Everything you need to know about cross-border ecommerce

What is Cross-border Ecommerce
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Every year, more and more companies expand their ecommerce business across borders. According to Statista, 27% of online shoppers in the US buy both domestically and cross-border, and this number is even higher for many countries in the EU. But how do you know if going global is the right move for your business?

Growth of cross-border ecommerce through the years

This is a market with rapid growth. Since 2016, cross-border ecommerce has grown from 15% of global ecommerce shipments to 22% in 2022, and is expected to reach over $2 trillion by 2026. Even more impressive is the almost $5 trillion market size that B2C ecommerce alone is projected to reach by 2027. It’s safe to say there is space in this industry for your business, no matter which side of the market you’re on.

Reasons why you should go global

Put simply, going global gets you global exposure. Expanding internationally opens your business to a much wider market, which translates to more customers, and thus a higher demand for your product. In addition to the increase in revenue from popular items, cross-border ecommerce can also improve sales of slow-moving stock as these products often prove to be more popular across borders.

Customs, duties, and taxes

When selling overseas, you’ll want to familiarize yourself with the different types of taxes that are unique to shipping across borders and which vary from country to country.

For example, import duty is the tax a government imposes on imported goods, hiking the overall price for these items and encouraging buyers to purchase them domestically instead.  That’s if the item meets the threshold at which customs begins to collect taxes on the item, known as de minimis value. If the total value of the item is under the de minimis value, no duties will be collected.

Value Added Tax, or VAT, is a tax added to the item at each stage of production, and is charged to the consumer. Goods & Services Tax is similar to VAT, in that it is charged in stages. However, the GST is a percentage of the total transaction, and is taxed at a flat rate across a nation. This tax is reimbursed to all but the end buyer.

Once you’ve calculated the total value of your item based on the above taxes, you’ll document it on a commercial invoice along with a description of the item, which customs refer to when processing your package for shipment.

Global payment methods

Payment isn’t a global one-size-fits-all. Different parts of the world have their own trends as to what is most commonly used, so you’ll want to adapt your payment methods accordingly. Take nations that are part of the EU. Visa, MasterCard, and American Express are the big three when it comes to online purchases, but the popularity of those cards varies across individual countries. In Spain, nearly everyone uses one of those cards, while in Germany, only 30% of online shoppers do. Cash is most common in Asian countries like India, where shoppers order items online and pay for them upon delivery.

Things to consider when going global

Opening your business to the global market can come with some challenges. Knowing ahead of time how to manage payment fraud and navigate the list of regulated and illegal items in certain countries will go a long way to avoiding profit loss from online purchases. Additionally, making your platform available in a variety of languages and currencies can be that extra step needed to grab more sales.

Bottom Line

Cross-border ecommerce is a fast-growing market worth taking the time to understand. While it may involve learning new practices when it comes to payment and shipping, the rewards speak for themselves. If you’ve been considering going global, but haven’t made the move, now is the time to break into this industry and take advantage of the substantial growth your business can achieve with it.

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