The current trade economy has been a difficult one: In the past year, air and ocean cargo shipments have dropped; cargo theft has risen; global unrest, weather and natural disasters have slowed international shipments; free trade agreements have fallen through; and politics — from the Brexit vote to the U.S. election of Donald Trump — have countries taking a new position of “deglobalization.”
Yet despite the difficult trade climate, there is one avenue of international business that continues to see dramatic gains: e-commerce. And with international online sales rising, and more companies entering these markets, trade is bound to be bolstered by cross-border internet retail sales.
Companies are struggling to keep up with the fast pace of international e-commerce
For companies seeing the growth in their online sales, or looking to enter the marketplace, there are some challenges that need to be addressed. According to a recent report from the American Association of Exporters and Importers (AAEI) and global trade management company Amber Road, a full three-quarters of the businesses surveyed have an e-commerce component.
Nearly half of these companies do business in more than 50 countries. For 35% of them, cross-border e-commerce contributes more than half of their sales. According to the report,
The growth of online sales is currently outpacing that of brick-and-mortar retail sales three to one.
The cross-border e-commerce industry is expected to grow to more than $1-trillion by 2020.
Companies who wish to capitalize on that growth must learn to provide customers with an easy online shopping experience and excellent customer service, the report states. To do that, companies must effectively manage the supply chain from the production and shipment of a quality good, to cross-border delivery through to the end customer. Some of the challenges for businesses dealing with international e-commerce along the supply chain include:
- Establishing a secure cyber environment in which to do business with customers;
- Finding suppliers and manufacturers who will produce quality goods that will hold up to high customer standards;
- Creating a visible supply chain that allows customers to track their shipments easily;
- Properly classifying goods for trouble-free customs transactions;
- Avoiding fines and fees by following the trade regulations of each country;
- Safely and securely transporting goods;
- Monitoring the costs and fees associated with transporting goods across borders, and;
- Having a reverse-logistics process in place, as 30% of online holiday purchases were returned, compared to 10% of holiday purchases made in stores, according to the National Retail Federation.
Addressing the challenges of cross-border e-commerce
In the end, e-commerce companies who fail to address the challenges of doing business internationally face serious risks. Some of those risks include:
- Negative publicity, lost business and association with privacy concerns due to cyber security breaches (think Target);
- Brand damage and costs of issuing refunds and replacements to deal with quality control issues (think of Samsung’s exploding Galaxy Note 7 recall);
- Lost revenue from unanticipated fees and fines or improperly calculating the cost of customs, and;
- Dissatisfied customers due to shipping delays, lost shipments, poor shipment tracking or a strict return policy due to a lack of effective reverse logistics.
In all, 29% of the e-commerce retailers reported that they have already seen the negative impacts of cross-border commerce challenges.
At the same time, fewer than 30% of survey respondents stated they had a management system in place to help them classify their shipments for customs, determine shipping rates, screen parties to see if they appear on any sanctions lists, or real-time shipment tracking for customers and logistics team members.
In the end, effective e-commerce depends on companies implementing systems that will help them to identify quality suppliers, offer secure cyber exchanges, navigate customs and trade laws, track shipments accurately and offer reverse logistics for customer returns.
More and more, software solutions are becoming available for international e-commerce businesses, and countries and international trade bodies are working to make cross-border sales easier on businesses. Companies who implement trade protocols, monitor and improve their trade management process will benefit from the steady and intractable growth of international e-commerce.