by Editorial Team
November 12, 2015

Many online retailers are reaping the rewards of cross-border expansion. Thereby they should look to the neighbouring countries

It has become very simple to set up an online shop for a domestic market – just a few steps are necessary for a shop to be opened, complete with a the necessary selection of payment options. However, if online merchants wish to expand abroad, they are confronted with considerable challenges: language barriers, different buying habits and unfamiliar payment preferences.

Opportunities for online retailers better than ever before

Online traders shouldn’t be afraid to make a foray into international markets, because the potential offered by e-commerce is huge: never before have the opportunities for online retailers to generate sales abroad been as great as they are right now. The e-commerce market is booming, with successful international online merchants registering sales worth billions. According to predictions by OC&C Strategy Consultants and Google, online trading volume from cross-border transactions from six of the biggest e-commerce markets in the world – including Germany – is set to increase fivefold by 2020.

According to a recent study by Research and Markets, Asia and the USA are the dominant global powers in the cross-border e-commerce market, with experts predicting that the Asia-Pacific region will account for around 40% of global internet retail in the coming years. However, Europe is also a hive of activity. Trade between EU members has intensified quite significantly over the past few years.

Cross-border e-commerce favours neighbouring countries

This is a good sign for both merchants and consumers: customers benefit from an ever greater choice of products and are better able to compare prices. Online merchants increase their growth potential as a result of cross-border e-commerce. However, providers may want to keep in mind that initially expanding into neighbouring countries offers the greatest potential, before looking to expand worldwide.

But why? Because the hurdles between a business and its neighbouring countries are comparatively easy to clear. Potential customers may speak a similar language and might even share a currency, while transport routes and freight costs are easy to calculate. If a trader were to expand into Asia or America, currency exchange rates and shipping costs would come into play. Unless, of course, traders sell digital goods, as these do not require transport and the costs involved.

SEPA gives impetus to cross-border e-commerce

The European Union is working towards establishing new standards that will simplify online trade within Europe’s borders. The introduction of SEPA in January 2014 is just one example. This has reduced the complexity of cashless payment transactions within the Eurozone.

Standardised solutions such as these are important as they help in removing barriers to cross-border trade. The many cultural differences which remain within Europe extend to preferred payment methods.

Standardisation is also required when it comes to the development of alternative payment methods. Acceptance in society is becoming ever higher, with the variety of alternative payment options growing at the same time. With this in mind, it is important that banks in Europe and around the world work to establish uniform alternative payment processes and standards on the market. If every bank comes up with its own solution, there is a danger that consumers will lose track.

Create trust, increase sales

Of course, it takes time to establish new initiatives, such as SEPA, which are aimed at benefiting many different countries. It is therefore all the more important to launch further initiatives. Trust is absolutely essential for cross-border e-commerce: if customers feel well looked after by an online shop, with payment methods they recognise, they are more likely to shop there again. Consequently, customers are less likely to just abandon their purchase. Payment providers like Wirecard support online merchants in successfully overcoming this challenge. Wirecard is able to process cross-market payments as it holds a German bank license.