The online tail now wagging the retail dog as e-commerce surges globally

via Flickr © Hamxa Butt (CC BY 2.0)

via Flickr © Hamxa Butt (CC BY 2.0)

  • By next year, cross-border trade will be 38 per cent of all e-commerce transactions made around the world
  • E-commerce value will be more than US$2.1 trillion, up 13 per cent year-on-year
  • Physical goods account for more than 97 per cent of cross-border eocommerce spend, digital goods for less than 3 per cent
  • “Marketplace model” key to sector growth, and relies heavily on the power and dominance of big vendors such as Amazon

A new report from Juniper Research finds that, by next year, cross-border e-commerce will account for 38 per cent of all the e-commerce transactions made around the world and that by 2023 the value of the sector will be over US$2.1 trillion. Given that it will be $1.9 trillion this year, the forecast figures indicate a sector growth of 13 per cent year-on-year.

The new paper, “Cross-border eCommerce: Emerging Opportunities, Future Challenges & Market Forecasts 2022-2026”, adds that the ‘marketplace model’ is a key to the growth of cross-border e-commerce transactions. An online marketplace is a site where there are multiple sellers and purchasers buying through the same website, and buyers can make purchases without having to leave a given website or app. Dominant vendors such as Amazon are in a good position here, selling goods to customers on behalf of cross-border vendors and providing a quick and easy way to get to a big and diverse audience of buyers whilst enabling and assuring that the acceptance of payments, and the provision of finely-tuned and robust logistical systems and issues are seamless.

Co-author of the research, Nick Maynard, said: “The marketplace model within eCommerce takes the complexity away, meaning that cross-border merchants can provide a localised service. As such, marketplaces are an excellent way to gain immediate access to an existing user base, albeit one that can be restrictive compared with having a direct-to-consumer relationship.”

The new report also concludes that cross-border trading must continue to develop to keep pace with other purchase models such as ‘buy-now, pay-later’ and ‘click and collect’. That development can be effected by signing local distribution and payment partnerships. Juniper recommends that cross-border e-commerce vendors offer localised e-commerce models if they are to avoid losing out to others offering options that consumers regard as better suited to their particular, individual requirements.

Interestingly, it is physical goods, rather than virtual, that dominate cross-border e-commerce and this reality will account for more than 97 per cent of cross-border e-commerce spend, with digital goods making up the tiny remainder of the 100 per cent. Juniper says the maturity of cross‑border export of physical goods as a business model is a major factor behind the imbalance. Also, as inflation rages across the planet and disposable incomes shrink, the report adds that payments vendors should support a wide range of local payment methods as consumers become more circumspect about what they buy and when.

In some countries, data-privacy issues cast a shadow over an otherwise sunny landscape

The report outlines the development and diversification of online commerce and the changes in consumer shopping habits since e-commerce began. It also highlights the increasing reliance on online shopping that, though already very popular by 2020, has been massively and permanently boosted by the global Covid-19 pandemic and concomitant lockdowns. Today and henceforth retailers must have a successful, developed and continually developing online presence if they intend or expect to be in the market for long. Indeed, these days, it is the online tail that very much wags the retail dog.

Additionally, the ever-increasing use of mobile devices within e-commerce has grown significantly, as 4G/LTE (and now, increasingly, 5G) becomes ubiquitous and payment apps like Apple Pay gain in sophistication and popularity. As the report shows, one of the biggest drivers behind mobile commerce is the ever-growing user acceptance of, and comfort and familiarity with digital wallets. Juniper Research estimates that by 2026, around 78 per cent of all e-commerce transactions will take place on a mobile device.

A further driver is customers demanding to be able to pay safely online via a preferred and often local method of choice. Other factors encouraging e-commerce globally are improved access to the Internet in emerging markets, increasing mobile penetration and the availability of mobile payments technologies, services and apps. Then there’s improved access to financial services for the unbanked and underbanked in emerging markets and the increasing availability of alternative payments systems, methodologies and options.

While e-commerce is enjoying unprecedented success, there are a few small clouds on the horizon. For example, effective cross-border trading means having to deal with different legislation and regulatory environments, and the speedy processing of cross-border payments. And there is a burgeoning demand for multi-currency pricing and local payment options such as ‘buy-now, pay-later’ that add an extra twist to the complexity of the payment landscape.

And last, but by no means least, then there’s the thorny and complex issue of consumer data and privacy. In Europe, the European Union’s overarching and comprehensive General Data Protection Regulation (GDPR) is being adopted as a template by many other countries around the world. But others still languish in the dark ages of data privacy and will eventually have to change or suffer the financial consequences for not properly safeguarding their citizens’ data. In this regard, even the US, notorious for its lack of protection and redress where data privacy is concerned, is at last inching towards reform of a system that, as it exists, is about as much use as a chocolate teapot. How long that change will take in practice is anyone’s guess.

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