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Cross-Border eCommerce: Why It's Hot and How to Win in Southeast Asia

With eCommerce sales in Asia Pacific seen nearly doubling by 2025 – the highest retail growth rate of any region – the stage is set for brands to start going beyond their local shores to tap into a buzzy US$2 trillion marketplace.

That the international market is the next frontier is a given. And yet, the tailwinds for Southeast Asian brands to venture out have never been stronger: internet connectivity is at an all-time high and rising exponentially alongside cross-border eCommerce traffic, even as online sales channels and the range of digitally-tradeable products grow in strength and number.

In spite of the damage caused by the COVID-19 pandemic, Southeast Asia’s internet economy remains on track to surpass US$300 billion by 2025, according to the SEA e-Conomy report by Google, Temasek, and Bain & Co.

The impact of all that growth is already showing up in the top-lines of online retailers. A DHL report said merchants boosted sales by 10% to 15% via international customers, which means those staying on the sidelines are missing out on a relatively easy-to-capture opportunity.

Meanwhile, the PayPal Cross-Border Consumer Research report noted minimal differences (except Japan) between the percentage of consumers shopping exclusively for domestic products and consumers shopping for both domestic and cross-border products. For Asia Pacific, 40% of shoppers are likely to shop for cross-border and domestic products.

PayPal cross border shopping
Source: PayPal

But given its origins as a digital-native product, the cross-border eCommerce shopfront of today bears little resemblance to the export-import trading shop of old.

That means brands and marketers wanting to make it work will have to take heed of both the opportunities as well as pitfalls unique to this sales channel. In the following sections, ADA’s eCommerce Enablement experts provide a framework for succeeding in the challenging but lucrative cross-border eCommerce sector.

Poised for Growth

Southeast Asia especially is setting up to be rich hunting grounds for SMEs and retailers hoping to launch brands for the cross-border market. A report from Mordor Intelligence said cross-border eCommerce already accounted for over 40% of total eCommerce sales in the region.

Lazada and Shopee are two big reasons for this phenomenon. Their platforms facilitate cross-border sales in Southeast Asia as both cover the six major regions – Singapore, Malaysia, Thailand, Philippines, Vietnam, and Indonesia. Each of these countries in turn shows huge potential for growth in eCommerce.

Luxasia  key growth drivers eCommerce
Source: Luxasia

Collectively, the region is reaping the rewards of a large, increasingly urban, and young working-age population eager to keep up with the latest trends they see on TikTok or Instagram by buying foreign goods.

Indonesia, unsurprisingly, will be the biggest market with GMV touching U$82 billion by 2025. Vietnam is seen leaping from US$400 million to a mammoth US$23 billion. Thailand is predicted to hit US$18 billion, and the Philippines US$12 billion. In Singapore, 55% of all online transactions is expected to come from cross-border orders.

SEA eCommerce GMV
Source: The Asean Post

Above all, the positive response from shoppers to cross-border sales comes down to a single factor: product availability.

By offering foreign products from more mature eCommerce markets like Japan and South Korea, merchants give Southeast Asian shoppers access to coveted goods that are unavailable in their home markets.

Lower Operational Cost

Whilst demand continues to grow for cross-border eCommerce in Southeast Asia, the market still lags behind regions such as China and the Middle East, where 70% of shoppers are likely to shop for cross-border products.

What makes Southeast Asia attractive to merchants, however, are the low set-up and operational costs.

Vis-a-vis more developed markets such as China, Japan, and the US, eCommerce is still a nascent industry in Southeast Asia. Furthermore, competition is minimal and fees are significantly lower.

Take the price of entry to popular eCommerce marketplaces as an example. Lazada’s sales commission is around 1% to 4% and transaction fees typically range from 1% to 2%. Shopee claims to charge commissions of 1% to 2% and transaction fees of around 1.5%. Outside of the big two, there are local marketplaces such as Tiki and Sendo in Vietnam, Bukalapak and Tokopedia in Indonesia, and Qoo10 in Singapore.

For brands looking to enter new overseas markets that combine strong potential for growth, low competition, and affordable fees, the Southeast Asian market should be their first port of call.

Beware of Local Competition

Nonetheless, each new market presents unique challenges due to the local context and market situation. It’s crucial for brands to identify, assess, and respond to these challenges before taking the plunge into cross-border eCommerce.

Local competition can be a high barrier to entry and can make it difficult for international brands to build momentum.

Likewise, the logistics and cost hurdles vary from country to country. Each market has its own tax regulations and customs procedures which may cause high variability in service levels – and ultimately pricing.

As eCommerce shoppers are known to be price-sensitive, cost will be one of the most important considerations for any cross-border business model. Brands need to spend time researching, strategising, and working out their return on investment before launching a store, product or campaign.

Scalability, along with the lack of digital infrastructure and automation, present additional issues. In Southeast Asia, many business processes are still conducted manually and involve human intervention.

Source: Luxasia

Meanwhile, last-mile fulfilment is particularly challenging in rural areas. In island nations such as the Philippines and Indonesia, only 50% of the population lives in cities, thereby incurring additional costs for shipping and fulfilment to remote regions.

Finally, payment methods across the region vary widely. While payment options such ATM transfer, credit and debit card payments, and over-the-counter are typically available in most countries, the bulk of shoppers still default to cash-on-delivery likely due to factors including weak digital payments infrastructure and high cash use. Secure payments are also far from uniform.


When in Rome

To create smooth customer journeys in a cross-border eCommerce setting, businesses need to take a customised approach and make sure they are aligned with the preferences of the local market.

Language should be the first consideration. Brands can minimise the language barrier through a mix of human and machine translation.

Cultural sensitivity and awareness are of equal importance. Some activities may be inappropriate in the local context, and ignorance towards using the proper cultural translations, especially during big and highly visible campaigns, can lead to unwanted consequences.

But localisation is hard work. It involves redesigning online assets and reassessing campaigns and marketing activities, and often rethinking the customer journey itself. This is why brands should outsource their cross-border sales to a local partner that can enable their eCommerce operations with end-to-end services.

Paradigm Shift 

The growth of cross-border eCommerce in Southeast Asia is a mega-trend brands can look forward to for many years to come.

While technology and infrastructure no doubt play a vital factor in making cross-border sales more efficient, they are not enough. A paradigm shift in mindset, conceptualising, and execution are the backbone of a successful cross-border eCommerce operation.

To thrive in the hyper-competitive international eCommerce arena, it helps to work with a partner that built its business on blazing the path of eCommerce brands large and small.

The ADA Difference​​

Managing every facet of your online sales can be daunting. Businesses constantly need to drive traffic, communicate with customers, optimise conversions, create engaging content, and so on. At ADA, our unique end-to-end eCommerce Enablement practice becomes a partner to your brand at every level of the online sales journey from awareness to loyalty.

If you want to learn more about our integrated eCommerce solutions, then reach out to our eCommerce Enablers here