The Unrealized Opportunity in Cross-Border eCommerce

The most obvious paths to growth for brands and retailers are new categories or new markets.

The biggest opportunity for most US and European brands is customers outside their home markets.  Home markets are the first to be mined for customers and, in these mature markets, each marginal customer tends to be harder to acquire.

The international opportunity is enormous: 

• The cross-border (D2C) eCommerce market is about $1T today and will grow at a 25% CAGR to about $7.9T by 2030

• 9 of the 10 fastest growing markets (and largest by % share of cross-border purchase by market share) are in Asia.

• 29% of Chinese consumers made an international eCommerce purchase in 2022. 

At Gilt, international (ex-Japan; we had a subsidiary there and we probably should not have) was 22% of the business.  At Spring it was over 50%.  In both cases a majority of that was Asia (and a majority of that majority was China).  

The Problem

In spite of the opportunity, almost everyone is doing it all wrong.  The solutions in market are about payments and logistics.  Boxes out and dollars in.  They have little regard—or control—over the digital customer experience, price parity, and managing the costs that the consumer bears. 

The approach is just checking a box, not building a business.

The result: Frustration—a large and unrealized opportunity for brands and retailers.  A terrible customer experience and a very low conversion rate.  That very low conversion rate means less marketing budget will be allocated to cross-border, and a disillusionment spiral with cross-border eCommerce takes hold.

But those customers WANT a to buy from their favorite brands or ones that they see influencers promoting, and a relationship with that brand.  In the absence of a trustworthy and fair direct channel, resellers will step in to fill that void and a gray market will emerge, meaning lost opportunity for that brand.

It’s a lose-lose all around.

The Way

Here’s the thing: 

You have to build a local product from a customer perspective; the current market solutions build a global product from a logistics perspective. 

Let’s look at the status quo from a customer perspective:

• You’re a customer from China shopping a US apparel brand website, looking for a black sweater.

• First off, without a local CDN (requiring local know-how and relationships), each page is probably going to take 20-60 seconds to load.  On every page.

• When you do finally get to the brand homepage, you are asked in (often in English) to create an account with an email address (and get 20% off your first purchase).  As a Chinese consumer, you don’t use email; you live on WeChat.  (And the brand, therefore, has no effective CRM)

• The search functionality doesn’t take Chinese characters. So you cannot search for “black sweater” and you can’t really read the filters to get there.

• When you do succeed to find black sweaters and add to cart, you are flummoxed (and even offended) by egregiously high costs that you find offensive: 

  • Duties and taxes should be 9.1%, but the brand is likely not using the proper channels for personal shopping so you are being charged 30-100% instead

  • The brand is being forced by the cross-border eCommerce solution to use a global logistics player at 2-4x the cost of more effective local companies

  • The foreign exchange rate is higher than expected because the platform (not the brand) is charging you extra there to pad their bottom line

  • And there is a good chance that local payments and wallets are not well supported

And this is the biggest market and opportunity out there.  Just a terrible experience.  

It’s hardly a wonder that this remains the biggest growth opportunity in eCommerce.