Cross-border e-commerce is one of the fastest growth opportunities in retail
Opportunity for product and service with higher basket values accounting for a significantly higher proportion of orders in cross border transactions.
April 19, 2017
By PLA Editor
DHL Express has published research highlighting the significant growth opportunity for retailers and manufacturers with an international online product offering. The report – The 21st Century Spice Trade: A Guide to the Cross-Border E-Commerce Opportunity – looks in detail at the markets and products that offer the highest growth potential, the motivations and preferences of customers making international online purchases and the success factors for online retailers that wish to expand overseas.
It focuses in particular on the opportunity for premium products and service offerings, with higher basket values accounting for a significantly higher proportion of orders in cross border transactions.
The report reveals that cross-border e-commerce offers aggregate growth rates not available in most other retail markets: cross-border retail volumes are predicted to increase at an annual average rate of 25 percent between 2015 and 2020 (from US$300 billion to US$900 billion) – twice the pace of domestic e-commerce growth. Online retailers are also boosting sales by 10-15 percent on average simply by extending their offering to international customers.
An additional boost comes from including a premium service offering: retailers and manufacturers that incorporated a faster shipping option into their online stores grew 1.6 times faster on average than other players.
Rising consumer education and e-tailer awareness of opportunity is spurring growth in markets outside of the United States, United Kingdom, and China — the three biggest spice route supply markets currently accounting for about 60 percent of the revenue. These include Asia (Singapore, Hong Kong and India) and Europe (Italy, Spain, France, Germany), key markets from which spice routes for high-value purchases are being expanded — with growth rates up to two or three times higher than the global average.
The report also stated that consumers are engaging in the spice trade to similar extents across Europe, Asia and North America. Specifically, the US$30 billion market of high-basket value transactions is evenly divided between Asia, Europe and North America.
“Shipping cross-border is much, much easier than many retailers believe, and we see every day the positive impact that selling to international markets can have on our customers’ business growth,” said Ken Allen, CEO, DHL Express.
“We also see that virtually every product category has the potential to upgrade to premium, both by developing higher quality luxury editions and by offering superior levels of service quality to meet the demands of less price sensitive customers. The opportunity to ‘go global’ and ‘go premium’ is there for many retailers in all markets. Our global door-to-door time definite network is perfectly positioned to support any retailer that is developing a premium service offering or simply looking for a way of reaching new overseas markets directly without investing resources in warehousing or distribution.”
Frank-Uwe Ungerer, MD of DHL Express Singapore said, “DHL Express is well-positioned to support our customers in their quest to grow internationally, as cross-border e-commerce gathers momentum in Asia. Our leading global network and knowledge of local markets will and has enabled small and medium-sized retail and manufacturing players to capitalize on opportunities generated overseas, by helping them to fulfill the gold-standards of service and delivery that consumers have come to expect.”
The report is based primarily on research and in-depth interviews conducted by a leading global management consultancy, as well as more than 1,800 responses to a proprietary exporter survey of retailers and manufacturers in six countries. It casts a light on the evolving face of e-commerce, with both supply and demand becoming more sophisticated.
Manufacturers are increasingly taking advantage of e-commerce to move to direct retail models – bypassing the ‘middleman’ and offering their products online to the end customer – and expect to grow 30 percent faster in cross-border e-commerce than other retailer groups. Customers in many markets are also becoming more discerning, citing product availability and trust, as well as attractive offers, as the motivating factors for shopping with overseas online retailers.
The main challenges highlighted by consumers to cross-border purchases relate to logistics, trust, price, and customer experience. At the same time, online retailers can take a number of relatively easy steps to identify, cultivate and service demand from abroad.
The report noted that the e-commerce trend has given birth to a new ecosystem of facilitators and off -the-shelf solutions (such as payment providers and programs that localize a website’s check-out experience for the visitor), helping retailers to adapt their offering to the digital world and to transact with customers in foreign markets. Global logistics partners can provide support in identifying the right trade-off between centralized and local warehousing and fulfillment, while fast, reliable and flexible delivery options can be an important tool in turning speculative interest into long-term customer loyalty.