Borderless Shopping: The Land of Opportunity and Risk
Now that we live in an era where practically any good or service can be purchased online with the swipe of a finger, cross-border commerce is in full swing. Smartphones have attracted over 2 billion consumers around the world onto the Internet. By 2020, it is expected that there will be 4 billion smartphones in use, with more than half of the users in China and India. With sufficient consumer demand and a logistics infrastructure already in place to support it, cross-border commerce will continue to experience explosive growth and become the leading source of revenue for retailers.
Opportunities and Risks
Access to new markets
Although traditionally resistant to importing foreign goods and focused on exports to other countries, China has been lifting its restrictions to allow more imports in recent years. Now the Asian economic powerhouse that built itself up through exporting mass quantities of manufactured products is set to become a major consumer of imported goods. Younger smartphone users have developed a palate for shopping for U.S., European, Japanese, and Korean brands online. And the opportunities are not limited to just the Chinese market. A recent study revealed that over the past year, 70 percent of global consumers have bought from retailers based in other countries.
Smartphone adoption is increasing at breakneck speed and it’s fueling the tremendous growth of mobile commerce, also known as m-commerce. Not only is it vital for online retailers to offer a frictionless and hassle-free experience, but it’s also important to implement an omni-channel strategy to ensure that a unified customer experience is facilitated from beginning to end of every transaction. Whether customers are opening promotional emails or contacting companies via social media mobile apps, customers expect real-time and seamless interactions with brands across all channels. For today’s mobile-obsessed world, customers want personalized content delivered to them on whatever device they have so they don’t have to waste time searching.
Exposure to online fraud
Wherever there’s money, there’s fraud, as the old saying goes. The adage applies equally to cross-border commerce. Just as online merchants are seeking new opportunities to increase revenues in other countries, the same can also be said for fraudsters. Now that the U.S. is finally moving away from easily copied magnetic stripe cards and adopting more secure chip-and-PIN EMV payment cards, criminals will focus greater attention on card-not-present fraud. This means that online retailers will become bigger targets for online payment fraud. They can mitigate their risk by implementing strong fraud detection systems that include behavioral analysis tools and online identity verification.
If domestic regulatory compliance wasn’t already complicated enough for most businesses, imagine managing compliance across multiple jurisdictions. With new markets such as China opening up to merchants from other countries, foreign retailers usually lack the necessary experience to deal with the intricacies of complex customs regulations as well as shipping and logistics. Each country has its own distinct set of laws and rules that must be followed, and savvy online businesses need to keep abreast of the differences in order to succeed.
“It’s important for online merchants to know and respect the local laws wherever they do business,” said Trulioo President Jon Jones. “Trulioo’s online identity verification solution streamlines compliance processes and provides the ability to customize rule sets per jurisdiction, helping them scale and expand into new international markets more efficiently and cost-effectively.”
In order for cross-border commerce to be sustainable, one of the key areas that needs to be well-supported is the area of payments. PayPal announced in October 2015 that it was launching its internationally popular Return Shipping on Us program in the United States after a successful roll-out in nearly 40 countries worldwide. The program allows shoppers who use PayPal to make international purchases online during the upcoming holiday shopping season to be reimbursed for up to four refunds on return shipping costs anywhere in the world.
Another major payments processor, Stripe, is also gearing up its efforts to support more businesses doing business in the online space. In July 2015, the company announced a partnership with American Express that would allow merchants accept the credit card as payment on their sites. Stripe also partnered with Chinese digital wallet giant Alipay in June 2014 so that online retailers can accept payments from shoppers in China.
A continual increase in global Internet access means that the traditional concept of borders has irrevocably changed. We can now communicate and do business with anyone just about anywhere in the world in real time from wherever we are, whenever we choose. The growth of cross-border commerce is a by-product of this trend, and savvy online merchants that can make the most of the opportunities while effectively managing the risks stand to reap the greatest gains as a result.
How will cross-border commerce impact your business?