e-commerce company has entered a foreign market, one of the challenges it faces is local promotions and advertising in the new market. Here, a company needs to do extra research to look into the buying behavior of the target customers and the advertising methods used in the target country.
A failure to properly execute the promotions and advertising in a foreign market may lead to the company losing its reputation for cross-border e-commerce sales.
8. Returns and Exchanges
It is a known fact that customers check the return and exchange policies of a company before finalizing a purchase. And this is understandable, especially if the purchase involves cross-border selling.
For example, fashion items are the most returned/ exchanged items as customers don’t want to take the risk of purchasing the wrong size, color, and texture of the product.
This is the reason why brands must display a return and exchange policy that is favorable for the customers and comes with minimal hassles.
A company can lose potential e-commerce sales if the return involves duty taxes, uncertain payment methods, and unreliable delivery options.
Top 6 Solutions to Overcome Cross-Border E-commerce Challenges
The obstacles to cross-border e-commerce may be many, but these obstacles can be overcome easily with a proactive planning approach and the assistance of a certified and professional translation agency. Here are some proposed top 6 solutions to the challenges confronting cross-border e-commerce.
1. Offer Localized Experiences
Localization is more than just the translation of one language to another. It entails changing a company’s strategy according to the culture, language, and customs of the target market.
A good cross-border e-commerce strategy would involve delivering localized customer experience to the target consumers while making sure this strategy is fully adapted to the culture and language of the target market.
To offer a localized experience to customers, be sure to adapt your website according to the culture and language of the target market, taking care to offer customized copy, images, shopping cart, and product selection options according to each target market’s language, currency, and culture.
Here, a company can go for e-commerce translation and benefit by using the services of qualified and professional translators from a certified localization agency. Professional localization services are well-aware of the cultural nuances of the target market.
2. Advertise and Market Locally
To overcome the challenge of cross-border advertising and promotion for your e-commerce brand, you need to have a localized marketing effort. Evaluate multiple marketing components for each target market–from the translation of a marketing tagline to the content localization of print media components.
Your e-commerce strategy across borders must address consumer drivers such as religion, culture, purchase habits, events, and political preferences.
Some tactics to adapt your marketing efforts in another market are to check out what your competitors are doing. How are they promoting their products? Which promotional channels are they adopting? What value proposition are they offering in the target market?
Another solution is to partner up with marketing and advertising agencies in the target market that can provide ample insight into the purchasing behavior of the target market.
Approach these customers through social media channels, promoting your e-commerce business on all social media platforms. But before you do, be sure to do your homework on which social media platforms are used in the target market.
3. Set up your Cross-border Logistics Plan
Logistics problem lies at the center of cross-border e-commerce challenges for a firm. To overcome this obstacle, ask yourself whether you can set up a specialized hub that can provide logistics in one go.
For example, you can set up a warehouse next to an airport for cutting down delivery delays and make accessibility easier for customers.
Other than this, your business can benefit from licensing and franchising options, and investing in end-to-end logistics services, warehouse space, and performance marketing.
4. Facilitate Cross-Border Transactions
Different countries and regions accept different payment options. To work effectively in another market, your business will need to accept payments in methods that are common in your target market.
You may start by partnering up with different payment solution providers which allow customers to buy from a website and make payments in installments over 30 days of purchase.
Companies should also abandon the “one-size-fits-all” approach to payments and conduct proper research on each country and region to decide which payment method is the right fit for an e-commerce setup in another country.
5. Offer Taxation and Cost Transparency
According to experts on cross-border e-commerce setups, there are essentially two reasons why people buy from international e-commerce platforms–price and convenience.
This means the costs associated with shipping a product across borders, such as the rate of tax, duty fees, carrier fees, and shipping charges. All these costs have an impact on the total landed cost that a customer has to pay.
Companies need to be transparent about the total landed costs that a customer has to bear in cross-border purchases. This is vital as customers now expect to have knowledge of the full landed cost of their purchase.
By revealing the full landed costs and expected time of delivery, e-commerce companies can secure a better customer base in another country. A failure to be fully transparent can lead to shoppers abandoning their online purchase carts or avoiding choosing the online retailers for their purchases.
6. Make your Website Easy to Navigate
When a customer lands on your e-commerce website, you should ensure it is fully customized and localized according to the language and preferences of the customer. Reduce or eliminate any friction points that are deterring a customer from ordering at your website.
One strategy that companies can undertake is to welcome buyers as soon as they land on a company website. Once the company knows which country the customer belongs to, it can let them know the cost of their purchases in their currency.
It is also important to keep the website interface as simple and straightforward as possible and to inform customers whether or not the company accepts orders from that particular country or not.
In addition, companies can provide important information to website visitors when they shop, such as the limit of purchase before the duty fee is charged. Greeting customers in their language will help to break down any communication hurdles and barriers between the parties, enabling easy cross-border trading and sales.
Cross-border e-commerce is an essential part of the rapidly expanding and evolving trading world of today. Although cross-border e-commerce comes with a host of challenges, the solutions are aplenty and with the right planning and strategy, a company can secure an appreciable customer base in another country. Nevertheless, it is important to have the support of a certified and professional localization partner that can make this cross-border trade easy for both companies and the customers, for securing higher sales and a better brand image.