Global Study: Cross-Border Sales Open New Routes For Merchants

What do eCommerce and cinnamon have in common? It turns out, much more than one would think.

The spice market represented the ancient world’s first crack at globalization, and merchants sought to expand their reach by opening new trade channels called “spice routes.” Today these spices routes have become virtual, and it is the eCommerce market that allows for the movement of hot commodities of the modern day. Internet connectivity gives overseas consumers the chance to buy products from all over the world, and the growth of eCommerce increases merchants’ desire to seek new trade channels. But just as the merchants in Eastern countries struggled to trade spices before oceans were explored, present day online merchants are struggling to maximize the potential of cross-border online sales. Consumer concerns about payment securities, online fraud, and geographic proximity continue to keep this new channel stuck at bay.

Recently, Nielsen conducted a new study commissioned by PayPal, which surveyed over 6,000 online consumers across the U.S., UK, Germany, Brazil, China and Australia to find out who was buying what, and from where they were buying. The study reveals pertinent information about online purchasing activity that can help online businesses understand how to expand cross-border channels and thus increase revenue.

Potential Growth

PayPal estimated that by 2018, there would be 130 million cross-border shoppers, and about $307 billion in cross-border sales would be reached by the same period. At present the survey reveals there are an identified 94 million cross-border shoppers in the six surveyed markets, and that total spending would likely reach $105 billion at the end of 2013.

Who And Where?

The Internet made it easier for consumers to purchase products originating from other countries. People are constantly on the hunt for one-of-a-kind products that are uncommon in their home countries. British girls want to buy bathing suits from the U.S., German consumers want to buy electronics from China, and so on.

So, which markets are the most popular? The survey indicated that out of the six markets, most cross-border online shopping takes place in the U.S. (45 percent). The then followed UK (37 percent), with mainland China (26 percent), Hong Kong (25 percent), Canada (18 percent), and Germany (14 percent) rounding out the study.  

Six-out-of-10 cross-border online consumers are male and married, while seven-out-of-10 earn middle to high salaries. Most shoppers are in the 35-54 age group. However, the average age drops in Brazil and China, and the majority of shoppers in those countries are aged 25-44.

What Are They Buying?

Not surprisingly, clothing, shoes and accessories came in first with the highest volume of cross-border sales ($12.5 billion.) Other categories included health and beauty products ($7.6 billion), personal electronics ($6 billion), jewelry, gems and watches ($5.8 million) and lastly, home electronics ($5.4 billion.)

Local markets are falling short of various consumer needs for those in the U.S., Germany and China since results show that many of these consumers looked overseas to purchase their health and beauty products. Shoppers in Britain seem content with local beauty products, but opted for buying airline tickets and electronic goods in other countries because respondents said other markets were more technologically advanced.

How They Pay And What Concerns Them?

PayPal proved to be the payment of choice for the majority of consumers when making cross-border purchases, as eight-out-of-10 respondents claimed to have used the service.

Participants were asked about the online payment process and nine-out-of-10 said buyer protection online was very important. Interestingly, the majority of those who agreed were from an emerging market. Additionally, several buyers admitted that they are concerned about online fraud and identity theft, and 70 percent said concerns as the primary reasons for not buying cross-border products.

It is true that the rise of the Internet gave consumers a platform to conduct shopping from country to country, but the survey also reports that geographic proximity is still influential. For example, the majority of Germans are buying from European neighbors, and Chinese consumers are mostly buying from Japan and Hong Kong.

This behavior further indicates that consumers continue to be concerned about purchase protection, and feel uneasy about products coming from parts of the world where they cannot meet sellers. Merchants must continue to explore secure payment options and target overseas markets before they can expect positive responses in cross-border sales and revenue.

To read the full report at PayPal click here.