Growing ecommerce successfully across borders

With their pandemic-induced spike in sales behind them, ecommerce firms are seeking new growth opportunities. One option that often comes up for discussion is the possibility of expanding into international markets.

The reasons are clear: thanks to the rise of convenient digital payment methods, consumers are becoming ever more comfortable buying goods online anywhere and at any time. And they like the fact that foreign retailers offer them access to a wider range of products. 

Etailers can access a much larger potential customer base by tapping into this demand at a time when growth in their domestic markets may well have plateaued. 

There appears to be plenty of earnings potential. Cross-border ecommerce sales are forecast to grow twice as fast as global ecommerce sales over the next few years.

Despite this, regulatory complexity is deterring many etailers from seizing such opportunities. In the EU, this means that well-resourced giants are free to dominate the cross-border space while smaller players hover on the sidelines.

Regulatory complexity

To change this situation, they need to be “proactive and adaptable” in tackling the challenges. That’s the view of Kunle Campbell, co-founder and partner at ecommerce investment company Octillion Capital Partners. 

For UK-based firms, that means dealing with the administrative burdens of Brexit, which have become the biggest barrier in recent years. Etailers selling into the bloc must prove that they meet its standards for goods and services when that was previously accepted without question. EU import VAT is payable in the member state of arrival, driving up costs.

Companies engaging in cross-border trade must deal with customs declarations, rules-of-origin requirements regarding tariffs “and other trade-related paperwork, which can lead to delays and increased costs”, notes Campbell, who is himself an etailer who sells to the EU. 

Many firms have also had to adjust their pricing strategies to remain competitive, he adds.  

To make their lives easier, they would be well advised to work closely with customs brokers or freight forwarders with expertise in handling customs procedures. Firms should invest in supply chain optimisation and visibility tools to track shipments and anticipate potential delays, Campbell recommends.

But it’s not only trade rules that create problems. Compliance with environmental regulations has become a headache, with retailers having to follow costly new green packaging rules that apply throughout the EU. 

Firms selling goods abroad must also cater to different local payment preferences, which means investing in the appropriate tech. When buying from foreign websites, shoppers need to be able to: view prices in their local currency; make payments using their preferred method; see up front what tax and duties they would have to pay; and access a range of reasonably priced shipping and return options.

“People don’t have to be restricted to shopping in their own country if the payment process is easy,” says Chris Kronenthal, president and CTO of FreedomPay. a provider of payment processing tech. “Brands that prioritise simplifying this process and ensuring that payments are instant, secure and transparent, will excel with their global commerce growth.”

Localisation challenges

Firms must ensure that their marketing communications are specific to each country of operation. They may need to hire multilingual teams to handle queries from customers around the world. 

BigCommerce, which helps merchants in 150 countries to build online stores, understands how important it is to adapt their communications, products and payment options to meet the needs of each market.

“This will lead to increased familiarity for shoppers in each region, offering them a better user experience,” says the firm’s senior vice-president and general manager in EMEA, Mark Adams. “The most successful international sites are region-specific for that reason. Rather than using home-country ideas that often fall flat abroad, they update product imagery and write marketing copy that engages regional audiences.” 

Firms should remember that they don’t have to tackle such challenges alone. BigCommerce, for instance, enables its clients to tailor several shopfronts to different markets. Perhaps more crucially, numerous third-party logistics providers have the ability to help firms get their shipping and fulfilment processes in order. 

Adams says: “As any company that’s dealt with shipping and fulfilment knows, this can quickly become a complex and challenging process – particularly true for companies that attempt to do it all in house.” 

The challenges of cross-border ecommerce are many and varied, but the potential benefits are huge for those that can rise to them. 

While locked down in Norway during the depths of the Covid crisis, Ruth Sparkes started Nordhuset (The North House), an online business selling poster art. The British national soon found strong demand for her designs from around the world, particularly in Australia.

Making the fulfilment process as sustainable as possible was important to her, as she explains: “I could have rolled up my posters and sent them by air, but that wouldn’t have been environmentally sound. My solution was to find a print-on-demand firm in Oslo called Gelato, which uses ethically sourced paper and sustainable ink. It can organise printing and delivery with its partners in other countries. So a customer from Melbourne buying from me here in Oslo will pay in krone but have their work printed and shipped locally.”

Nordhuset is one of a growing number of online businesses with similar environmental concerns, notes Sebastian Gatzer, partner at McKinsey and a member of its retail and consumer goods practices. 

“Sustainability has never been more on the radar for ecommerce companies,” he says. “The motivation is coming from consumers, investors, employees and green regulations.”

Gatzer reports that the number of shoppers who are concerned about matters such as an etailer’s carbon footprint is increasing apace, although he adds that most still rank matters of price, quality and convenience above sustainability.  

“Yet sustainability is important even to these shoppers,” Gatzer says. “As such, ecommerce players are trying to make sustainable choices affordable, convenient and attractive.”

It’s a tricky balance for an etailer to strike, admits Sam Morgan, director of ecommerce at Paria, a specialist supplier of apparel for cyclists.

“At our stage of growth, being eco-friendly is a consideration for us, but not top of the pile. The key is to make a more sustainable choice where we can, without sacrificing service to the customer and cash to the business,” he explains.

How can cross-border etailers square the circle?

Shipping is a good place to start. For example, increasing usage of electric vehicles and last-mile delivery options such as e-bikes can help reduce greenhouse gas emissions. The use of parcel lockers can also help to make deliveries more sustainable and convenient if a customer is coming back from work or out shopping. These can cut the number of journeys needed for redelivery attempts if people are not at home and can enable couriers to deliver several packages in one trip. For smaller businesses and eBay merchants selling to continental Europe, say, using a nearby locker can also be more convenient than queueing at a lesser-spotted post office or making a lengthy round trip to an out-of-town depot.

Etailers should build locker deliveries into their European fulfilment strategy, according to Parcel Pending by Quadient, which has a continent-wide network of lockers. They could do this by partnering with retailers that have in-store lockers or with carriers that have access to a broad network of lockers. Carriers and etailers can also invest in their own lockers at locations such as railway stations, pharmacies or dedicated parcel centres.

Effective communication with customers regarding their delivery needs is also key in minimising wasted journeys. This can mean rearranging dates and offering different delivery locations even at short notice. The better use of data can also provide deeper insights into customers’ behaviour to help predict optimal delivery times, for instance.

“In addition, I know of one ecommerce company that charges higher prices for customers who are serial parcel returners, according to its data,” Gatzer says. “That can improve sustainability if it results in fewer journeys.”

Greener packaging

A quick win – and one that will be highly visible to customers – is the introduction of sustainable packaging. Sparkes uses a cardboard tube and paper for her posters. No plastic is involved.

Morgan says that Paria is moving all its delivery packaging to recycled/ recyclable paper from plastic envelopes. “Product packaging will also transition to compostable packaging later this summer as we phase our current plastic offering out,” he explains.

Custom Neon, an Australian-based supplier of bespoke LED neon signs, prioritises the use of recyclable and biodegradable materials in its packaging. The firm does this without compromising the integrity of its delicate cargo in transit, according to its co-founder and CEO, Jake Munday. 

“We continue to research LED neon signage materials,” he adds. “While these aren’t fully recyclable as yet, we have supplied customers with upcycled signs made from LED neon offcuts.”

Samuel Smith is the director of SmithPackaging, a supplier that offers a completely recyclable range of packaging to eco-conscious etailers. He contends that sustainability doesn't have to come at the expense of customer experience. 

“Ecommerce firms can achieve this balance by offering sustainable packaging options that meet customers’ needs while still reducing their environmental impact,” Smith argues. “It can be hard to find supplies of packaging that are genuinely eco-friendly, but we wanted to ensure that we used as little plastic as possible. In cases such as our cardboard boxes, we use 100% recycled paper, meaning that they are 100% recyclable after use.”

Sparkes says that her insistence on sustainable printing and packaging may mean extra costs for customers, but she believes that her service ticks both the convenience and quality boxes. 

“Gelato can do a shipment in just two days,” she says. “It’s a balance, but we can really help the customer and the environment at the same time.”

In early 2023 Eurostat reported that almost half of shoppers in the European Union buy goods online from other countries, both within the bloc and outside it. Doing so gives consumers more choice on products and prices, while the rise of mobile shopping and advanced payments technologies has made it easier and safer to buy goods from abroad.

Stijn Meeus, managing director of ecommerce marketing at global logistics leader FedEx, says that most domestic ecommerce markets are considered “very mature and highly competitive” at the moment but global expansion offers new opportunities. “Cross-border sales remain a relatively untapped part of the market, particularly for SMEs, but that is set to change. Firms bold enough to navigate the challenges stand to reap huge gains in the years to come.” 

So, how can online retailers make the most of this golden opportunity?

It’s something that most seasoned online shoppers have experienced after excitedly ripping open the parcel: the sad realisation that the shirt you ordered is so small that it could have a double life as a handkerchief.

Such sizing errors by the customer, along with the receipt of unwanted gifts and the deliberate ordering of several similar items to try out, are among the commonest reasons behind ecommerce product returns.

The average returns rate is approximately 25%, according to research by Richpanel. That’s about three times higher than the equivalent rate for bricks-and-mortar stores. Clothes and electronic goods are the most common purchases to be rewrapped and sent back. 

Figures from return specialist ReBound, which works with firms such as Asos, suggest that as many as 90% of online shoppers will check a merchant’s return policy before buying from it. It clearly matters to consumers.

A high returns rate will seriously erode any trader’s profits. Research by SML Group suggests that 12% of rejected purchases are never sold again on average, while 42% have to be resold at a discount.

Dean Frew is SML Group’s chief technology officer and senior vice-president of radio-frequency identification (RFID) solutions. He believes that companies have tended to overlook the returns process in their eagerness to boost sales. 

“Some retailers even have a ‘let them keep it’ strategy, which is sad,” he says. “When products do come back, they’re usually manually handled in a cumbersome way. Fashion items need to be graded – determining whether they need repairing, for instance – before you can repackage and resell them. That can take weeks or even months.”

How can international etailers improve the returns process?

One way forward for merchants selling direct from their own websites or an online marketplace is to develop local returns hubs with their logistics and warehousing partners. Such partnerships can help them to access better pricing deals with returns shipped to their main fulfilment centres in bulk.

This can reduce lengthy logistics movements and costs while also cutting carbon emissions. Customers also tend to feel more comfortable if there’s a local address to send returns.

A shipping carrier offers convenient options for customers too. These include pick-ups from home or drop-offs at a shipper’s collection point, lockers or a retail store. Pre-printed return labels are another huge help to shoppers.

Ben Balfour is the COO of the Advanced Supply Chain Group, which handles returns for UK-based cross-border etailers. He believes that the best way to handle international returns is to “decentralise the whole process. Items being sent back need to be processed close to where the customer is based. Their condition can be determined quickly, enabling speedy decisions to be made about what to do with them. For example, depending on quality, an item can be returned to the original point of sale or diverted to an alternative locally available channel, such as a discount outlet. This enhances stock availability and selling opportunities.”

Jelle Schoenmaker, managing director of ReBound, which joined forces with Dutch-based returns specialist Cycleon last year, says there are many factors shooting returns up the agenda of ecommerce firms.

“Companies are increasingly being driven by legislation, such as Right to Repair in the EU, as well as the consumer, to think more about returns,” he says. “There are many things to consider when developing a returns policy. For example, if you are a French retailer selling into the UK or Germany then it needs to be in the local language with a local return address. You have to adapt to local habits and standards in Europe and elsewhere.”

He adds: “If I am a consumer living in Paris and I buy a product on Amazon or another online marketplace, I may not know that the retailer is from another European country and that they need to ship from there to France. But if that customer hates the product, then that European retailer needs a proper local logistics solution in France to improve efficiencies. If the retailer is from the UK, then it can be a costly exercise post-Brexit to get the return shipped back.”

Danish group Flying Tiger’s ecommerce arm covers over 20 countries, including major European nations, with a Poland direct-to-consumer warehouse set up to handle deliveries and very occasional returns. It also takes a consumer-first approach to returned goods. “Unlike a fashion firm, return rates are not a pain point for us,” says Andre Filomeno, senior vice president of customer and digital. “Our returns policy is focussed around improving customer satisfaction and the type of problem encountered. If your item is broken, then there is no need to return it. We just refund you and send another product. We always put the customer first which may mean opening more local-based warehouses in the future to cut down lead times. We are seeing high demand.”

Schoenmaker says that returns management has become more of a data-driven operation based on the quality, price, status and even seasonality of the item. “It’s no longer a one-size-fits-all approach. If a customer is returning flip-flops to the UK in November, then take the slow boat. If the item is still on sale or promotion, get a speedier, more expensive logistics service to convert that return into an extra sale,” he says.

Hi-tech solutions

Technology can also play a key role in the efficient handling of returned goods. Frew points out that item-level RFID tagging can help to accelerate manual processes. 

“We have brought 11 touches of a returned product down to six in one example, saving labour costs,” he says. “One of our customers manages more than 900,000 returns every year, so this can add up to a large saving.”

A dedicated returns channel feeding live data into a central control hub can also help merchants to quickly detect problems such as goods generating an unusually large number of returns.

“If you know that there’s a specific item of clothing or audience where the return rates are extremely high, then inform them better about product sizing to ensure that the order is correct,” Schoenmaker advises. “Maybe state on your site that the dress is a size 12 but fits like a 10. Provide that additional help.”

Hi-tech firm Reactive Reality has created a digital fitting room in which online fashion shoppers can create avatars of themselves to ‘try on’ clothes virtually before ordering. Its technology is being used by global brands such as Hugo Boss and Shopify to boost sales and reduce return rates. 

Its co-founder and CEO, Stefan Hausweiner, explains: “When you get websites with flat, static photos of models who don’t look like regular people, then the gap between product expectation and reality is clear.” 

An ecommerce firm’s returns policy, in the local language, should also be reviewed regularly to ensure that it gives customers the clearest possible explanation of the terms under which items can be returned and how to start that process.

There should be an opportunity here for merchants to offer greener logistics options for customers looking to return goods, Schoenmaker notes. 

“Give them choices about walking to a drop-off point or using a green carrier, for instance,” he suggests. “Organise fuller truckloads and less excess packaging. Returns can help you to meet your sustainable goals.”