Cross-border e-commerce: the 21st century spice trade
By Frank-Uwe Ungerer, managing director, DHL Express Singapore
July 17, 2017
By PLA Editor
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Amidst recent uncertainties around the themes of globalization and international trade, one thing remains absolutely certain: cross-border trade is here to stay. People have been engaged in international trade for more than five millenniums. According to some of the earliest records of civilization, the exchange of goods was already supported by trading posts established in South Asia and Middle East.
One of the main commodities was spices, which were highly prized. Traders in the Middle East offered cinnamon and cassia, embellishing their sales pitches with tales about their mysterious origins and properties. And customers loved it: The spice trade flourished and continued through to modern times, on the back of demand for these high value commodities, and the ingenuity of those who worked to source and sell them around the world. It built bridges between different cultures and gave rise to major shipping routes between continents, many of which endure till this day.
Fundamentally, consumers have not changed over the last 5,000 years. As consumers, they still crave exclusive, high quality and exotic goods. They are willing to invest a certain amount of time and effort to seek out what they want at the best price. Merchants are constantly looking for enterprising, creative ways of taking their goods across borders to new markets. All these have set the stage for cross-border e-commerce – the new ‘spice trade’ phenomenon that will help to shape international trade, transform the world’s supply chains and build new shipping routes in the future
E-commerce is not a particularly new phenomenon. And neither is cross-border e-commerce. People have been able to order – particularly from major online retailers – around the world for years now, and this has helped the cross-border market grow to USD 300 billion up till 2015.
Research insights published recently by DHL Express – in partnership with a leading global management consultancy, has indicated that this business will continue to flourish for years to come. According to the report, this market offers superior growth rates to those available in just about any other retail segment today. Cross-border e-commerce is expected to grow, on average, at nearly twice the rate of domestic online retail by 2020. The market will be three times bigger than what it was in 2015 by then.
Outside of today’s biggest spice route supply markets—US, UK and China—new spice trade routes have emerged in Singapore, Hong Kong and India, spurred by rising consumer education and e-tailer awareness of opportunity. According to Google’s Consumer Barometer, consumers are motivated to purchase from abroad because of better product availability, more attractive offerings and trust in the brands. And consumers in Singapore (being ranked top alongside Japan, Germany and the UK) also cited better availability as a principal reason for cross-border online purchases.
Cross-border e-commerce also attracts more spend from customers, with 20 per cent of cross-border purchases having a basket value of more than USD200. The global map for high-basket value route transaction is diverse, with the USD30 billion market of high-basket value transactions being evenly divided between Asia, Europe and North America. Singapore, Hong Kong and India have been earmarked as key Asian markets from which spice routes for high-value purchases are being expanded and with growth rates up to two or three times higher than the global average.
The premium aspect of cross-border commerce is worth noting. According to our research, retailers who offer a premium service offering (including faster delivery) are growing 60 per cent faster than the average. This is driven in part by the fact that fashion and technology still account for a substantial proportion of cross-border sales. However, the premium opportunity is there for every product, both in terms of what the retailer offers and what the customer demands.
This all makes for a compelling case for building an online offering (with a premium option) that is also open for business to overseas customers, whatever your product. Importantly, as we see within our own customer base at DHL Express, this is much, much easier than many people think. The main barriers cited by customers to buying something from overseas are logistics, trust, price and customer experience. Today, with reliable global door-to-door logistics networks connecting businesses with customers and enabling easy returns anywhere in the world within days, and off-the-shelf solutions making website visits, price calculations and transactions possible in just about any language or currency, you can address the vast majority of these concerns.
There is a modern-day spice trade emerging, which I strongly encourage every retailer to take a serious look at. It requires a new skill-set, a new mind-set and new approaches to managing inventories, supply chains and even customer interactions. But it offers a definite growth opportunity for all retailers and manufacturers – customers surveyed for our research reported an average sales boost of 10 per cent through simply having a cross-border option. For those entrepreneurs and markets that can connect most effectively with the global market, it will deliver handsome rewards. Most importantly, it will highlight the most positive aspects of global trade, allowing everyone – wherever they are in the world – to exploit the very best of their unique culture, skills and creativity to trade with the world, grow and build prosperity.