It’s a small world

It’s a small world!

Twenty years ago, Frances Cairncross, a British economist, journalist and academic, forecasted that the Internet revolution would have changed our lives and wrote a book called “the death of distance: how the communications revolution is changing our lives”.

Fast forward, two decades later, digital technologies have allowed companies and consumers to operate on a global scale and many of us definitely have a feeling to live in a smaller world.

Ecommerce is a clear example of how the Internet has helped to “kill the distance”. According to eMarketer, retail ecommerce sales (including products and services) have reached the astronomical value of 1.915 trillion dollars in 2016, the equivalent of 8.7% of global retail spending, a large portion of which is cross-border trade.

Buying online from China is the new normal

Buying online abroad is not a temporary fashion. The stereotype of the startup selling globally from a garage has been around for almost two decades , amplified by the success stories of some of the largest internet companies – e.g. Amazon, Google, Microsoft and Apple - that actually really went from a garage to Wall Street.

In recent years, standardization of the user experience, more secure payments, fast shipment, a new generation of online buyers and the surge of new internationally-minded fully-localized players have massively increased trust in cross-border ecommerce.

It’s now a normal behavior to buy from countries where people speak a language we don’t understand, to the point that, as PayPal recently revealed, China has become the most popular shopping destination globally!

In the third annual PayPal global cross-border commerce report, based on answers from more than 28,000 consumers in across 32 countries, we discovered that 21 % of online shoppers declared to have shopped from the Asian country in past 12 months, ahead of the US and the UK.

Surfing on international pricing opportunities

Unsurprisingly, 76% of interviewed consumers buy abroad in search for better pricing. On top of taking advantage of different pricing policies in different countries, online buyers also rapidly take advantage of currency fluctuation. The 2016 Pound devaluation, following the Brexit vote, which has made UK exports more competitive overnight, is a good example of how quickly consumers surf on price opportunities online.

Several online retailers have reported an increase in overseas sales during the last quarters of 2016, as the Sterling plummeted to 30-years low, triggered by the British vote to leave the European Union, and lately IMRG, the UK's Online Retail Association, noted that “cross-border online retail demand remains high entering 2017”.

Also, recent transaction data from PayPal revealed that small and medium-sized businesses benefitted from the record lows of the pound last year. While SMEs in the UK saw their international PayPal sales rise 10% year-on-year from January to June 2016, the rate of growth jumped to 34% in the second half of the year.

Clothing and apparel are the most popular category for cross-border purchases globally, followed by consumer electronics, but travel and digital goods are growing very quickly, helped by the absence of any logistic complication.

Globalization, Trump and the future of global ecommerce

Although 2017 started with the Trump administration promising increased trade barriers, it’s hard to believe this will be enough to change a global trend and “bring distance back to life”.

Consumers in emerging markets are starving for products they can’t find (or they can’t afford) locally.

Shipping is progressively being made easier and merchants are increasingly becoming more transparent on shipping fees right from the start of the user experience (and, yes, shipping fees are the main reason behind abandoned cross-border shopping carts!).

More and more websites allow a fully localized experience, with local languages (not just English), local currencies and secure local payments, to the point that we can now observe a form of unconscious cross border experience, when consumers don’t even realize to be interacting with a merchant based in a different country.

Sellers and payment companies are increasingly offering protection services to the online buyers: refunded return, refund in case the article is not received, travel cancelation…

The Internet has democratized access to global offer. As consumers, we all want wide choice and the best price. Merchants are looking for new ways to grow their business, opening new international corridors and listing on marketplace to reach a wider audience and grow a global business from their own country.

The world has become our playground and cross border commerce is here to stay!

Luca

P.S. No need to say, this is a personal post. The opinions expressed here represent my own and not those of my employer. Posting on LinkedIn doesn’t pay a salary!