1 February 2023
As consumers’ desire to make international purchases increases year after year, businesses must become smarter, faster, and more adaptable than before.
Nearly 20% of all e-commerce transactions are predicted to be international by 2023. The rise in the proportion of international buyers who will make cross-border purchases is perhaps even more astounding – by 2023, around 45% of consumers worldwide will be actively making such purchases.
But what does this imply for merchants and brands? What effects will this have on manufacturers? As consumers’ desire to make international purchases increases year after year, businesses must become smarter, faster, and more adaptable than before. Currenxie and Michelle Chia, Co-founder of MDADA provided their expert insights on some of the trends in cross-border ecommerce and what to anticipate in 2023.
Impact Of Cross-border Commerce On The APAC Region In The Last 3 Years
The Asia-Pacific (APAC) area is home to some of the world’s most inventive, vibrant, and quick-moving cross-border commerce markets, including the biggest one. Cross-border commerce is expanding in Southeast Asian nations. Indonesia, the Philippines, Malaysia, and Thailand are a few of the prominent nations in this region. Online transactions are still rising in these and other bordering nations. The market has undeniably been more competitive over the past three years as a result of new competitors consistently entering the market and established competitors increasing their skills. This has resulted in innovative developments and sustainable possibilities. An example of such innovative developments would be the availability of unique payment options like “Buy Now, Pay Later”.
“With the rise of cross-border commerce, digital merchants are increasingly finding themselves under pressure to provide services that are fast, frictionless, and tailored to customer preferences. This means that digital merchants must familiarise themselves with local customer shopping and payment preferences, especially as each market is different, and consumers have their own favourite payment method. In developed markets, consumers rely on credit and debit cards, whereas developing markets in Asia prioritise e-wallets and cash. Understanding their consumer purchasing trends is critical for digital merchants looking to create positive shopping experiences”.
– Arvind Swami, Director, FSI, APAC, Red Hat
Evolution Of Cross-Border Commerce In The Future: Key Aspects To Prioritize
The rise in cross-border commerce has been very beneficial to companies in the Asia Pacific region. During the pandemic, the rise in consumer demand and online shopping behaviour only accelerated this cross-border growth. For many businesses these last few years, the pandemic presented an opportunity to tap into online sales and digital marketplaces for the first time. Others, who were already established online, were now able to take advantage of the situation to strengthen their online presence and capture greater market share.
Today and moving forward, however, concerns around the state of the global economy and rising interest rates are causing cross-border companies to struggle to find a balance between supply, demand, and costs. How much should you keep in inventory? What about cash flow and logistics planning? This is felt most by the merchants managing their own supply chains and inventory. Marketplaces will suffer if Gross Merchandise Volume (GMV) drops, but they will continue to generate revenue as long as merchants pay listing and transaction fees.
A lot is up in the air right now, such as when interest rates will flatten and whether many countries will face recessions in 2023. The Buy Now Pay Later (BNPL) trend is also slowing down which may further dampen consumer spending. While many experts will try to predict what comes next, it’s imperative that companies in this space do what they can to stay relevant, continue to adapt and readily tap into new cross-border markets when opportunities arise.
– Sam Coyne, CMO at Currenxie
With consumers leaning towards transacting in a digital manner, merchants and marketplaces will continue to focus on embracing new payment options. Country regulators are also stepping in, so as to make cross border transactions more frictionless. Hence, we believe that merchants and marketplaces will increasingly look towards leveraging technology & platforms which provide them with agility, security, scalability, and the openness to leverage the wider payments ecosystem.
– Arvind Swami, Director, FSI, APAC, Red Hat
Social Media’s Contribution To The Rise Of Cross-Border Commerce
Cross-border commerce sees a continual growth year after year with a boom during the pandemic period partly due to social media. When lockdowns were in place due to the pandemic, people from all over the world utilised social media platforms like Tik Tok to post reviews about their online purchases and it influenced others to make purchases from businesses in any part of the world.
It appears that everyone was utilizing social media more frequently than usual in the wake of the COVID-19 pandemic. People were using it to stay in touch with their loved ones, spread critical information or safety precautions, and find humor during those trying times of the lockdown. E-commerce sales inevitaby increased as a result of COVID-19. Online shopping is nothing new, but because of the COVID-19 pandemic, many brick-and-mortar stores have all but been replaced by ecommerce.
With worldwide shipping, it is now possible for people to easily purchase items from countries like the US, UK and Europe without having to get on a flight to do it. With social media users learning of new products everyday, businesses can expect purchases from international consumers on a daily basis. With this growth, many businesses are starting to not see a need in having a physical store and instead, they would much rather invest in an online one.
“The high social media penetration rate across the Asia Pacific region contributed to the rise of cross-border social commerce. In Singapore, for example, the live-streaming business has taken off in the last 3 years. Some brick-and-mortar retailers have also turned to live streams to overcome pandemic-induced challenges. Seamless transactions process and quality control are the keys to matching consumers’ expectations. We believe cross-border live-stream is definitely here to stay and will become increasingly important as consumers will no longer be satisfied with shopping through websites and will build expectations for it.”
– Michelle Chia, Co-founder of MDADA
Rising Customer Expectations
The increased use of social media also reflects the rising expectations of customers. Customers in 2023 anticipate a straightforward, practical, entertaining purchasing experience. They desire the ability to track their orders, make purchases through various channels, and get real-time updates on the progress of their delivery.
E-commerce companies need to foresee customer expectations and fulfill them if they want to keep up. Direct communication and indirect research are the greatest approaches to achieve this goal. For instance, post-purchase surveys, social media monitoring, and direct contact with the support staff are all methods for gathering data about client expectations and grievances. Businesses must comprehend the major complaints of their customers and develop solutions in response to their input.
One pertinent issue with cross-border commerce is payment options. Every country has their own payment services, currencies and banks. What ecommerce companies should do is find a way to provide a payment option that is convenient, accessible and feasible for their international consumers. The only way to get this done is by doing research and collaborating with Fintech companies that will allow businesses to reach a wider audience.
Challenges Surrounding Cross-Border Commerce
Global businesses will face a mix of challenges in the coming years. Balance of supply and demand, being one. Operational efficiencies, given the flux of the global economy, being another. For example many businesses are currently expanding their sourcing in Vietnam and India, following China’s long pandemic lockdown. It’s not clear yet whether this will reverse in the near future.
The cost of cross-border commerce is also not going down and cash flow will need to be meticulously managed. Businesses will need to mind their fixed and variable expenses. Streamlining the cost of collecting and sending payments across borders helps protect margins.
Inflation and recession are obviously forefront in terms of concern and at the heart of the challenges businesses are facing in the coming year. Businesses are also faced with the lingering impacts of more than two years of shipping disruptions and component shortages around the world. While transportation rates are coming down, disruptions and shortages are still common, and there is still a notable amount of uncertainty that businesses must contend with in the coming year
– Sam Coyne, CMO at Currenxie
The Asian payments landscape is fragmented, as the widespread adoption of digital payments and push for cashless transactions has led to the rise of multiple digital payment service providers across the region. In fact, a McKinsey report noted that there were over 150 wallet licences being issued in Southeast Asia, and there are also numerous debit and credit cards available for consumers looking to make purchases online.
However, this makes it a challenge for digital merchants to adopt and integrate in a secure manner, as many of them are non-interoperable. With hundreds of payment methods being used across the region, this adds cost and complexity for businesses, making it difficult to offer fast and frictionless experiences to consumers.
– Arvind Swami, Director, FSI, APAC, Red Hat
The cross-border commerce sector will keep expanding in 2023. Organizations should anticipate increased obstacles in 2023 as a result of the business environment’s ongoing change and fast-paced nature. As businesses work to satisfy customer needs, consumer behavior will continue to evolve, supply chain disruptions will occur more frequently, and operational inefficiencies will increase. Additionally, the distinctions between online and offline shopping will become increasingly hazy. However, companies who follow these trends will be able to take advantage of possibilities to increase income and drive up sales.
