In this blog post, Flow experts take a closer look at buying a cross-border e-commerce solution compared to building it in-house.
Cross-border e-commerce is poised for explosive growth, driven in large part by a growing number of international consumers who are regularly turning to online merchants for everything from groceries and household supplies to apparel and electronics. Forrester predicts that the value of cross-border e-commerce will rise to $627 billion by 2022, accounting for a total of 20% of global e-commerce as a whole.
Given this opportunity, many direct-to-consumer brands and retailers are investing heavily in their cross-border e-commerce expansion initiatives. But when considering how to prioritize their investment, many still struggle with the question of whether or not to build cross-border tools in-house or buy an external, ready-made solution.
For brands that want to be in the driver’s seat throughout their global expansion journey, building a solution in-house may appear to be an attractive option at first. But it comes at a high cost and will require a great deal of both up-front investment and ongoing maintenance.
Building In-house: The investment of Time, Money and Resources
The most pressing issue of building in-house international e-commerce tools is the complexity of managing international transactions. For example, trying to build an engine to harmonize a large catalog of products to calculate accurate duties and taxes for each ship-to country is a huge undertaking. Without an automated tool, this requires significant financial investment into human resources and technology to execute correctly, which will require the involvement of a hefty development team to build a powerful engine to execute the task. Further, this engine needs constant updating and maintenance, given the ongoing changes in tariffs, tax rules, and regulations in global markets.
When it comes to accepting payments for online transactions, brands that take this in-house will need to invest time and resources into negotiating and managing direct contracts with each of the different payment providers and processors. This is a time-consuming endeavor. Customers in different markets are accustomed to transacting with their local payment methods and for an online brand, particularly a smaller and fast-growing one, offering multiple options and building out a vast ecosystem of payment methods can become too complex to manage.
When it comes to localization, it’s not just a matter of being able to display different currencies on the product page. Creating a fully localized experience requires brands and retailers to ensure that customers can complete the transaction in the local currency. The brand needs to display the price with proper rounding so that it matches local norms in each international market. Displaying any relevant duties and taxes and communicating accurate shipping delivery windows is very important to boosting cross-border conversion rates. Localizing and removing friction from the checkout experience presents a whole other set of challenges given the many different steps in the checkout flow.
And then, there’s the order fulfillment part of the customer journey. To take this in-house, retailers need to build and manage relationships with local and global carriers and optimize shipping options so customers have the ability to choose a fast versus cost-effective shipping method that works for their business. To onboard and manage these carrier relationships will require additional in-house support and resources. Further, even if brands are successful at cultivating relationships with multiple individual carriers worldwide, a market disruption can pose a number of challenges that introduces unforeseen barriers to work through. For example, during a global market shift, brands may need to change their shipping options in different markets to make the unit economics work. This may require changing out their carriers to maintain the speed and cost of delivery that works for their customers in each market. Being nimble and adaptive in this way when responding to market disruptions might not be possible for many brands that might try to manage cross-border shipping on their own.
The Decision To Buy The Right Solution
Buying a cross-border solution gives brands and retailers five key benefits as they expand globally:
- Stick with your core mission. By partnering with an established cross-border e-commerce platform, brands free up internal resources, allowing them to focus on what they’re good at (and what they were hired to do) and leave the heavy cross-border management and operational execution to an automated system and the outside experts that can support the effort.
- Avoid “reinventing the wheel.” As mentioned, building out the required relationships and operational execution of international shipping, in-market taxes and duties, currency exchange calculations, checkout localization, and all the other aspects of a localized experience can be a full-time job. If a cross-border partner has already done the work and has the expertise, why not leverage their knowledge instead of blazing your own path?
- Lower total cost of ownership. Brands that try to build in-house solutions are looking at creating a suite of tools from scratch that automates the process for localizing a website. Building discrete tools for these areas and staffing up to manage it all will cost many times more than one strategic investment in an existing solution that already has all these tools centralized in an easy-to-use Console.
- Reduce time-to-market. Let’s face it: staffing up, developing tools, testing, and creating new processes — these all take a lot of time, trial and error, and coordination. It can take years to properly go to market in multiple countries, depending on the business and its size. With a solution that can seamlessly integrate into a brand’s existing tech stack, including e-commerce platforms, warehouse management systems, order management systems, and other tools supporting the customer value chain, retailers can start selling cross-border within a few weeks.
- Increase the quality of the customer experience and lower the risk of a poor execution. Building an in-house cross-border e-commerce platform has the risk of creating a sub-par customer experience. Brands that neglect to localize certain parts of the site properly due to budget constraints or lack of expertise are gambling with their reputation and brand loyalty. This can result in spending time and money developing tools that localize only parts of the full e-commerce site, without seeing the conversions or sales lift you expected.
The many aspects of localization, not to mention how consumer behaviors are different and change in each market, make it extremely difficult for brands to build the tools they need for a successful execution in-house. If only a handful of variables required localization, brands might be able to successfully and cost-effectively build their own platform. But when it comes to solving all the hurdles we’ve outlined, most retailers could risk not having the time, money, or resources to do it right.
We’ve already discussed how point solutions aren’t a good fit for solving cross-border e-commerce challenges either. But if you use a comprehensive and flexible solution like Flow that can handle all aspects of localization, wouldn’t it be much more cost-effective and worthwhile to buy it, rather than to try to build all the tools and functions yourself?
Read more about some of the brands that have partnered with Flow. Our comprehensive and automated solution has a number of brands get up and running quickly with their cross-border efforts and achieve their goals for international business. Their results speak volumes.
If you’re ready to buy a solution to handle your cross-border needs, get in touch today and speak with a Flow expert.