We’ve all had experiences with online shopping. Nowadays, cross-border e-commerce is flourishing, eliminating the constraints of location and time on buying and selling. If you’re interested in cross-border e-commerce, today’s article will guide you through understanding it and its advantages compared to traditional international trade. At the end of the article, we’ll also share a useful tool essential for e-commerce entrepreneurs. Don’t miss out!
What is cross-border e-commerce?
Cross-border e-commerce, refers to a business model where buying and selling parties conduct transactions through websites or e-commerce platforms in different countries or regions. With cross-border e-commerce, we can easily purchase goods from other countries and sell our own products globally, all conducted online, providing consumers with more diverse choices and convenient trading channels.
Differences between Cross-border E-commerce and Traditional International Trade
While both involve international trade, cross-border e-commerce and traditional international trade have many differences:
Consumer Approach
Cross-border e-commerce transactions can be conducted entirely online through web platforms, sometimes with showcase stores established. These stores are not primarily for sales but to allow consumers to experience products before redirecting them to the e-commerce platform for purchases. Traditional international trade requires physical visits to stores, limiting product choices and consumer autonomy.
Pickup Locations
Consumers in cross-border e-commerce can specify pickup locations at convenience stores, logistics centers, or designated spots in certain areas. In contrast, traditional international trade typically limits purchases to specific physical stores.
Costs
Traditional international trade involves customs procedures, taxes, financial transactions, exchange rates, and significant communication costs. Cross-border e-commerce, conducted through online platforms, requires fewer manpower and operational expenses.
Processes
Cross-border e-commerce directly sells goods to consumers through online platforms, simplifying complex intermediary processes compared to traditional international trade, which involves finding importers, agents, wholesalers, etc.
Sales Models
Cross-border e-commerce encompasses various sales models such as B2C (Business to Consumer), B2B (Business to Business), C2C (Consumer to Consumer), and B2B2C (Business to Platform to Consumer), while traditional international trade typically involves B2B and B2C. Cross-border e-commerce enables sellers to directly engage with consumers, better understand their needs and preferences, enhance product transparency, and provide buyers with greater bargaining power.
Why is cross-border e-commerce so prevalent?
The prevalence of cross-border e-commerce can be attributed to several factors:
- Globalization: The trend of globalization has led to more frequent international business activities and an increase in demand for international goods.
- Internet Development: The development of the internet has blurred the boundaries between countries and facilitated online transactions.
- Economic Growth: Rapid economic growth in many countries and regions has boosted consumer purchasing power.
- Government Policies: Governments worldwide are committed to promoting trade liberalization by reducing tariffs and lowering trade barriers.
- Pandemic: The impact of COVID-19 has caused operating costs for physical stores to rise continuously, prompting many sellers to shift to online sales.
What are the trading models of cross-border e-commerce?
Cross-border e-commerce can be divided into three trading models: direct shipping, platform cooperation, and local operation. Below, I will explain these three major models in detail.
Direct Shipping
Direct shipping refers to consumers placing orders from online e-commerce platforms, and the goods are directly shipped from the seller’s region to the buyer.
The threshold for direct shipping is relatively low, as it only requires managing the website and listing products on the e-commerce platform for sales. However, since the goods are shipped directly from the seller’s country, logistics costs need to be considered, and the delivery time may be longer.
Local Operation
Local operation involves setting up branches overseas. Sellers from various countries place orders through the website, and the local branches are responsible for processing and shipping the goods. However, it should be noted that local operation entails very high operating costs and requires overcoming local cultural and language barriers, making it a higher-risk approach.
Local Operation
Local operation involves setting up branches overseas. Consumers from various countries place orders through the website, and the local branches are responsible for processing and shipping the goods. However, it should be noted that local operation entails very high operating costs and requires overcoming local cultural and language barriers, making it a higher-risk approach.
How to Get Started in Cross-border E-commerce?
Do you need an e-commerce background to do cross-border e-commerce? Actually, not necessarily! To operate cross-border e-commerce, you just need to follow these points:
- Market research: Understand product positioning, market demand, and identify target markets.
- Platform selection: Choose the appropriate cross-border e-commerce platform based on the market and product positioning.
- Establish supply chain: Establish a comprehensive supply chain and logistics to ensure smooth cash flow and logistics.
- Plan marketing strategy: Develop marketing plans to ensure successful exposure of the products.
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What are the cross-border e-commerce platforms?
After understanding cross-border e-commerce, let’s take a look at four common cross-border e-commerce platforms:
Amazon
Founded in 1994, headquartered in the United States, Amazon is currently the largest global cross-border e-commerce platform with the highest market share in the European and American markets. Its main business models are B2C and B2B2C. Amazon has a comprehensive warehouse and logistics system and operates independent e-commerce platforms in different countries, such as Amazon UK, Amazon JP, Amazon CA, and even launched its own payment system, Amazon Pay.
Shopee
Founded in 2015, headquartered in Singapore, Shopee is a well-known cross-border e-commerce platform in Taiwan and the platform with the highest market share in the Southeast Asian region. Its business models include C2C, B2C, and B2B2C. Shopee has become a Southeast Asian e-commerce giant in less than 10 years. Besides meeting the consumption patterns of young people, its success also lies in its marketing strategies.
Rakuten
Founded in 1997, headquartered in Japan, Rakuten is the largest e-commerce platform in Japan. Its main business model is B2B2C. Rakuten mainly sells bags, clothing, food, and other products, targeting Japanese women. It is the first choice for entering the Japanese market. However, Rakuten’s review process is strict. To list products on Rakuten, merchants must have a local Japanese company and a local bank account.
Pinkoi
Pinkoi is a cross-border e-commerce platform based in Taiwan, founded in 2011. Its market scope covers Taiwan, Japan, Malaysia, Hong Kong, and other regions. Its main business model is C2C. Although Pinkoi has fewer product types and generally higher prices, it promotes “Designed for Life,” attracting many consumers eager for originality and high-quality products, and providing designers with an opportunity to showcase their products.
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