As the cost-of-living crisis continues to take its toll globally, the combination of macroeconomic conditions and access to a growing eCommerce market has acted as a catalyst for cross-border growth. According to a recent survey, consumers are now buying across borders regularly, driven by cheaper prices and their search for better value. Around half of consumers shop outside of their domestic markets regularly, with younger consumers leading the charge as the category most likely to shop beyond borders (71% of Millennials do so up to several times a year, followed by 60% of Gen Z shoppers). Additional reports claim that a third (33%) of global eCommerce will be cross-border by 2028, as growth shifts to developing markets.
With consumers more willing to look further afield for the best deal, competition online is growing increasingly fierce. Many customers who once felt a strong sense of loyalty to local brands are having to put their sentiment aside as disposable incomes get tighter and an ‘every penny counts’ mentality takes over. On the flip side, as cross-border shopping accelerates, these same brands can capture alternative audiences from across the world while new brands entering the global market have the chance to engage with UK shoppers.
Being in the position to reap the rewards that cross-border retail has to offer requires significant groundwork and investment in an uncertain economic landscape can be daunting. With challenges surrounding Brexit resurfacing in recent headlines, including new customs checks and VAT changes, cross-border expansion will require a well-thought-out strategy geared for growth and underpinned by flexible operations that provide ultimate agility.
Taking a strategic approach to reflect demand
As brands and retailers seek to grow their business, the ability to expand cross-border into international markets is critical in today’s global economy. However, supporting the unique requirements of selling internationally and localising operations to different markets is not a simple task. Identifying levels of demand and establishing which stage of international expansion your brand currently sits at is an important starting point. From here a strategic approach can be built to support and grow your presence.
For example, for brands beginning their cross-border journey, customers will primarily be local, with some international order volume starting to build. In this situation, both domestic and international demand can be fulfilled from a single pile of inventory located within the primary country. For brands seeing international demand increase, this requires a more localised approach including the localisation of the brands’ website, the streamlining of payments and the implementation of a more efficient order processing strategy for international orders from the single fulfilment node. At the other end of the scale, brands experiencing a surge in international demand may want to consider expanding operations to include in-region fulfilment. This involves engaging in a multi-node fulfilment operation and leveraging international distribution centres to ensure fast delivery to customers across all regions.
Solutions that scale
The purpose of a multi-node fulfilment network is to spread out inventory across multiple smaller distribution centres (DCs) as opposed to one single facility. This concept not only enables brands to cover more ground in terms of audience, but it acts as a great contingency should an unexpected event occur at one location, as it can be picked up by another with no need for production to come to a stop. When combined with a robust Distributed Order Management (DOM) solution, orders can be routed to the appropriate DC depending on the final delivery destination.
Scalable solutions available to respond to international expansion also include the use of pop-up DCs which act as temporary facilities that can be rapidly ‘popped up’ to spread inventory across different territories – enabling brands to fulfil orders closer to the customer and in doing so – reduce the cost and time associated with last-mile delivery. Once tried and tested, these DCs can become permanent facilities to provide additional relief to a primary fulfilment centre. This concept of a micro-DC doesn’t have to be a traditional warehouse environment, it can be a storeroom in an existing brick-and-mortar store. By embracing omnichannel order-picking technology, brands can adopt a hybrid store model that is equipped to fulfil online orders using existing inventory.
Navigating cross-border complexity
Despite the opportunities on offer and the various fulfilment operation methods available to support this, the complexity surrounding the VAT reporting requirements involved in processing international orders is still causing hesitancy for brands looking to expand across Europe. Whilst for many, Brexit has become a distant memory, the VAT tax requirements for European eCommerce fulfilment continue to be extremely complicated and difficult to manage. In this instance, implementing a Merchant of Record (MoR) through a third-party logistics provider (3PL) – can be a useful solution – relieving the retailer of upcoming VAT challenges. This process works by transferring the ownership and therefore the tax responsibilities onto the MoR by allowing them to purchase the product from the retailer once the customer presses the ‘buy now’ button. This means the sale is managed through them – eliminating the need for the retailer to be VAT registered in multiple countries and removing the potential headache associated with VAT administration.
The right third-party logistics provider (3PL) should be able to support the brand as it navigates any potential barriers to reaching international customers. Whether that be within Europe or further afield in regions such as the US or Canada which require retailers to keep up with trade requirements such as Section 321 (a provision of the Trade Facilitation and Trade Enforcement Act of 2015). This allows US-bound qualified shipments, that are valued at $800 USD or less, to benefit from the duty-free entry of goods. With the right expertise and support behind them, brands can take advantage of this for a more streamlined border entry process.
Going global is certainly no mean feat, but with the right strategy, infrastructures and expert partners behind you – the opportunities are endless.