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What is cross-border EC? Benefits of expanding the market size and how to start cross-border EC

Cross Border EC
Cross Border EC

Cross-border EC is to conduct international electronic commerce with overseas customers via the Internet. It is a business made possible by the spread of the Internet, and it is popular that it is possible to expand the trade area at low cost while suppressing risks, rather than opening a branch office or branch office locally to do business. However, it has been pointed out that there are difficult aspects such as regulations and payment methods that are different from those in the domestic market, language barriers, and differences in consumption trends.

This time, for those who are considering entering the market, we will introduce the current state of the cross-border EC market, its advantages and disadvantages, and how to start cross-border EC.

 

table of contents

  • 1. What is an EC site in the first place?
  • 2. What is cross-border EC?
  • 3. Increase in cross-border EC market size
  • 4. Advantages and disadvantages of cross-border EC
  • 5. How to start cross-border EC
  • 6. The appeal of cross-border e-commerce with immeasurable strength

What is an EC site in the first place?

What is an EC site?
words meaning
EC site A word that describes a mail-order site or online shop
EC Abbreviation for “e-commerce”
E-commerce Mechanism and concept of “electronic commerce”
Commerce Business, transactions

An EC site is a common name for a website that provides e-commerce (E-Commerce) services.

An EC site is a website that sells or auctions products on the Internet by trading products and services through the website. In short, it mostly refers to mail-order sites and online shops.

In the modern age of communication technology, EC sites are becoming a common means of purchasing something. The following articles introduce in detail the functions that are indispensable for operating this EC site, how to create and operate an EC site, and security.

■ Security measures in the construction and operation of EC sites. How to prevent information leakage

 

What is cross-border EC?

Cross-border EC is international electronic commerce conducted through the Internet. Originally, it is a term that refers to all cross-border e-commerce without limiting the transaction content, but now it means building an EC site mainly for overseas customers and selling products.

The mainstream cross-border e-commerce sites are of the type “inventory overseas and operating companies overseas”, and famous sites in Japan are Alibaba (China), Wish (USA), and Amazon (USA). Amazon is an e-commerce site that can be used in Japan, but American consumers are using Amazon in the United States. Although it is possible to access Amazon in Japan from overseas, it takes time to switch languages ​​and screens, so having an EC site locally tends to increase profitability.

Many companies in Japan are working on cross-border EC, saying that “EC sales can be expected to increase.” If you are a person in charge of a company that operates an EC site for the domestic market or is considering opening an EC site, why not start cross-border EC? Below, we will explain the market size of cross-border EC, which is increasing year by year.

 

Increase in cross-border EC market size

The market size of cross-border e-commerce continues to expand, and in the first year of Rewa, it is increasing in all countries of Japan, the United States, and China. According to data released by the Ministry of Economy, Trade, and Industry, the amount of cross-border EC purchases from Japanese businesses by Chinese consumers in 2020 was 1,655.8 billion yen, up 7.9% from the previous year, and the amount of cross-border EC purchases from US businesses. Was 2,094 billion yen, an increase of 16.3% from the previous year.

Compared to Japan’s cross-border e-commerce usage scale, the United States has five times the market of Japan and China has 12 times the market.

The market size of cross-border e-commerce among the three countries of Japan, the United States, and China
Country Cross-border EC purchase amount Growth rate
Japan 317.5 billion yen 14.8%
USA 1,557 billion yen 11.8%
China 3,665.2 billion yen 12.3%

Source: Ministry of Economy, Trade and Industry ” Summary of market research results on e-commerce ”

 

● An increasing number of companies are aware of global needs

Cross-border EC is also called cross-border EC. In addition to selling Japanese products overseas as they are, we will commercialize new products that have overseas needs, and develop and sell products targeting the entire world rather than a single country. It is necessary to develop marketing and products that meet global needs as well as in Japan.

Although it seems to be difficult, the number of companies working on it in Japan is increasing, saying that “EC sales can be expected to increase”. The high quality of Japanese products is known all over the world, as you can see from the fact that “buying” Japanese products by Chinese people inbound became a hot topic. Many overseas customers are attracted to Japanese products, and many people in the world want to purchase Japanese products using cross-border EC.

Also, depending on the product, there is a possibility that the business will expand with cross-border EC. In some cases, simply moving the field overseas will have fewer rivals than doing business in Japan. Even for products that are difficult to compete in Japan, you may be able to expand your business by going overseas to the Blue Ocean.

 

Advantages and disadvantages of cross-border EC

Advantages and disadvantages of cross-border EC
merit Demerit
Reduction of initial costs, labor costs, utility costs, etc. High shipping and handling fees
In addition to Japan, where the birthrate is declining, the trade area will expand. It is difficult to use low prices as a weapon due to fluctuations in exchange rates
Easy to acquire new customers with products with rare value Regulations and laws differ depending on the country of sale

Cross-border EC is a transaction with foreigners. Therefore, some advantages and disadvantages are different from domestic commercial transactions. Let’s take a closer look below.

 

● Merit

・ Reduction of initial costs, labor costs, utility costs, etc.

Cross-border EC is based on an EC site on the Internet, so there is no need to open a store directly in the field. Therefore, fixed costs such as initial costs, labor costs, and utility costs can be reduced. It can be said that it is suitable for companies that want to reduce costs and consider expanding overseas when expanding product sales channels.

 

・ The trade area will expand in addition to Japan, where the birthrate is declining.

In Japan, the birthrate is declining and the population is aging, the population is expected to decline further, and consumption is expected to decline accordingly. Therefore, cross-border e-commerce is attracting attention as a way to expand the market at once.

 

・ It is easy for new customers to acquire products with rare value.

We can expect to acquire new customers by selling products that are unique to Japan and products that are difficult to obtain outside Japan in overseas markets. There are many customers overseas who want high-quality Japanese products, and there are business opportunities for products that have not been sold overseas.

 

● Disadvantages

・ High shipping and handling fees

Cross-border EC ships products overseas, so shipping costs are higher than in Japan. Furthermore, since the shipping fee varies greatly depending on the region, it is difficult to display the price including the shipping fee. Since the distribution situation is different, the number of days until the product arrives at the customer cannot be read.

 

・ It is difficult to use low prices as a weapon due to fluctuations in exchange rates.

Since the exchange rate is constantly changing, the price of the same product may differ depending on the time of purchase. Therefore, it can be said that a sales strategy that uses low prices as a weapon is difficult.

 

・ Regulations and laws differ depending on the country of sale

Cross-border EC will comply with the regulations and laws of each country as well as Japan, such as distribution conditions, payment methods, and site translations. For example, “PayPal” is the mainstream payment method in Europe and the United States, and in China, the online payment service “Alipay” and the credit card “UnionPay” are the mainstream. If these are not supported, it will be difficult to spread.

 

In addition, cross-border EC needs to create a site that suits the local circumstances. It is necessary to translate the product description into the local language, prepare a help page and customer support in each language, and create an EC site tailored to the local circumstances. However, even with these disadvantages in mind, cross-border e-commerce is a field that is easy to get started and has great business opportunities.

 

How to start cross-border EC

How to start cross-border EC
Method merit Demerit
Use domestic and overseas shopping malls Easy to reduce the trouble and cost of opening a store Fees are charged and the rate of return tends to below
Easy to utilize the brand power of the mall to attract customers Difficult to customize EC site
Start with your site Easy to build an EC site as you imagined Prior research on the destination is required
Profit margin tends to be high It is necessary to attract customers from scratch
Ask an external system company Easy to create an EC site without know-how on web production Site production is more costly than in-house production
Easy to install functions that meet the needs of the countries in which we are expanding Adding or refurbishing features can be costly

There are three ways to enter cross-border EC: “shopping mall”, “own site”, and “external system company”. Let’s take a closer look at each.

 

● Use domestic and overseas shopping malls

If you use a shopping mall, you do not need to develop a system or research the destination, and you can reduce the trouble and cost of opening a store. Even if you don’t know the distribution system, payment method, tax system, license, etc. of the destination, you can do the translation work automatically. If you use a shopping mall that supports cross-border e-commerce, you can easily operate an online shop in the same way as “Rakuten” and “Yahoo! Shopping”. Major shopping malls are also advantageous for attracting customers because of their brand power and the trust of customers.

However, there is a usage fee for shopping malls. Since you pay a monthly usage fee and a commission according to sales, the profit margin will be lower accordingly. In addition, since each shopping center has its own operating rules, it is difficult to customize the EC site, and the disadvantage of a low degree of freedom is conspicuous. In addition, no shopping mall covers all areas such as China, Asia, Europe, and the United States. To support the whole world, it is necessary to use several shopping malls properly, which also takes time and effort.

 

● Start on your site

You can also build your site and start cross-border EC. Creating content that brings your brand to the forefront using your domain name will lead to effective marketing. Since the company’s site does not have regulations like shopping malls, it is possible to freely create a site. The company’s site requires an initial investment to build the system, but the profit margin increases because there are no settlement fees or system usage fees.

However, to start with your site, you need to research the destination in advance. Regarding payment methods and distribution systems, it is necessary to properly investigate and respond to the circumstances, laws, and regulations unique to each country, and when laws and regulations are revised, it is required to respond promptly accordingly. In addition, your site needs to attract customers from scratch, so it will take some time before you can make a profit.

 

● Ask an external system company

Cross-border e-commerce needs to create an e-commerce site that meets the regulations and laws of each country where stores are opened, such as distribution conditions, payment methods, and site translation.

What tends to be a bottleneck here is the lack of specialized know-how in-house. Not only will it not be possible to meet the needs of users just by tracing the surface, but it will also carry various risks such as legal troubles. It is desirable to create languages ​​and payment systems according to local needs, but it will take valuable resources for market research. In cases where online telephone calls are difficult due to the time difference, it is necessary to incorporate functions that solve operational issues, such as making them chat-only.

If you start from a state where you lack the know-how, you can open a store smoothly by asking an external system company. Among the companies that are good at building EC sites, many companies can handle cross-border EC.

 

The appeal of cross-border e-commerce with immeasurable strength

The number of companies that support cross-border EC has increased, making it easier for companies to enter the market. It is best to make a comprehensive decision on whether to choose a shopping mall or your website based on the product, industry characteristics, brand power, and so on.

However, it is not recommended to change the method on the way. If you change the method on the way, the brand power, customer attraction power, and credibility that you have built will be wasted. Before you start cross-border e-commerce, think carefully and think about the method that suits your company.

If you ever want to know about similar things, check out the Facebook page Maga Techs

 

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