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U.S. Brands Place Heavy Importance on Cross-Border E-Commerce Despite Cost Challenges
Meghan Hall
5 min read
U.S. brands have a vested interest in swapping the domestic stage for the global stage, according to new data from e-commerce firm Swap.
Seven in 10 brands surveyed said cross-border e-commerce is too large of an opportunity for them to pass up, and an additional 29 percent of brands somewhat agreed with that statement. That means nearly all U.S. brands have, in some way, considered the value of cross-border selling and the profit it can turn for them.
However, many brands acknowledged that a few key challenges prevent cross-border selling from being an easy “yes” for their teams. Nearly half of brands pointed to increased supply chain costs as a major challenge, 45 percent said delivery costs gave them pause, and 44 percent noted the expense of tariffs and duties for certain countries of interest. That same percentage of brands said they struggle with the cost of returns outside of their primary market—and given that returns are already a major expense in brands’ core markets, that challenge may feel particularly daunting.
To set up successful cross-border selling systems, brands need to evaluate their logistics and supply chain capabilities, whether owned or partnered.
David Romeo, e-commerce expert and founder of Winborne Consulting, said that finding or creating a sturdy logistics strategy can be one of the most important pieces of the puzzle when it comes to selling outside a company’s primary jurisdiction.
Setting up owned logistical infrastructure can be timely, cost exhaustive and inefficient in many cases. Romeo said by and large he advises clients to hold off on building their own warehouses until the business case for staying in another country has already been proven.
“I never advise somebody to start by building out localized warehouses, unless they already have a taste for the business that’s coming in and they know what that volume looks like. But down the road, that’s definitely what a properly localized experience is, because you can do all sorts of great things on the front end and make it look localized,” he said. “It’s about baby steps, and once you see traction from the top countries, then amplifying that.”
Romeo also noted that while end-to-end third-party partners can prove expensive, it’s possible to make a start in a new country without all the bells and whistles. In most cases, it makes sense to start in large markets like Australia, Canada, the UK and Central Europe because they offer well-defined markets and solutions.
That could be in part because so many UK and European brands already operate as cross-border entities, so logistical infrastructure can handle an influx of goods coming from the U.S.
Juan Pellerano-Rendón, chief marketing officer at Swap, said U.S. brands are finally catching up to the trend across the pond, which in turn could offer them greater profits.
“When you’re thinking about the UK and Europe, their baseline is cross-border. If you’re going to be a brand of significance [there], you have to be able to sell to multiple markets,” he said. “When you look at the U.S., there’s a pretty significant consumer base, where brands often feel comfortable leveraging the U.S. market. But they’re sharpening up and saying, we can’t just rely on this customer since they’re being a little bit more price sensitive and more fickle.”
Approaching markets with existing infrastructure may also prove easier to justify when it comes to returns—the No. 4 issue on retailers’ minds for cross-border commerce. Romeo said that at least to start off, returns might be as much if not more of a sunk cost for retailers as they are in existing markets.
“The customer expects, in most cases, to have free returns, so brands are already subsidizing this today in [their main market]. It’s even worse in the cross-border sense, because the shipping is much more expensive, and the company is usually losing a lot of the tax and duties that they don’t get back.”
Both Pellerano-Rendón and Romeo said they expect to see a rise in the use of localized return centers, which could help mitigate extreme returns costs for brands operating outside of their main country.
Though setting up shop in a new country can prove costly, Pellerano-Rendón believes some of the reasons U.S. brands have decided to invest in other markets include inflationary conditions, limited credit lines in the U.S. and an understanding that omnichannel retail has become increasingly important to consumers. Turning higher sales volume in any country could help companies recover some of the money lost to those factors.
And U.S. brands’ increased interest in cross-border commerce is reflected in the projections for cross-border sales. Shopify data shows worldwide e-commerce sales will likely reach nearly $8 trillion by 2030. For 2024, eMarketer data shows that figure is expected to stand at just over $6 billion.
The key to bridging a $2 billion gap in about five years could be in less selective cross-border expansion.
Pellerano-Rendón said that, today, many brands use hyper-localization as the key to cross-border selling; that is to say, rather than deciding to sell in every country in the European Union, for instance, a brand may start with Germany and France, then expand from there.
That approach is partly aimed at pleasing customers by adapting the site to their language, preferences and more.
The strategy may not be long for the world. Swap expects technology could make country-agnostic selling much more of a viable reality in the coming years, particularly because the cost of advertising and adapting to consumers’ native languages could decrease. While logistics services are likely to remain expensive, brands may be able to shift money that would have otherwise been allocated to creative spend.
“Through large language models, the ChatGPTs of the world, you’ll be able to localize your ads in minutes. Whereas before you might have had to work with a local agency [to] think about how to change your website, to factor the different languages, [for] currency conversion—there are tools now that you can easily implement to make yourself border agnostic,” Pellerano-Rendón told Sourcing Journal.
