The size of the cross-border EC market continues to grow worldwide. The growth potential is so great that this strategy represents an opportunity to take a major step toward globalization.

This article details the size of the cross-border EC market and the reasons why the market is expanding.

Cross-border EC market size to reach 541 trillion yen by 2027

 

Source: International Economic Survey Project for Building an Integrated Domestic and Foreign Economic Growth Strategy for Fiscal Year 2022 (Market Survey on Electronic Commerce)

According to the ” International Economic Research Project for Building an Integrated Domestic and Foreign Economic Growth Strategy for Fiscal Year 2022 (Market Research on Electronic Commerce)” published by the Ministry of Economy, Trade and Industry, the global cross-border EC market is expected to grow to approximately 541 trillion yen (US$4.856 trillion) in 2027. According to the “Global Cross-border EC Market Survey (e-commerce market research),” the global cross-border EC market is expected to grow to approximately ¥541 trillion (US$4.856 trillion) by 2027.

Source: FY 2020 Industrial Economics Research Commissioned Project (Market Research on Electronic Commerce)

Looking from Japan to the rest of the world regarding market size, we see that China and the U.S. have very large EC market sizes.

The above figures are EC market sizes by country as published by the Ministry of Economy, Trade and Industry’s ” FY2020 Industrial Economy Research Commission Project (Market Research on Electronic Commerce).

The size of the Chinese market is particularly large, with a nearly three-fold difference between China (No. 1) and the U.S. (No. 2). Compared to Japan, the Chinese EC market is more than 14 times larger. With cross-border EC, it is possible to target the large markets of these countries.

Cross-border EC market size among Japan, the U.S., and China

Here we will introduce the scale of the cross-border EC market among the three countries: Japan, the U.S., and China. According to the “Cross-border EC Market Size among Japan, the U.S., and China” published by the Ministry of Economy, Trade and Industry, the scale of the cross-border EC market among these countries is shown in the figure below.

Source: FY 2020 Industrial Economics Research Commissioned Project (Market Research on Electronic Commerce)

First, let’s look at Japan’s cross-border BtoC-EC (U.S. and China). The total market size was 341.6 billion yen, with the market size via the U.S. at 307.6 billion yen and the market size via China at 34 billion yen.

Next, the total market size of the U.S. cross-border BtoC-EC (Japan and China) is 1,710.8 billion yen, with 972.7 billion yen via Japan and 738.2 billion yen via China.

The largest market is China’s cross-border BtoC-EC (Japan/US), with a total market size of 4,261.7 billion yen. Of this, the market size via Japan was 1,949.9 billion yen, and the market size via the U.S. was 2,311.9 billion yen.

As can be seen from the year-on-year comparisons in parentheses, the size of the cross-border EC market is increasing in all countries, whether in Japan, the U.S., or China.Among these, the amount of money purchased by Chinese consumers from Japanese businesses through cross-border EC has grown significantly, at 17.8% over the previous year.

Cross-border EC is outpacing inbound

Statistics from the Ministry of Economy, Trade and Industry show that cross-border EC is a larger market than inbound as of 2014.

The value of inbound purchases by Chinese in 2014 was 402 billion yen. On the other hand, the value of goods purchased by Chinese from Japan via cross-border EC was 606.4 billion yen, indicating that cross-border EC has been highly popular for several years.

In China, a new system of “electric commerce” came into effect in January 2019, and individual buyers selling unlicensed goods were strictly controlled, which may also have affected the expansion of the cross-border EC market size.

Also in the EU, the EPA (Japan-EU Economic Partnership Agreement) has eliminated tariffs on sake. This is expected to further expand the market.

Background of Cross-border EC Market Expansion

Let’s take a closer look at the background to the expansion of the cross-border EC market. Knowing more about the reasons for the market’s significant growth will help you plan when introducing cross-border EC.

Diffusion of the Internet

The first thing that can be mentioned is the internet infrastructure. The global Internet penetration rate has been increasing year after year, reaching 57% in 2019, 10% higher than the previous year. (Japan’s Internet penetration rate is 94%.) Particularly large increases have been seen in the ASEAN region and emerging African countries.

Another influence may be the widespread use of smartphones, which have made it easier for people to shop whenever and wherever they want.

In China, it is estimated that approximately 80% of orders on the famous Chinese e-commerce mall Jingdong (JD.com) in 2016 came from mobile devices, and we can expect to see similar trends in other e-commerce malls and e-commerce sites.

Cost and labor can be reduced

Even if you want to expand new sales channels or acquire new customers, opening a physical store overseas requires labor costs for local staff, rent, and the hassle and expense of applying to open a store. On the other hand, in the case of cross-border e-commerce, you can acquire overseas customers online without having a physical store.

In addition to building your own cross-border e-commerce site system, there are other methods such as opening and selling items in overseas malls or going through an agent, so you can start with a low initial cost using a method that suits your business.

If you are thinking of expanding your business overseas, you may want to introduce cross-border e-commerce first, see how it goes, and then plan to prepare for a physical store.

Can expand the trade area

It is believed that consumption in Japan will decline in the future. In addition, companies that are already widely known in Japan will need to take different measures to attract new customers.

With cross-border e-commerce, they can also expect to attract new customers by appealing to consumers who are not yet familiar with their products and services.There are many countries in the world where Japanese products are not readily available and where there are many potential customers.

The ability to develop overseas markets via the Internet while in Japan is a major attraction of cross-border EC.

Trust in Japanese and other countries’ products

In China, economic growth has led to an increase in the number of wealthy people. However, even when shopping, fake and inferior products are rampant in China, and satisfaction with the country’s own products tends to be low. This is why we turned our attention to products from overseas.

Japanese products are recognized for their high quality as “Made in Japan” and are trusted worldwide.The growing number of consumers seeking reliable items and quality products is another reason for the increase in cross-border e-commerce spending.

The “Bakuhai” phenomenon, in which inbound Chinese tourists who came to Japan to see the sights bought numerous products, has become a hot topic. However, inbound demand has now plummeted due to the impact of the new coronavirus infection (COVID-19). This demand has slid into cross-border e-commerce.

Source: FY 2008 Infrastructure Development for a Data-Driven Society in Japan (Market Survey on Electronic Commerce)

The above pie chart shows the number of Chinese consumers who have purchased Japanese goods through cross-border EC, based on the ” FY 2008 Infrastructure Development for a Data-driven Society in Japan (Market Survey on Electronic Commerce) ” published by the Ministry of Economy, Trade and Industry. Imported goods from Japan are highly popular with over 65% of Chinese consumers.

Source: FY 2008 Infrastructure Development for a Data-Driven Society in Japan (Market Survey on Electronic Commerce)

The survey also found that Chinese consumers place the highest priority on “quality,” followed by “brand” and “safety” when purchasing products from Japan via cross-border EC.

As price competition and differentiation from similar products intensifies in Japan, what is sought in cross-border e-commerce is more than price; it is the solid quality and safety of products and services, and whether the brand is attractive or not.

Repeat purchase

The number of foreigners visiting Japan for tourism has been increasing every year, from 19.7 million in 2015 to 31.9 million in 2018, a 62% increase. And nearly 90% of these inbound tourists were from Asia.

There was strong interest in products sold in Japan, and many visited Japan for the purpose of shopping.Inbound sales were greatly reduced by Corona, but on the other hand, repeat purchases through cross-border EC increased.

When they travel to Japan, they actually pick up and experience the products and think, “This is good. I want to keep using it again,” fans are increasingly searching the Internet and purchasing products through cross-border e-commerce.

summary

The cross-border EC market is expanding every year and is expected to grow to approximately ¥541 trillion (US$4,856.1 billion) by 2027.

EC is becoming increasingly popular and in demand both in Japan and around the world. Cross-border EC, which allows companies to develop their products and services in various countries and regions without having a base of operations, is being used by retailers and manufacturers in particular.

Cross-border e-commerce is a strategy that not only reduces labor and costs, but also allows you to communicate the appeal of your products and services to a large overseas market, develop new sales channels, and acquire new customers.

The ability to “compete on the basis of added value” such as product and brand history, development stories, and “Made in Japan” is another characteristic and major attraction of cross-border EC. However, there is also the difficulty of overcoming the hurdle of national borders. Careful preparation should be made when introducing cross-border EC so that you can respond flexibly to each country’s language, laws, regulations, cultural differences, etc.