Three Emerging Trends in Cross-Border E-commerce That Define the Future of Retail

July 1, 2019

E-commerce has been evolving at such a rapid pace, it may be challenging to know what comes next. How will consumers’ preferences change one year from now or even five years from now? In light of recent global events and market disruptions, what continued shifts can we expect? The ability to predict the future of e-commerce becomes even more difficult for cross-border merchants. It’s hard enough to prepare for the future in one market that brands are already familiar with. What about multiple countries where each consumer market has varying needs and expectations?

Based on Flow's past research and interaction with cross-border merchants and consumers, here are three trends we're following closely.

1. E-commerce categories will become even more specialized.

There’s been a rise in Digitally Native Vertical Brands (DNVBs) over the past 10 years. A DNVB is a direct-to-consumer micro-brand that was born on the internet and is often selling in a single product category that is hyper-focused on the digital customer experience. These brands usually control their own distribution, so they govern their products sourced directly from a manufacturer and sold directly to the end-user. This control allows for higher profit margins which can translate into higher marketing budgets for these brands. As a result of their digital focus and disintermediation of supply chains and distribution models, DNVBs are able to grow quickly.

There are several reasons for DNVBs’ impact on e-commerce. First, they are removing the “middle man” in the supply chain of traditional systems and doing direct-sourcing. This allows them to quickly innovate on product design and to develop what customers want in near real-time. DNVBs are influencing how e-commerce works as a whole – on both an international and a local level. These brands are setting the standard for loyalty with customers by providing extremely personalized customer experiences. This level of personalization is something customers are beginning to expect from all brands more and more.

These brands are showing strong performance in niche markets within categories like ready-to-wear, athleisure, performance wear, and others. One example is the increasingly popular sustainable clothing market. Outerknown – a sustainable, planet-friendly men’s and women’s lifestyle clothing brand – is one such example. The brand’s mission to empower their workers, protect the Earth, and inspire change within the apparel industry resulted in successful sales. But even DNVBs like Outerknown have cross border e-commerce challenges

Another part of the reason why DNVBs will remain influential is that they have successfully targeted millennials and will remain popular with that generation of buyers. Millennials care about the transparency of brands, and that is a quality DNVBs have embraced. Successful DNVBs have shared their operations with consumers from where materials are sourced to how profits are spent. We expect this trend to continue well into the rise of Generation Z when they develop strong buying power as well.

2. Social commerce will increase globally.

The rise in social media usage has already affected cross border e-commerce retailers. With the ability to purchase products through social media, the world of e-commerce has already been turned on its head. We've seen the Chinese e-commerce market shifting as a result of payment solutions used through social media apps like WeChat. Emerging e-commerce powerhouses in Latin America are being fueled by social media's influence as well along with a rise in young consumers.

We're seeing a perfect storm of celebrity influencers combined with the reach of social media driving demand for instant and fast fashion. Product reviews via social media are growing as one of the most important methods through which e-commerce brands gain trust with consumers. Research from Nielsen shows that 73% of online respondents use reviews to make purchase decisions. If reviews are not available, Fan & Fuel says 92% of consumers will hesitate to make a purchase. Social media is a natural breeding ground for reviews because customers can comment on product photos and don't have to look far for opinions they value.

Many brands have also been successful in using social media to develop devoted customer bases. DNVBs are especially known for their prowess in the social media realm in developing huge followings of global consumers. With an increase in the number of followers, a brand can hold a global audience captive and interact with them to cultivate that coveted personalized experience. We predict that – to compete – e-commerce merchants entering new global markets will need a social selling strategy that takes into consideration each market's local preferences.

3. Cross border e-commerce platforms will create more global competitors.

As more direct-to-consumer e-commerce retailers reach their domestic market potential, the need to expand into global markets will become even more vital to their continued growth. E-commerce platforms are transforming the way domestic brands reach new global markets. These platforms allow international consumers to purchase products easily and cheaply, as if they are shopping from an in-country online store. A leading cross-border e-commerce platform can provide a turn-key solution to manage all aspects of the international customer experience, such as multi-currency pricing, multiple local payment options, direct international shipping, international payment options, well-defined taxes and duties, catalog targeting by market, localized checkout, and simple returns.

Many businesses are taking advantage of the growing global opportunity to reach new markets. While global expansion will mean competing with more businesses in other countries, if brands do not explore global expansion they risk falling behind their domestic competitors that are also looking to expand globally. Cross-border technology enables e-commerce retailers to market, sell and ship goods to customers in other countries, simplifying the process of international e-commerce. The internet has simplified the process of going global, and with social media's help, brands can see massive, unprecedented growth. E-commerce retailers are watching this success and exploring it, and as cross-border e-commerce platforms evolve, this market will only continue to grow.

Part of what will make going global so accessible and successful will be the wider availability of turn-key, out-of-the-box technologies that come onto the market to help manage the processes in selling internationally. More brands will be able to launch internationally from the get-go and begin to compete immediately on the global stage. Leveraging technology evens the playing fields for smaller brands, enabling them to launch into global markets to compete for global market share.

Regardless of what the next version of e-commerce retail looks like, brands and retailers must continue to focus on creating memorable, authentic customer experiences. Building strong relationships with customers, no matter where they live and how they like to shop remains a top priority and primary goal. Brands that don't prioritize this risk becoming commoditized on marketplaces where price is a key factor and merchants have little to no control over the look and feel of their brand, their packaging, and their product listings. Now and in the future, brands and retailers will need to invest heavily in connecting directly with customers to build trust and loyalty and drive repeat purchases.

If your e-commerce brand is considering taking the next step and going global, download our International E-commerce Kit today or contact us to learn more.