The future of online business: Cross-Border E-commerce

Trade has been a crucial part of human history and that has evolved humans to be such an advanced civilization. However, we are living in the era of globalisation that made the earth a small village. Never ever in the history of humankind was it easier to transport almost everything from one country to another and that too in very short time. Moreover, we are also surrounded by technology and the internet.

The power of the internet spans over multiple sectors and shopping is probably one of the largest of all. The traditional way of going to a shop and purchasing has not gone out of the picture entirely. In fact, bigger shops, malls, superstores and smart shopping outlets have opened in recent times but the scene of online shopping was made possible due to the advent of the internet. It allowed people to watch and select some product according to their likings and then just order it from the comfort of their homes. The order would be delivered right to their doorsteps and they can even pay online without the need to give out cash. According to research done by Accenture, the total value of the e-commerce market would be north of $3.4 trillion by the year 2020.

Ordering online is fun in itself but what if products can be ordered from somewhere far and wide, like some other country? – That would be incredible! Isn’t it?

Cross-border is a term that ring bells in people’s minds. This makes the impression of something international, premium, exotic and probably better than the local ones. The reason behind this is the basic human tendency of thinking that the grass is greener on the other side.

Cross-Border Ecommerce, as the name suggests, refers to the kind of e-commerce that involves more than one country. In this, products are imported from other countries to be delivered to a consumer. This happens at various levels such as Business to Business (B2B), Business to Consumer (B2C) and Consumer to Consumer (C2C).

When it comes to economy and trade figures, some nations cannot be left unnoticed. They are the US, China and India. The opportunities of cross-border e-commerce in China is currently worth $60 billion, which is more than numerous counties’ GDP. India has emerged as one of the largest online shopping countries in the world along with The US and China. Flipkart was the largest e-commerce player in India, which sold its 77% stake to the American retail giant WalMart at around $16 billion.

The American e-tailer Amazon is one of the American companies to have reached the $1 trillion dollar mark. However, they have been in a cutthroat competition with the world’s largest e-commerce platform, Alibaba. This year, on the Singles’ Day in China, the giant did a business of over $ 10 billion dollars within just 12 hours. Such sales figure dwarfs any other company in the world by a large margin.

According to Xinhuanet’s report, the figures from the General Administration of Customs show that between January and October 2018, retail imports of cross-border e-commerce reached 67.2 billion yuan (about 9.7 billion U.S. dollars), which rose at 53.7 per cent year-on-year. The country’s Premier, Li Keqiang recently announced that China will expand and improve the existing policies on retail imports via cross-border e-commerce to widen opening-up and unlock the potential of consumption.

The Xinhuanet news portal also mentioned that Goods included in the cross-border e-commerce retail imports list have till now enjoyed zero tariffs within a set quota and had their import VAT and consumer tax collected at 30% less than the statutory taxable amount. Such preferential policies will be extended to another 63 tax categories of high-demand goods. China is aiming to encourage the cross-border e-commerce business but with a fair model that does not hurt the local players.

The Indian market has been so engrossed in the online shopping scene that the foreign giants started investing heavily in the country. This led to the domination of foreign players and led to a loss of business for the domestic e-commerce platforms and offline retailers. Numerous complaints have been filed against unfair trade practices by the local players. They also put through requests for protective measures to be taken by the Indian government. Local retailers’ association from all over the country also protested the presence of foreign players and their alluring offers to customers. The recent e-commerce policies put a brake on these practices and that made the local players happier.

On one hand, the South East Asian market is expected to cross $200 billion by 2025. This is the reason that the giants such as Alibaba and Amazon have increased their presence in the region. On the other hand, Australians love to purchase online from other countries. This has raked up their cross-border e-commerce transactions. Europes’ average in terms of cross-border e-commerce is at 15%, whereas  France, one of the major economies in the region has its statistics at 19%, which is 4 points more than the regional average. These regions have a potential to grow a lot in the future. The regions with many developed economies such as North America and Europe loves to transact through cross-border e-commerce channels. The reason behind this is the difference in their currency values. Products coming in from China are comparatively very cheap for those countries, making it more desirable for the customers in these countries.

However, one must consider some major drawbacks of cross-border e-commerce. Fraud ranks on the top among them. It is extremely difficult to judge the product that is coming in from another country. The difference in the norms in both the transacting countries makes it difficult to understand the product’s quality.

Logistics is another major issue. It should be understood that it is not just one-way logistics, rather two ways. To sell a product and deliver it to the customer at the right time and in the right condition is crucial. However, the need for reverse logistics is also important. If a customer is not satisfied with the product, then s/he needs to return easily too. The payment mechanism needs to be smooth too especially in the era of online transactions.

The third and most complicated issue is the governments’ trade and tax regulations. Each and every country has its own set of laws regarding imports and exports. Bringing in products from other countries through e-commerce websites make the process complicated and the players need to keep in mind that the customers should not be liable to pay a lot of local taxes and so on that hikes the final price of the product.

Globally functioning companies such as Alibaba and Amazon have their services available in most countries, as their cross-border e-commerce is very strong. They do a lot of business outside their home turf. They need to take care of the above-mentioned issues, which sours the experience of the customers. There are high hopes for the growth of cross-border e-commerce in the recent future.

-Soumya De

Comment here