The growth of online shopping has been both an opportunity and challenge for many retailers – but is the biggest opportunity of all yet to be fully exploited?
Managing the shift in domestic sales from the high street to online has been difficult enough for many – managing capacity and restructuring logistics to meet this change is far from trivial.
But there is a still a huge opportunity available to be exploited – the cross-boarder market. A study by DHL highlights the fact that cross-border retail volumes are predicted to increase at an annual average rate of 25 per cent between 2015 and 2020 (from $300 billion to $900bn) – twice the pace of domestic e-commerce growth.
The study, “The 21st Century Spice Trade: A Guide to the Cross-Border E-Commerce Opportunity”, found that cross-border e-commerce offers aggregate growth rates not available in most other retail markets.
In fact, online retailers can boost sales by 10-15 per cent on average simply by extending their offering to international customers.
Why do consumers want to shop cross-border? The study found highlighted product availability, a more attractive offering (including price), and trust as the main reasons. “Sharpening a competitive advantage related to availability and trust is both a motivation and a strategic opportunity for the majority of cross-border retailers and manufacturers.”
Fashion and electronics are the obvious big sellers but the study also suggested strong potential for beauty and cosmetics, pet care, food and beverages, and sporting goods.
It also found that some 20 per cent of cross-border purchases are worth over $200 – a higher share than in domestic e commerce markets – and provide especially high profit potential.
“Spice routes for high-value purchases are being expanded out of ‘sleeping giant’ markets in Europe (Italy, Spain, France, Germany) and Asia (Singapore, Hong Kong, India) with growth rates up to two to three times higher than the global average.”
But if there are challenges involved in moving to a successful domestic e-commerce, those challenges are even more significant in growing that business internationally – understanding target markets, creating global online shops that feel local, and developing the right fulfilment strategy. The final mile problem is every bit as challenging in Budapest as it is in Bristol.
Nevertheless, none of these problems are insurmountable and the opportunities are clearly too significant to ignore.