Changes in consumer behaviour mean new opportunities for retailers in cross-border e-commerce
- An Ipsos survey for PayPal’s 2022 Borderless Commerce Report indicates that over 50 per cent of online shoppers make purchases from international merchants
- New trends in e-commerce and new ways of reaching customers are fuelling growth in the sector
The growth of the e-commerce sector has been nothing short of remarkable. Worldwide online retail sales are anticipated to hit more than US$5.5 trillion in 2022, with the figure expected to exceed US$7.4 trillion by 2025¹.
There has been a particular uptick in customers engaging in cross-border e-commerce. Between 2016 and the end of this year, the share of the global e-commerce market held by cross-border transactions is forecasted to rise from 15 per cent to 22 per cent². Furthermore, a report estimates the value of worldwide cross-border e-commerce will reach US$2.1 trillion in 2023 and account for 38 per cent of all e-commerce sales – 13 per cent higher than 2022’s US$1.9 trillion figure³.
These numbers represent a marked shift in consumer behaviour in terms of how and where consumers choose to spend their money. According to an Ipsos survey commissioned by PayPal, 57 per cent of online shoppers currently participate in cross-border e-commerce, with 42 per cent of them more confident about making purchases from international merchants than before. It is clearly an advantageous time for e-commerce businesses to cultivate an overseas customer base.
Consumers are the driving force behind trends
There are a number of reasons for the surge in cross-border e-commerce. Covid-19 – and its associated lockdowns – forced many shoppers to redirect their purchases from bricks-and-mortar operations to online vendors. This exposed them to a wide range of retailers beyond their immediate domestic market, meaning an improvement for customers in terms of choice, quality, pricing and payment options. The development and adoption of digital technologies has also been a significant contributor, particularly in the Asia-Pacific.
In Hong Kong, cross-border transactions make up 25 per cent of all e-commerce sales, according to a report by JP Morgan4. Shoppers are more likely to make online purchases using a mobile device, while app-based social commerce has also been gaining ground in the city, especially among the younger demographic.
China’s digitally savvy population has also been quick to hop on the cross-border e-commerce bandwagon, with 39 per cent of online shoppers having transacted with an overseas merchant. Mobile-first consumers in China prefer to shop using an app, as 65 per cent of mobile-facilitated sales are fulfilled this way5. Live commerce – enacted by many companies – is another key fixture, with McKinsey & Company forecasting that China’s live-commerce transactions will reach US$423 billion this year6.
Cross-border e-commerce is gaining traction in other Asia-Pacific markets, too. In Japan, which is one of the largest e-commerce economies by value, the younger population – with higher incomes and a desire to spend more time online – is expected to be the next driver of e-commerce. Retailers are increasingly offering “buy now, pay later” options to customers, which help boost cross-border transactions. And while desktop-based online shopping remains king, the growth of mobile commerce is projected to surpass it by 20247.
In Singapore, a significant 78 per cent of online consumers have shopped with international merchants, and cross-border e-commerce – especially with China, the United States and South Korea – makes up 55 per cent of total sales8. Mobile shopping and live commerce are also on the rise, thanks to the city state’s robust digital infrastructure.
Market uncertainties mean opportunities
The current economic climate presents numerous headwinds for businesses – winds they must overcome. Supply chain challenges such as longer shipping times and shortages of raw materials – all exacerbated by the pandemic – have shown no signs of abating, and will likely persist for the foreseeable future. This means retailers must find innovative ways to protect their bottom line.
Concerns about inflation and the rising cost of living are also affecting consumer behaviour as the price of goods continues to rise. Many shoppers are displaying increased price sensitivity, cutting back on their purchases to weather the storm – and the looming threat of a recession.
While there are ongoing economic uncertainties and lower consumer confidence, businesses can take full advantage of the growth in cross-border e-commerce and what that means for the future. This can allow companies to expand their customer base and explore the opportunities presented by different markets, thereby diversifying and mitigating risk.
To be successful on the global stage, businesses need to consider many factors, including the unique consumer characteristics and disparate taxation regulations between markets. They also need to ensure a seamless customer experience, such as optimising online user interfaces and providing a variety of payment options – solutions that PayPal can offer to help businesses address e-commerce concerns.
Those who are able to navigate these intricacies successfully stand in good stead to leverage the boom in cross-border e-commerce, and unlock new opportunities for their business.