Cross-border sales as an opportunity in the face of the local economic downturn
Dla biznesu Fulfillment
16 June 2023
Sales in the cross-border model are an important element of revenue diversification for Polish e-entrepreneurs. A significant challenge in such a model becomes logistics, especially the organisation of warehouse space, employment costs and handling returns. This is why, in the case of sales on foreign markets, it is worth considering outsourcing warehouse operations, exports and last mile deliveries. This will allow you to focus on acquiring new customers and further expansion into additional markets.
Diversification of sales channels
E-commerce sales recorded a weak start to 2023, despite a 1.7pc increase in February [1] . This was influenced by factors such as the post-pandemic adjustment, the war in Ukraine, as well as inflation and the limited budgets of Poles. The decline was particularly felt by entrepreneurs who sell mainly on the Polish market.
However, many of them have been developing cross-border sales in parallel for several years, allowing them to diversify revenues and minimise sales risks only in one market. However, they still face a number of logistical problems that often stop them from extensively developing overseas sales channels.
Online sales in Europe
An optimistic indicator is the fact that e-commerce in the European Union continues its upward trend ; 91% of EU citizens aged 16 - 74 actively use the internet and 75% of them have purchased goods or services online at least once in 2022.
The highest proportion of internet users buying online was recorded in the Netherlands (92%), Denmark (90%) and Ireland (89%), while the highest increases over the past 10 years were recorded in Estonia (47%), Hungary (43%), the Czech Republic and Romania (41%). By contrast, Bulgaria has the lowest rate of online shoppers with 49%. [2] .
At the same time, EU residents do not shy away from shopping outside their own country - the almost one third of online shoppers made a purchase in 2022 from a seller from another Community country [3] .
Źródło: Eurostat (2021): Percentage of individuals who purchased online in the last 3 months, https://ecommerce-europe.eu/wp-content/uploads/2022/06/CMI2022_FullVersion_LIGHT_v2.pdf
Among the most popular product categories in the cross-border trade, the following are leading the way:
- clothing
- footwear and accessories
- multimedia in physical form
- cosmetics
- sporting goods
- interior furnishings
At the same time, openness to cross-border shopping varies between member states. Among The most willing buyers in other countries of the Community are Austrians, Belgians, Irish, residents of Luxembourg, Cyprus and Malta, while the least interested are Poles and Romanians .
Źródło: Eurostat (2021): Percentage of individuals who purchaesd online in the last 3 months, https://ecommerce-europe.eu/wp-content/uploads/2022/06/CMI2022_FullVersion_LIGHT_v2.pdf
Although Poles are quite cautious about buying from foreign online shops, they are looking much more boldly at their EU neighbours as potential sales markets. According to IdoSell's data, up to 45% of the platform's customers actively sell in the cross-border model. [4] , and the largest markets in terms of value (in millions of PLN) in 2022 are:
- Germany - 380 million
- Czech Republic - 166 million
- Romania - close to 86 million
In contrast, the countries with the highest growth rates include Hungary, Ukraine and Lithuania [5] .
Cross-border - own shop or marketplace?
The low barrier to entry and ease of access to many markets means that the marketplace platforms are the tool of choice for starting cross-border sales led by Amazon. Depending on the market, Kaufland.de and Ebay (Germany), Bol.com (Benelux) or Cdiscount (France) are also very popular. In each of these cases, however, sales are associated with quite high commissions and very high competition.
Moreover, the increasingly applied productisation (the inclusion of offers from multiple retailers under one product card) means that successful sales are mainly driven by offering the lowest price. In the case of Amazon additionally bonuses offers based on Amazon logistics (FBA), which for the retailer means additional costs for storing and handling parcels in Amazon's logistics centres.
The biggest challenge of crossborder sales is to set up efficient cross-border logistics.
Building your own shop in a foreign territory, on the other hand, is a difficult and lengthy process, but it allows you to break away from the constraints imposed by the marketplace. A strategy based on its own website allows for a high degree of individuality, attracting customers with unique descriptions and multimedia, its own standards of customer service and building a specific, unique canon of values.
Challenges in cross-border sales
It is worth taking a look at what barriers Polish e-entrepreneurs face when entering the cross-border sales model. In 2022, softwarehose Strix conducted a cross-sectional study [6] to investigate the experiences of Polish online shops in this area.
The results of the survey indicate that if one already chooses to sell cross-border, one chooses to operate in several markets simultaneously (55% of respondents operate in 5-9 markets and 25% in more than 10 markets). At the same time, as many as 59% of respondents indicate that the biggest challenge of crossborder sales is to set up efficient cross-border logistics and inadequacies in this area are the biggest brake on development.
Vendors cited the cross-border model as the biggest pain points:
- high cost of handling returns (38%)
- problems with stock organisation and human resources (27%)
- high cost of overseas shipments (27%)
Problem areas also appeared among the problem areas:
- problems in the IT area
- little business knowledge of the specific market
- market uncertainty
- insufficient marketing experience in local markets
- problems in accessing specialists in a particular field/market
- long return on investment
How do you select a cross-border logistics partner?
For entrepreneurs who have not yet ventured beyond their national borders, cross-border expansion will certainly be challenging. However, it may prove to be one of the few avenues for growth during a local market downturn.
Going into foreign markets should be preceded in each case by an analysis of the potential and a realistic assessment of one's own capabilities:
- competitive assessment of the selected market - Are my products likely to sell in a given market, am I able to offer them at competitive prices while still maintaining a high margin?
- analysis of target consumers' expectations - what the sale requires in terms of customer service policy in the country (delivery times, realistic expectations regarding returns, payment methods)
- in which areas external support should be considered - a clear delineation of which areas we can take care of ourselves and which are best left to specialists
Taking into account the barriers mentioned earlier entry into foreign markets , it is worth considering entrusting the area of logistics to specialists. A professional logistics operator - especially one with knowledge and experience in the cross-border area such as InPost Fulfillment - can offer much more than just storing, packing and preparing parcels for dispatch.
The complexity of the online shop service includes, among other things:
- competence and experience in the area of deliveries to Fulfillment By Amazon centres, where not only deliveries within specific time windows are required, but also specific preparation of the products (labelling with ASIN codes), the appropriate forming and labelling of packages and pallets in the delivery, or the systematic advising of the delivery to a specific Amazon logistics centre.
- experience in the preparation of relevant documentation export for shipments outside the EU, both for individual and consolidated shipments
- wide portfolio of partners in the area of transport and warehousing services, making it possible to comprehensively handle not only deliveries to overseas customers, but also to locally manage the extremely important process of handling cross-border trade returns.
Cross-border with potential in the UK
When considering going outside the European Union with sales, it is impossible not to mention the extremely absorbent, rich and developed British market, where additional purchasing potential is created by our compatriots. According to British statistics, in 2021 there will be nearly 750,000 people born in Poland living in Britain [7] . They are not only natural customers for online shops based in Poland, but also natural ambassadors for both Polish brands and Polish retailers.
Moreover, in recent years Paczkomat® InPost has become an everyday part of the English landscape. There are already more than 5,000 of them on the Isles, so the synergy of fulfilment, transport, customs and last mile services under one logistics operator is certainly a high-value option for anyone looking to expand or extend their presence in the UK market.
Logistics outsourcing as an opportunity for growth
Cross-border sales for many e-tailers today are a necessity in the face of cooling domestic sales. Developed early enough, it will certainly be a strong base for stable and diversified revenues in the future . One way to develop such sales fairly quickly, while minimising operational and exchange rate risks, is to entrust logistics, which is indicated as difficult and demanding, to specialists. Outsourcing warehousing, export and last-mile operations will allow you to focus on what matters most: winning new customers and maintaining perfect service to existing ones.
[1] CSO data.
[4] https://ehandel.com.pl/do-jakich-krajow-sprzedawaly-polskie-e-sklepy-cross-border-w-2022-roku,2292
[5] https://ehandel.com.pl/do-jakich-krajow-sprzedawaly-polskie-e-sklepy-cross-border-w-2022-roku,2292
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