Five Cross-Border E-Commerce Predictions for 2021

December 23, 2020

In 2020, cross-border e-commerce became a greater priority for retailers and consumers alike. E-commerce became a lifeline for consumers who couldn't leave their homes. And online shopping has been the dominant revenue source for retailers who couldn't rely on their brick-and-mortar stores. Domestic e-retailers are seeing unprecedented traffic coming to their websites from international sources. The global pandemic drove much of this, as consumers scrambled to find the goods they needed and many are not necessarily available on domestic websites. Savvy e-commerce brands recognize the growth potential from this significant shift to online shopping. It will be important for brands to continue to focus on capturing international demand, converting global traffic, and retaining these customers in the future. Below are five predictions for how we see cross-border e-commerce evolving in 2021 to do just that.

1) Market diversification will ramp up.

By offering localized customer experiences to improve international conversion, e-commerce brands are realizing they can rely less on their domestic markets in the event of global disruptions. We believe this focus on market diversification will accelerate in 2021 as more brands recognize the need for a presence across multiple global markets. Global events, as we've learned with the pandemic, are unexpected and hard to predict and can create large-scale challenges. The magnitude of this pandemic and how broadly it has impacted the world is a strong example of something that retailers had not anticipated. Cross-border e-commerce for most brands, now and in the future, is a way to expand business, accelerate growth, and mitigate risks from these unpredictable factors through market diversification.

2) Adaptive business models will be the path forward.

In grappling with the impact of the pandemic on retail, many brands had to accept the reality that businesses must be prepared to adapt quickly to massive global shifts, especially when the events causing them come out of the blue. But adapting is not always enough, though. Smart international brands will dramatically transform their operational models and become more nimble and agile when managing through a global crisis impacting their business. Many brands will work to disintermediate their supply chains and leverage technologies that automate operations in order to make better business decisions that can be actioned quickly. Retailers have often been reactive to global shifts, but they must now develop more forward-thinking strategies to better anticipate and respond to business disruptions.

3) International traffic to cross-border e-commerce websites will reach new heights.

Flow has been closely tracking domestic traffic and international traffic to a selection of the largest e-commerce sites across several markets. We've found that international traffic is outpacing domestic growth and that year over year international traffic amounts to an incrementally larger percent of total traffic. What does this mean for domestic retailers? As more shoppers continue to make cross-border purchases, the percentage of international traffic to e-commerce sites will continue to grow faster than that of domestic. This makes sense, given that there are many more shoppers in the world than in any single market. In looking at these patterns, we predict that by 2025, the amount of international traffic directed to the largest global websites will be greater than 50% of total traffic. In other words, many e-commerce brands will see over the next few years more global traffic coming to their site than domestic.  This trend will apply to smaller online retailers as well over time.    

4) E-commerce brands will invest more in A/B testing.

For many years, the e-commerce industry has discussed the importance of addressing nuances in the customer journey and delivering better personalized experiences. But not enough brands are conducting optimization testing across all the markets where they do business. In 2021, we will see more brands take a strategic approach to A/B testing, implementing a continuous testing approach to help them fine-tune their offerings in each global market. A/B testing will uncover market-specific trends and clarify which products, shipping tiers, and payments are most popular in each country. By embracing continuous optimization testing for all customer experiences, brands will find they can unlock greater insight into specific customer behaviors and preferences across markets, which in turn will boost conversion and drive sales.

5) Brands will develop nuanced global marketing budgets.

With the rise of cross-border e-commerce, retail marketers will need to be more strategic when crafting their budgets. While marketing costs vary from one country to the next, we expect to see marketing budgets proportionally distributed between all the different markets, and not simply devoted to domestic. In other words, e-commerce budgets will become global, and businesses will need to view their budgets that way as well. Customer acquisition costs (CAC) vary in different markets so brands will need to take this into account as they plan for budget distribution between markets. Furthermore, cross-border brands will start being more proactive with shifting their spend between markets depending on global events or local shifts in consumer behaviors. Therefore, by looking at the budget as a whole, rather than viewing it as domestic vs. international, brands will have more control and flexibility to apply their marketing dollars to the areas that will have the most impact to the business, rather than being locked into a static budget per market.

Brands and retailers should be prepared now for these trends in 2021. Being successful at cross-border e-commerce all starts with providing localized shopping experiences for global shoppers. Taking a hard look at your current e-commerce store and removing any friction points from the shopping, checkout, and delivery experiences will be crucial for brands who want to capitalize on all of this cross-border demand for goods. For more on how Flow's cross-border e-commerce platform can help, get in touch today.