5 challenges of selling via cross-border marketplaces
In June, the Pitney Bowes team had the opportunity to attend Alibaba’s Gateway ’17 event in Detroit, where the Chinese tech giant and Pitney Bowes partner talked about its pledge to drive more trade (cross-border ecommerce as a primary example) between the United States and China. Alibaba founder Jack Ma mentioned two avenues to growth for businesses looking to sell into China:
- U.S. businesses selling products manufactured in China or with components sourced from Chinese suppliers
- U.S. businesses selling directly to consumers in China through Alibaba’s portfolio of in-country marketplaces
That second route stood out because it acknowledges a topic that we’ve been talking about for quite some time: the massive opportunity for cross-border ecommerce through global online marketplaces.
Medium and large-sized retailers in the United States, United Kingdom and Australia typically view marketplaces with some level of trepidation—as these marketplaces could be considered competitors or niche channels (suitable for small business and private sellers).
But, in key Asian markets, marketplaces are the primary online shopping channel for consumers. In China, 85 percent of total ecommerce transactions occur on marketplaces, according to eMarketer. In India, that figure is 83 percent, and in Japan it’s 70 percent.
In terms of gross merchandise value (GMV), just three Asian companies (China’s Alibaba, India’s Myntra and Japan’s Rakuten) out-earn the top 10 U.S. online marketplaces combined, by nearly 40%. In fact, Alibaba’s properties alone outsell the top 10 U.S. marketplaces.
The overwhelming popularity of marketplaces, combined with Asian and Latin American shoppers’ growing interest in cross-border shopping (our upcoming global ecommerce survey found that 70% of online shoppers globally have purchased products cross-border, a 6% increase over last year) , makes it a table stakes-level opportunity for foreign retailers looking to enter China, India, Japan or any global market. But, as retailers who have tried a ‘DIY’ approach can attest, the process of integrating with and operating a global marketplace storefront isn’t as straightforward or easy. In our experience, there are five key challenges that retailers often face in creating a cross-border marketplace offering:
01. Establishing and Maintaining Contracts
Before you can get your marketplace storefront off the ground, you have to work on the financial, legal and contractual considerations. That requires close cooperation with foreign government offices on regulatory issues and local entity considerations, the marketplace itself to establish a storefront, as well as trading partners (local system integrators) who specialize in storefront development and operations. You’ll also have to dedicate resources and time to determine product restrictions that may differ from standard cross-border policies given the marketplace context.
02. Building an Infrastructure
Logistics processes and technology infrastructure to support your cross-border marketplace storefront must be developed and tested well ahead of launch. For those who choose to go it alone, this often means new partnerships with logistics service providers who specialize in both cross-border trade and last-mile delivery. It also typically requires custom integration development that, along with your logistics processes, needs to be tested at scale to ensure stability during peak promotional periods.
03. Ongoing Maintenance
As with domestic ecommerce operations, maintaining a storefront on an ongoing basis requires a dedicated team. To stay relevant to buyers in a foreign market, that team should specialize in not only how to position products to local consumers (by translating content and curating creative assets), but also in adapting assortments and product content to local marketplace-wide promotions and seasonal buying patterns. Retailers taking the DIY approach typically work with a trading partner to maintain the storefront, refresh the product catalog, and translate and adapt creative assets that bring your brand story to life and lead to high buyer engagement. This, then, introduces the challenge of integrating another partner into the mix—in addition to the logistics, legal, compliance, and payment partners already needed.
04. Getting the Word Out
Even the most-recognized global brands find that some level of brand awareness work is needed when entering a new market and to stay top-of-mind among consumers on an ongoing basis. That means investing in marketing and demand generation across multiple channels. For most brands, it’s therefore important to have a dedicated marketing team (or yet another partner) who understand not just the local language, but also unique cultural nuances, to develop and execute promotional plans. It’s paramount that these plans integrate with the marketplace’s own promotional calendar, membership database, and marketing channels.
05. Caring for Your Customers
Who will your marketplace customers call if they have questions about or issues with a product, shipping, or returns? In fact, in Japan, a lack of adequate and localized customer service was ranked as the top reason consumers refrain from cross-border purchases, according to eMarketer. Therefore, retailers going it alone often find it necessary to invest in a localized customer care team—or outsource this function to yet another dedicated service partner.
These challenges may be significant, but they’re not insurmountable. Our goal has been to alleviate these burdens from retailers wanting to sell via online global marketplaces—by creating a comprehensive, turnkey solution that addresses and simplifies all five of these aspects. The tremendous opportunity that awaits retailers in reaching these marketplace consumers shouldn’t have to be so difficult to realize.