Do U.S. retailers have a big cross-border opportunity?
According to the “2017 Pitney Bowes Global Ecommerce Study,” 52.7 percent of U.S. retailers already engage in cross-border e-commerce and another 39.7 percent plan to in the next 12 months.
By all accounts, U.S. retail is already reaching its nearest neighbors. The study found 80 percent of Mexicans and 81 percent of Canadians had made a cross-border purchase versus 43 percent of Americans.
A recent Bloomberg article also noted that purchases from Canada and Mexico should increase if the Trump administration succeeds in raising the threshold at which duties are applied to cross-border purchases as part of NAFTA renegotiations.
While many retailers focus on “near-border” opportunities because of proximity and similar cultures, the “greatest opportunity” for cross-border growth is further from home, according to the Pitney Bowes study. “Entering new markets with different cultures, languages and laws is complex, but the rewards can far outweigh the investment and challenges.”
Retailers are looking to sell cross-border in order to capitalize on their global brands and because it can be profitable. The study found average cross-border order values are 17 percent higher than domestic AOV.
Still, Pitney Bowes found retailers are often hesitant about investing in a foreign market with unknown demand. A small majority, for instance, prefer shipping cross-border versus owning inventory and shipping within a foreign market (either via owned distribution centers, stores or bonded warehouses). Depending on the region, a country’s primary online marketplaces or a retailer’s branded website may be a better option to enter a market.
Delivery costs, duty and tax costs were found to be the biggest inhibitors to cross-border purchases, so those must be kept at a minimum. Retailers and brands also often overlook the importance of high visibility of delivery, localized customer care and localized marketing in their cross-border approaches.
Said Lila Snyder, EVP and president, global e-commerce and presort services, Pitney Bowes, in a statement, “It is important that cross-border retailers focus on the consumers they are trying to reach; not necessarily the consumers they are most used to dealing with.”
- Pitney Bowes Global Ecommerce Study Finds Attractive Market Driven by a More Demanding, Frequent and Global Online Shopper – Pitney Bowes
- The 2017 Global Commerce Report – Pitney Bowes
- Amazon Would Gain From Trump Push to Boost Cross-Border Retail – Bloomberg
DISCUSSION QUESTIONS: Do you see the cross-border opportunity for U.S. retailers as limited to Canada and Mexico, or is it broader? What do you see as the main challenges in pursuing cross-border growth?