In 2015, the opportunities in cross-border commerce were limited only to the size of the globe itself … yet merchants seem ill-prepared to seize them. The PYMNTS Cross-Border Payments Optimization Index measures how much work remains for a merchant community that has only seen the very beginning of what can be achieved.
SHUTTERSTOCKThe major cross-border story of 2015 was one of evolution — an evolution that will continue for some time.
As global eCommerce continues to grow toward a $1.2 trillion opportunity, the largest, best, most sophisticated players in the space continue to excel, while the lower rungs remain burdened as less-equipped players struggle to keep up with changing technology and consumer demands.
Over the past year, PYMNTS has been monitoring the cross-border industry and watching for signs of change and growth and measuring the degree to which merchants are prepared to seize their fair share of that cross-border opportunity.
Here are the most important data points and stories from 2015.
According to data from Research and Markets, global business-to-consumer (B2C) eCommerce is expected to experience double-digit growth into 2017. Much of the expansion and popularity of global cross-border is being attributed to the motivation shoppers have to buy their goods directly from foreign online merchants. While customs charges, higher shipping costs and longer delivery times are still challenges facing many global shoppers, the potential for greater product availability, product integrity and authenticity and better price options keeps global consumers coming back for more.
Leading the way in this continued expansion will be merchants from the top nations in cross-border commerce, including merchants in Canada, China, France, Germany, Italy, Japan, Mexico, Spain, the U.K. and the U.S. Those actively seeking to improve prices, simplify payments, streamline shipping, offer outstanding support (in multiple languages) and create a smooth checkout experience continue to pull ahead in the crowded x-border field. PYMNTS tracks the top players in the industry through our monthly and quarterly X-Border indexes. In the latest edition, the U.S. came out on top with the highest average score in cross-border optimization (65 out of a possible 100), with Canada and Germany tying for second at 55 apiece.
In markets like Asia-Pacific, China maintained its dominance in eCommerce and cross-border eCommerce with the China Ministry of Commerce predicting online commerce across the country’s borders in 2016 would reach $1.02 trillion. This would mark a 30 percent overall increase and a 20 percent bump in China’s total import and export trade. In the first half of 2015, cross-border eCommerce in the country was estimated to increase 42.8 percent, reaching $0.31 trillion and representing 17.3 percent of China’s import and export market by the year’s end. There are currently more than 5,000 cross-border eCommerce platforms operating in China, representing a viable force for the country’s continued economic growth, with the Chinese government issuing a number of measures targeted at developing x-border eCommerce.
Meanwhile, some cross-border players who got their start in China and the Asia-Pacific region sought to expand their global influence. In September, China-based eCommerce powerhouse Alibaba — which to date has been primarily committed to supporting x-border eCommerce growth within China — formed a major partnership with METRO GROUP. The partnership will give Alibaba a physical footprint in Europe and simultaneously allow the German-based retailing company to introduce its products into the Chinese market.
“This partnership will encompass collaboration in areas including cross-border eCommerce, logistics, rural eCommerce, online supermarket and online-offline initiatives. Insights provided by Alibaba Group’s Big Data will help METRO GROUP effectively capture the demand for quality imported products among Chinese consumers,” commented Alibaba CEO Daniel Zhang. “Additionally, Alibaba Group and METRO GROUP will work together to help more European consumer brands establish fast-track solutions for expanding into the Chinese market.”
Given that all cross-border commerce is not created equal, certain categories pulled ahead this past year while other showed continued signs of sluggishness. Categories like travel boomed in 2015 while others floundered. Travel ranked highest in the X-Border Index (a collaboration between PYMNTS and Digital River), receiving a score of 63 (out of 100). In a recent webinar on cross-border commerce, John Phillips, Head of Marketing at Digital River, remarked to MPD CEO Karen Webster that booking airfare is a “good that’s more easily delivered than something physical.”
Not surprisingly, observed Phillips, jewelry ranked at the bottom of the category list (with a score of 48), due to a wide selection of options available on the market, the complications customization adds to the buying process, high taxes levied on these luxury goods, and the price/value perception component. As Phillips pointed out, there is more risk associated with buying a $2,500 piece of jewelry that a consumer is unable to weigh against a competitor’s offering, compared to a $2,500 airline ticket, the relative value of which is much easier to assess.
With so many changes unfolding in global payments technology standards, fulfillment infrastructures and eCommerce accessibility across border and language barriers, there is plenty of opportunity still to be had in the space. The cross border sector will undoubtedly be one to watch in 2016 and beyond.
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