Cross-Border E-Commerce: Growing Fast, But Still a Messy Reality

“More than a quarter of all revenue for sellers on Amazon globally was from cross-border transactions in 2017, up more than 50 percent from the year prior, Amazon Vice President Eric Broussard said in an interview,” as reported by Jeffrey Dastin in a recent article in Reuters. “That amounts to between $50 billion and $75 billion for merchants selling to customers in another country, based on analysts’ estimates for Amazon’s total gross merchandise sales.”

Cross-Border E-commerce is Growing Fast

Descartes’ CEO Ed Ryan, in his opening keynote address at Evolution 2018 earlier this month, highlighted how cross-border e-commerce grew 28 percent last year, twice the growth of e-commerce as a whole. It’s part of the reason why Descartes acquired ShipRush last year, a provider of e-commerce multi-carrier parcel shipping solutions. When you couple the ShipRush solution with Descartes’ global trade content capabilities, you have the foundation of a cross-border e-commerce fulfillment platform.

The fast growth of cross-border e-commerce is also a big reason why Pitney Bowes acquired Borderfree in May 2015 and why UPS acquired i-parcel in 2014. And it’s why two years ago I included “Parcel comes out of the shadows, with cross-border e-commerce the next frontier for growth” in my supply chain and logistics predictions for 2016.

Cross-Border E-Commerce is Anything But Simple

Although it may sound simple, enabling a consumer in one country to buy from an online retailer in another country is incredibly complex. In addition to language and currency considerations, there are many other factors that come into play, including cost factors (duties, taxes, brokerage fees), customs compliance requirements (product classification, restricted party screening, import/export documentation), and complying with the address formats of destination countries to prevent delays and other issues with last-mile delivery.

In a guest commentary earlier this year, Chris Jones from Descartes (a Talking Logistics sponsor) highlights how global e-commerce will likely drive changes in customs processes and across all stakeholders involved in moving goods (packages) across borders:

So why would anybody care about individuals buying directly from some company in another country? At a low level, the answer is no one would. But what happens when it becomes 20% of the inbound shipments into a country? Now we are talking about traditional supply chains being disintermediated, goods entering countries without duties being paid and governments with no easy way to track it…As governments realize the magnitude of the impact to their duties income, there will be changes to import policies to close the loop on missed revenue and to shift the burden of enforcement to supply chain partners.

Back in October 2014, I wrote a post titled, The Messy Reality of Cross-Border E-commerce, where I discussed the various challenges and complexities involved with the process. Here was one of my takeaways:

Many consumers are not loving the cross-border e-commerce experience, and most of the issues are not with the buying part of the process, but with customs clearance and final delivery. In short, when it comes to cross-border e-commerce, the biggest challenge online retailers and its logistics service providers face today is answering the two most common questions consumers ask after placing an order: Where is my shipment? When will I receive it?

I haven’t looked into whether the consumer experience is better today than three years ago. My guess is that it has improved, but that online retailers and logistics service providers are still falling short on providing consumers with specific and reliable delivery dates and times at the time of purchase (e.g., “Your order from the U.S. will arrive at your house in Tokyo on October 15th between 12:00 and 15:00”). The industry will eventually get there, but as I wrote three years ago, online retailers and logistics service providers “will have keep educating consumers about the complexities involved in cross-border shipments, and do a better job of aligning consumer expectations with that messy reality.”

Final thought: if e-commerce returns are a growing headache and challenge for domestic retailers, just imagine the complexities of managing returns for cross-border purchases.