CSCMP's Supply Chain Quarterly
October 17, 2019
Forward Thinking

Hot growth predicted for cross-border e-commerce

A new DHL report predicts cross-border online retail will grow at twice the rate of domestic e-commerce through 2020.

Cross-border online retail sales will grow at twice the rate of domestic e-commerce through 2020, according to a report from German transport and logistics giant DHL.

Cross-border retail volumes will increase at an annual average rate of 25 percent between 2015 and 2020, rising from $300 billion to $900 billion, according to the report "The 21st Century Spice Trade: A Guide to the Cross-Border E-Commerce Opportunity."

That prediction could benefit DHL itself as a potential carrier of all those extra packages. (Not surprisingly, the report extolls the value of "premium shipping" for cross-border e-commerce.) But the report also contains useful information for online retailers that want to capitalize on the trend. For example, retailers that extend their offerings to international customers are boosting sales by 10 to 15 percent, and those that added a faster shipping option to their online stores saw sales grow 1.6 times faster on average than other players, according to DHL.

The report is primarily based on research and interviews conducted by an unspecified global management consultancy, as well as more than 1,800 responses to a proprietary exporter survey of retailers and manufacturers in six countries.

DHL's research identified four types of successful cross-border online retailers:

1. E-commerce giants like Amazon and Alibaba, which have the financial resources to expand internationally
2. Pure online retailers, online natives that have a firm grasp of online shopper behavior
3. Brick-and-mortar retailers that can leverage the reputation of well-known brands
4. Manufacturers, which can bypass middlemen like distributors and sell more profitably directly to consumers

The report also highlighted five steps to successful international online sales: identify your cross-border opportunity and strategy for taking advantage of it; understand local tastes and rules, and adjust your product assortment accordingly; make the online shopping experience feel local; find the right warehouse and fulfillment strategy; and use delivery capabilities to earn customer loyalty.

Several factors could potentially restrain cross-border retail's growth. When asked about the challenges of making cross-border purchases, consumers cited four main concerns: logistics, trust, price, and customer experience.

In response, retailers can turn to a growing array of technology solutions, such as online payment providers and programs that localize a website's checkout experience for each visitor, helping retailers better interact with customers in foreign markets, the report suggested.

Retailers also face challenges in finding the right balance between central and local warehousing and fulfillment operations for their international sales, and in picking the best parcel delivery service for their needs.

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