What is cross-border trade? What do you need to know about this method of product sales? Is it profitable? To find out more read the article.
Cross-border trade – table of contents:
- Cross-border trade – definition
- How to get ready for cross-border trade?
- Cross-border trade – pros and cons
- Make cross-border trade easier
- Cross-border trade – development factors
Cross-border trade – definition
What is cross-border trade? The definition of this concept was shaped over recent years. It is the sales method used by companies that offer their services in foreign markets. Cross-border trade aims to reach new groups of customers, business development, and increase profits.
Currently, this form of trade bears testimony to wealth and is the pillar of growth of the world’s largest economies. Due to the specificity of the global character cross-border trade is used more and more often in the e-commerce sector.
The sales with the use of the internet create the opportunity to reach clients that live outside the country. It is worth it to seize this opportunity, but how do reach potential, foreign clients with the offer? How to generate sales without risking high expenditures, will not bring the expected result and will be lost. The beginning of the activity in the sector of cross-border trade requires detailed planning.
In the beginning, one has to create a detailed and well-thought of strategy. The activity of the competition has to be taken into account. One should remember that local sellers know the specificity of the market better and they are more oriented to the existing sales habits.
How to get ready for cross-border trade?
Before starting the expansion in a foreign land one should create a good strategy. First and foremost one should analyze the strategy of the competition.
It has to be decided ahead, of what products can be offered abroad, how they will be priced, and what quality is required. All the strategies for marketing activity have to be preplanned and well-thought before entering the foreign market. Still, other external and internal factors influence cross-border trade and those factors have to be considered.
Cross-border trade – pros and cons
Among the buyers, there is a phenomenon of so-called home bias. Consumers prefer to buy in their local market. In the case of online shopping buyers are 16 times more eager to buy products from online stores in their own country. Those preferences are changing, and more and more buyers are happy to buy from foreign sellers, but sill most of the clients are apprehensive to buy from abroad.
The next inconvenience of cross-border trade is the time needed for the shipping of products. It poses a huge problem in the case of seasonal products that clients want to use or wear immediately (clothes, food items). The product has to be ordered ahead and the client has to wait. This only can deter many from shopping with foreign sellers.
The fact that the online store is based abroad poses other types of problems. Fearing losing the password to the internet bank account clients give up foreign shopping options and go to local stores. It is even worse when the website was not translated into the local language and clients do not understand the information about the products.
Make cross-border trade easier
Outsourcing is one of the ways companies organize their cross-border trade. It means delegating to other specialized entities some of the tasks that the company has to deal with. Such a form of cooperation is useful in the case of cross-border trade.
The delivery that is usually a challenge for cross-border trade is the most frequently and willingly outsourced activity of the company. The way that the parcel has to battle through is long and costly, hence it is better to leave the delivery to foreign carriers.
The marketplace is a special online store that gathers offers from many sellers in one place. Thanks to the existence of marketplaces clients can purchase shoes, literature, and equipment at one go.
Marketplaces drive the development of cross-border trade. The use of such platforms is the easiest way to start in the international sales market. It is always better to use a ready-made solution than to start your internet store.
Cross-border trade – development factors
Multi-seasonality is one of the development factors of cross-border trade, it means the ability to sell products all over the year. It has an important meaning in the case of optimization of stock levels, sales of outlet products, and the remaining parts of clothes collections. Multi-seasonality allows sales abroad of products that are off-season at the local market.
The independence from the local market is achieved by cross-border trade as well. Operation in many, different markets is a chance to increase the sales volume even in face of a crisis in the local market. The local market can be saturated, due to the strong competition. Companies decide to move abroad, which allows them to limit the price competition. Sometimes, foreign markets offer a niche for a product that is not popular locally.
A cross-border market lowers the risk of financial failure. If there is a problem in one of the markets, there are still other, that help to diversify the risk. In most cases moving abroad with the offer is a good step in the company’s development. Cross-border trade is demanding but promising and in most situations profitable and safe.