Opinion: The rising opportunities of cross-border trade for Hong Kong’s e-commerce merchants

The lead up to the holiday season is a good time to consider how merchants can capture cross-border opportunities and how they can capitalise on the boost to online shopping in different markets.

Even before the pandemic, global e-commerce had been steadily increasing, according to a report from Forrester Analytics. Cross-border sales represented 12% of all e-commerce in 2015 and were expected to reach 17% by 2023, worth an estimated US$736 billion.

Recent PayPal research reveals that 45% of surveyed e-commerce merchants in Hong Kong are actively looking to reach customers in new markets as part of their efforts to recapture lost business. No matter which season we are approaching, a good cross-border strategy can diversify risk, create a larger addressable customer base, and balance slow domestic sales periods.

Understand how consumers in different markets shop
Consumer insights compiled by PayPal during COVID-19 have found there were several markets around the world, such as India, the UAE, South Africa, Israel and Colombia, where consumers are more receptive to making cross-border purchases than local ones.

The reasons behind this trend vary from being an import-driven economy, to more consumer trust in foreign merchants than local ones, or simply having limited local shopping options. Although this makes these markets highly attractive for cross-border merchants, it is important to also understand common pitfalls and how to address them.paypal byline 1For example, 73% of Indian consumers shopped cross-border for lower priced goods, particularly for beauty, lifestyle, and fashion items, yet shopping basket abandonment is high due to shipping prices. Therefore the key focus for merchants looking to crack India’s online market is to be able to offer low-priced goods, with budget delivery options.

There is also a second group of large consumer markets that can also offer sizable opportunities for cross-border merchants. The UK and Germany, for example, are among some of the largest consumer markets in Europe that have experienced a boost in online shopping during the pandemic. Yet in a PayPal commissioned study, it was found that unlike India or Israel, consumers in these markets prefer to shop from local merchants over cross-border ones.

To crack these markets and achieve the best chance of success, merchants must get under the skin of how consumers in these markets shop online.

For merchants looking to crack the UK market, the main motivation for people to shop online, beyond convenience, is the ability to obtain unique products (41%); consumers were also generally less price sensitive. This may be a lifeline for merchants who have unique products or collectibles to promote as gift items during the festive season. In Germany, on the other hand, purchasing decisions are largely based on the ability to obtain fast, free shipping and returns, as well as post-purchase payments. Like in India, offering an international courier versus a national postal service could boost appeal.

Know your consumers’ payment preferences
In addition to understanding local shopping habits, it is vital to know each market’s payment preferences. The UK has a diverse payment landscape, with credit cards, debit cards, pre-paid cards, and buy-now-pay-later products popular among consumers. Yet in Mexico and Japan, consumers prefer payment upon pickup at convenience stores. Therefore, understanding consumer payment preferences and behaviours is a major step before an e-commerce business ventures into a new market.paypal byline 2Here in Asia, it will be of no surprise that consumers in Japan and South Korea tend to shop from local merchants as language is the biggest barrier for consumers. This is usually a big oversight for e-commerce merchants when it is so easy to function in language and currency translation to an online commerce site.

Ensuring you are m-commerce ready
The same rule applies to mobile-friendly sites. Having a good mobile commerce (m-commerce) strategy is critical for any cross-border merchant, especially those targeting Asia. These markets often have an overall younger demographic, and they tend to be ‘mobile first’. Today’s on-the-go Chinese people live on their mobile devices. Almost 75% of all eCommerce sales happen on a mobile device, making China the world leader in m-commerce, with US$873 billion in annual sales and 36% predicted annual growth. We also find m-commerce driving cross-border sales in India – of the one in three Indian online shoppers who purchased something abroad, 84% used a smartphone.paypal byline 3Increasing mobile penetration, along with cheap mobile-internet packages, looks set to boost both m-commerce and cross-border sales. Businesses can leverage the growth with mobile-friendly websites, mobile-only or in-app offers, and seamless payment solutions.

The opportunities are out there for e-commerce merchants who are planning ahead

The pandemic is reshaping the way consumers are shopping and paying online. The trend is creating unprecedented opportunities for businesses looking to expand beyond their local market and it is encouraging to see merchants beginning to reshape their strategy to capitalise on peak trading cycles and grow cross-border business.


This article is contributed by Tim Fu, market leader, Hong Kong, Korea and Taiwan, PayPal