Cross Border Ecommerce Booming

As populous countries including Brazil, China, and India develop increasingly acquisitive middle classes, opportunities for internet sales to those countries are growing. Except for small mom and pop sockets, the brick and mortar retail industries are poorly developed out of major cities. Consumers in these and several other developing nations are searching online for more options in apparel, electronics, and luxury goods.

Prior to 2010, international ecommerce consisted mainly of Americans purchasing products from European and American online websites. Now cross border shopping is becoming more balanced, with Americans and Europeans purchasing goods from sites based in countries where production occurs, such as India and China. A few of the sellers are the producers themselves, but often folks are selling to overseas customers on eBay.

Nielsen recently ran a survey of cross border online shoppers in six states: U.S., U.K., Germany, Brazil, China, and Australia, obtaining the opinions of over 6,000 online shoppers who bought from overseas vendors in 2012. The ensuing report, commissioned by PayPal,”Modern Spice Routes –The Cultural Impact and Economic Opportunity of Cross-Border Shopping,” discovered that clothes, shoes, and accessories represent the biggest cross-border internet shopping class in five out of the six markets, with Brazilian shoppers opting for pc hardware. Nielsen predicts that cross border shopping will contribute 16 percent of total global online sales in 2013.

The best cross boundary online shopping categories from the Nielsen report are:

  • Clothing, shoes, and accessories ($12.5 billion);
  • Health and beauty ($7.6 billion);
  • Personal electronics ($6 billion);
  • Computer hardware ($6 billion);
  • Jewelry, stone, and watches ($5.8 billion);
  • Home electronics ($5.4 billion).

Around the six surveyed markets, the top four online shopping destinations for respondents were in order: U.S., U.K., China, and Hong Kong.

Attributes of Foreign Online Shoppers

Seven out of ten online shoppers are mid-to-high income earners. The majority are between 35 to 54 years old, even though the average age is younger in Brazil (25 to 44) and China, where most online shoppers are younger than 30.

Buyer protection is quite important for Chinese shoppers that are trying to prevent the shoddy and counterfeit product produced in their own country. Poor quality products are a frequent complaint of people who purchase from eBay China.

The dawn of smartphones has been a wonderful enabler of online shopping in developing nations. While people still might not have the ability to afford a home computer, they do purchase smartphones with Internet access. According to Nielsen, in the six countries surveyed, mobile shopping revenues in 2013 have already reached $36.4 billion, over a third of all cross border online shopping in these markets.

Purchasing via mobile devices is most pronounced in China, where 14 million cross border mobile shoppers contain almost 78 percent of their overall online cross border shopping population. Chinese mobile shoppers have spent $16.7 billion in 2013 based on Nielsen, nearly half the value of cross border online sales.

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China, the Largest Market

In “Ecommerce Trends Point to Bright Future,” my previous post, China is home to the biggest ecommerce marketplace on earth, Alibaba. Online retail revenue in China was somewhere between $179 and $219 billion last year, representing six percent of China’s total retail spending. That’s with just 43 percent of the nation online.

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Alibaba delivers online platforms but doesn’t sell merchandise itself. Originally Alibaba was a B-to-B online marketplace, connecting overseas buyers with Chinese suppliers. With the development of the middle class in China, Alibaba added two subsidiaries: Taobao (like eBay), which specializes in consumer-to-consumer trade; and Tmall, which functions as a mall, linking small companies in addition to major brands to customers, similar to Amazon Marketplace. It doesn’t need to manage inventories since it serves as a middleman. Tmall leads the business-to-consumer ecommerce marketplace in China, with over 50 percent market share. Selling products on Tmall is a fantastic way for foreign brands to enter the Chinese market; many luxury brands market on Tmall to establish a new presence in China. In general, Chinese consumers will purchase 20 percent of global luxury goods sold in 2015, according to McKinsey Global Institute research.

Payment

The most popular way to cover cross border online transactions is through PayPal, with roughly 80 percent of cross border online shoppers using it for overseas purchases. Alibaba includes a payment subsidiary, Alipay, that retains payments in escrow until clients confirm that they’re happy with their purchases. It accounts for approximately half of all online payment transactions within China. The two Alipay and PayPal offer buyer protection policies to clients.

The two most popular countries for Oriental cross border shoppers are United States and Hong Kong. Americans prefer to purchase foreign goods from websites in the uk and China. In 2013, 34.1 million Americans are expected to take part in online cross border shopping, spending $40.6 billion.
EBay is a favourite site for cross border shoppers in most countries.

Conclusion

Emerging economies provide new opportunities for American ecommerce merchants. The new middle classes have access to the web and are eager to purchase discretionary goods that might not be readily accessible their home markets. It’s often easier to market via among the regional platforms to get a foothold in these markets and to allow for earnings in the regional currencies.