Go global to unlock the next level of growth for your business
Tara Daly
·May 6, 2024
If you’ve nailed your niche in your home country but feel like you’re hitting a ceiling, going cross-border can be your ticket to the next level of growth.
Expanding your brand internationally isn’t just about getting your name out there globally; it’s also about connecting with a larger audience and growing your Total Addressable Market (TAM).
And there’s no denying the proof: Juniper Research predicts that over $3.3 trillion in cross-border e-commerce transactions will be conducted in 2028, rising 107% compared to 2023. Plus, brands offering premium international shipping experience a 60% faster growth rate than brands that don’t.
That said, taking your brand international isn’t as easy as it sounds. You must have a message that resonates with that new market audience, and a strong customer experience to support it.
Navigating the Challenges of Cross-Border Expansion
- Volatile Freight Rates
- Container freight rates fluctuated dramatically between Jan 2023 and March 2024. Rates slumped to their lowest level on the 26th of October 2023, when the going rate for a 40-foot container was only 1,342 U.S. dollars. Since then, the global freight rate has gradually increased, hitting over 3,900 U.S. dollars in February 2024—the highest value on record (and a 190.6% increase in just four months!).
- Onset of New Challenges
- 55% of retailers say they find the cross-border e-commerce business environment challenging due to shipment delays, customs and compliance, added supply chain costs, delivery costs, and tariffs and duties.
What This Data Tells Us
International Shipping Adds Complexity to Backend Operations
Managing your shipping and fulfillment is already complex enough—and when you add cross-border laws, regulations, duties, and customs to that mix, it’s enough to deter many brands from wanting to expand overseas.
Plain and simple, cross-border e-commerce can easily become a logistical nightmare.
These challenges don’t just affect you; they impact your customers as well. When customers are faced with large duty fees and slow shipping times, it leads to frustration, and frustration leads to churn.
Do you really want customers to churn when you’re spending so much to acquire them in the first place?
And don’t forget about customers who initiate a return… There’s so much added complexity to reverse logistics when shipping cross-border.
For example, you’ll need to budget for staff who can process returns and handle customer support queries across all time zones you ship to.
As an added concern, these challenges are especially difficult to navigate when customers often expect international orders and returns to feel as seamless as domestic ones—and we both know this is hardly ever the case.
The problem? Many brands are still processing international returns manually. The longer it takes the item to come back, the longer it takes the customer to get a refund. This also means it takes longer for a merchant to be able to restock or resell that returned item to a new customer as well, directly cutting into their margins.
The Opportunities From Cross-Border Expansion
Despite these challenges, there are huge growth opportunities for brands that spend the time putting systems in place to manage cross-border shipping and returns.
So, why should you care? Let’s summarize:
- 57% of consumers say they’ve made an international purchase online in the past six months.
- Retailers who offer premium international shipping grow 60% faster than those who don’t.
- 28% of sales from companies engaged in international e-commerce are cross border transactions.
How to Unlock These Opportunities
Brush Up On International Laws and Restrictions
Navigating international laws and restrictions is a critical first step in expanding your brand across borders. And yes, every country has its own restrictions to be mindful of, including value-added tax and online sales tax.
Here are some examples, in case you weren’t aware:
- The United Kingdom: All online businesses must adhere to the regulations outlined in the Consumer Rights Act. Most goods and services in the United Kingdom incur a standard rate of 20% VAT tax. And the UK government is now considering a 2% sales tax on top of the digital sales tax.
- Australia: Australian Consumer Law (ACL) regulates all businesses that deal with consumers, maintaining a high level of business conduct. Online businesses must have processes in place to protect all consumer data, including personal information and credit card details. GST applies to businesses with an annual turnover of over $75,000. GST is a rate of 10% that is tacked on to the original sales price of a product.
- The United States: The Federal Trade Commission Act (FTC Act) enforces privacy laws to protect consumers from “deceptive trade practices”. There is no national sales tax rate. The state-decided sales tax rates range from 2.9% in Colorado to 7.25% in California. The USA imposes federal income tax at a rate that varies depending on your entity.
Tips to help you get started with international laws:
- Partner with the Right Experts: Collaborate with partners (i.e. Global-E, Passport, or Shopify Markets) who have a deep understanding of international regulations, customs procedures, and the nuances of global expansion. These partners can provide invaluable guidance and support, helping you navigate the complexities of cross-border commerce with confidence. In other words, with the right partners, you don’t need to become an international commerce expert.
- Leverage Shopify’s Capabilities: If you’re using Shopify as your e-commerce platform, take advantage of its built-in features to manage international sales. You can ensure compliance with international trade regulations by adding Harmonized System (HS) codes, country of origin, and weights to all your Shopify products. This information syncs over to certain 3PL and returns partners as well.
Partner With A Trusted 3PL
Partnering with a third-party logistics provider (3PL) can significantly streamline your reverse logistics, especially when it comes to international returns.
Here’s how:
- Localized Fulfillment: By outsourcing fulfillment and returns processing to a 3PL local to your international market, you reduce the need for cross-border shipping. For example, instead of shipping returns from the UK back to New York, you can have a local warehouse in the UK handle everything. This approach not only saves on shipping costs but also speeds up delivery times for your customers.
- Scalability: As your brand grows, managing fulfillment in-house can become overwhelming. Outsourcing to a 3PL allows you to scale your operations without the added complexity of creating warehouse space and hiring additional staff. This is especially important for international expansion, where logistics can become even more complicated.
- Comprehensive Services: A good 3PL can offer a range of services, from processing returns to inspecting and restocking items. They can also handle refurbishing or recycling products as needed. By partnering with a 3PL, you can access these services without having to manage them yourself, freeing up time and resources to focus on other aspects of your business.
Bonus: Combine the power of a 3PL with a returns partner
A returns partner like Loop Returns offers numerous partnerships in the logistics space, particularly with third-party logistics providers (3PLs) who handle warehousing for brands.
So, even though Loop doesn’t focus on the physical handling of returns, it does streamline the process with your 3PL partner by automatically syncing the return merchandise authorization (RMA) so the 3PL can automatically process, flag, and list all return data.
Ultimately, expediting return logistics and ensuring that the customer has their refund or exchange item more quickly, and your product is quickly shipped to the next location (donated, resold, or restock).
Easy-peasy.
Proof These Solutions Work
- Shops using Loop Workflows to reject returns saw a 1pp reduction in return rate (7.4% to 6.2%) with nearly 100k returns rejected.
- On average, Loop Merchants see a 10% reduction in time to process are return in their first year on Loop.
- In 2023, Loop identified 1,119,518 items to be kept versus returned, meaning merchants saved return shipping and manual labor costs by automatically identifying returns that can’t be restocked and aren’t worth shipping back. This saved merchants an average of $9,864 on shipping costs.
Cross Border Predictions
“More retailers and brands will expand their reach globally, leveraging cross-border e-commerce to access new markets and customer segments. In order to achieve this, they will focus on improving logistics and supply chain efficiencies to reduce shipping times and costs, making cross-border shopping more attractive to consumers.”
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