Selling internationally is becoming easier and more accessible with the advancement of technology. Mobile and social, payment solutions and online platforms have reduced the friction that typically came with cross-border e-commerce in the past.
Global Trade Growth Powered by E-commerce and Small Business
In fact, according to the World Trade Organization, e-commerce and international selling have become “democratized,” allowing enterprising small and medium businesses to explore new markets for growth. The development of e-commerce has expanded export opportunities for small and medium-sized enterprises and given them global presence once reserved for large multinational firms. These businesses are turning into “micro-multinationals.” They go beyond their local consumers and are able to reach a new and diverse customer base, and compete in a global market.
The growth of marketplaces is a key factor in enabling sellers to reach new customers. Utilizing a business model perfected by Amazon, marketplaces are basically trading platforms that allow sellers from all over the world to list their goods or services to the buyers on those platforms.
U.S. e-tailers will know the instantly recognizable platforms like eBay or Getty Images, but few have taken advantage of the countless others around the world that specialize in different geographies or types of goods (e.g. Rakuten for the Japanese market or Newegg for computers).
Rather than relying on the traditional production and inventory model, marketplaces are able to offer unprecedented options to consumers by simply connecting them to a global network of sellers.
Streamlined processes and logistics solutions offered by these marketplaces — such as fulfillment or shipping, localized customer support, payments and currency conversion — make global expansion easier than ever. Where, traditionally, small and medium businesses had to have a physical presence to showcase their goods, fulfill orders and ship the product, today’s e-commerce platforms have allowed for digital expansion, without needing to invest in crucial resources for localized support.
According to a MGI digital globalization report, digital platforms change the economics of doing business across borders, bringing down the cost of international interactions and transactions. They create markets and user communities with global scale, providing businesses with a huge base of potential customers and effective ways to reach them.
The growth and future projections are staggering. By 2020, cross-border e-commerce sales to consumers are projected to hit $1 trillion, accounting for almost 30 percent of total business to consumer sales.
Channel Diversification With An Eye Toward Emerging Markets
With the emergence of different marketplaces in different geographies, sales channel diversification makes good business sense for the SME. Expanding to new markets to seek a previously untapped customer base offers a huge growth opportunity. Moreover, e-sellers can now avoid the difficulties of direct international sales, such as regulatory concerns, customs and duties, payment methods and currencies, simply by using a marketplace.
Successful international volumes also provide a buffer against domestic downturns, Many U.S. sellers engaging in cross-border selling start with Canada and the U.K., but sellers should consider developing countries. Across Asia, rising incomes are creating an enormous new class of consumers. Much of that growth is coming from China, whose working population is larger than those of the U.S. and Europe combined. As more Chinese consumers gain purchasing power, their needs and preferences will have a powerful effect on the global economy.
In a recent report, Joshua Lu, co-business unit leader of Asia Consumer Research at Goldman Sachs, is confident that in the coming years, rising income in China will bring a couple hundred million people into the consumer class. The increasing consumer power in China makes that market a growth opportunity for many U.S. businesses in the coming decade.
This trend is already becoming evident, with Alipay reporting in 2015 that the number of Chinese users buying goods from U.S. online retail stores during the Thanksgiving holiday sale weekend had increased 700 percent from the previous year, according to reports. By going directly to Chinese consumers via local marketplaces, U.S. businesses can tap into this growing customer base, helping the consumer avoid the complexity of international exports.
Another region to watch is Latin America. Despite the current economic downturn, Latin America is one of the top regions in the world for e-commerce growth. Like China, it also boasts a rapidly growing middle class with demand for a broader selection of foreign, quality goods. Up until now, the region suffered from unreliable shipping and a limited consumer adoption of banking and credit card services.
Today’s e-sellers, however, can avoid the difficulties of direct sales by using a marketplace. Retailers that build out their e-commerce operations now will be in the best position to grab market share when the economy rebounds.
An example of such a marketplace is Linio. Linio has grown to become one of the leading B2C e-commerce platforms in Latin America, with operations in Mexico, Colombia, Peru, Venezuela, Chile and Argentina. With a customer base of over 300 million, Linio offers more than six million products in 60 categories, leveraging an impressive network of over 27,000 professional sellers.
E-sellers still need to do their homework. Whether assessing market demand preferences, localization requirements, or logistics, SMEs must approach each new market with the same deliberate approach they did when they first launched their business domestically. But e-commerce marketplaces have come a long way in reducing the barriers to launching new sales channels around the world. All indicators show that e-sellers with the right products will find success with international commerce.
Richard Gilbert is director, SME Partnerships & Business Development, North America, at Payoneer.