When selling products and services through cross-border EC, you will face a variety of challenges. Since the circumstances and rules are very different from those for selling in Japan, it is difficult to take appropriate measures in advance.
In addition, those who are not accustomed to doing business overseas are at risk of encountering problems at the time of launching an EC site. In this issue, we will explain the challenges faced in cross-border EC operations, how to deal with them, and the key points that are important when selling products.
By the end, you will have a preliminary understanding of the issues and measures to be taken, and you will be able to select the appropriate sales method for your company.
The market size of cross-border EC is expanding.
The size of the cross-border EC market continues to grow every year. According to the FY2020 ” e-Commerce Survey” released by the Ministry of Economy, Trade and Industry, the global cross-border EC market is estimated to be worth US$780 billion by 2019.
It is also expected to expand to US$4.82 trillion by 2026. Why is cross-border EC gaining so much momentum around the world?
There are three major factors that may contribute to this.
- Diffusion of the Internet
- Widespread use of smartphones
- Widespread use of cashless payments
With the spread of these technologies, the market for cross-border e-commerce is expanding. In addition, as the Internet and smartphone penetration rates continue to increase, there are high expectations for further market expansion.
Cross-border EC development of Japanese companies lags behind that of other countries.
Cross-border e-commerce is expanding on a global scale, but things are not that smooth for Japanese companies. According to the “Questionnaire Survey on Overseas Business Development of Japanese Companies” conducted by the Japan External Trade Organization (JETRO) in 2018, 30.3% of all companies have used EC to sell their products.
Of these, less than half (40.3%) have used cross-border EC. Furthermore, the Ministry of Economy, Trade and Industry’s 2020 ” e-Commerce Survey” revealed the respective market sizes of Japan, the U.S., and China.
|home (i.e. hometown, home country)||Cross-border EC Purchases||growth rate|
|Japan||341.6 billion yen||7.6%|
|America||1,710.8 billion yen||9.9%|
|China||4,261.7 billion yen||16.3%|
Thus, it can be said that Japan’s cross-border EC market lags far behind that of the U.S. and China, where the market size is much larger.
In order to catch up with the U.S. and China in the future, it is important to understand the issues involved in operating cross-border EC.
Five Challenges Faced in Cross-border EC Operations and How to Address Them
Achieving success in cross-border e-commerce is not easy. Here are five challenges you may face when operating your business.
In addition, we will also explain how to respond to these issues, so those who plan to operate cross-border EC in the future are encouraged to refer to this section.
Challenge 1. high language barrier
The first challenge is the high language barrier. Because cross-border EC sells products and services to foreigners, it is necessary to provide easy-to-understand descriptions for each country in which the products or services are sold.
In addition, the hurdles to entry are very high, as product registration, after-sales support, and even the creation of shipping slips are handled in other languages.
Measures｜Subcontract out the difficult parts.
If you have problems handling other languages, we recommend outsourcing the difficult parts. Using automatic translation is one way to handle this, but it does not convey the information clearly to the customer, and there is a risk that it will cause problems.
On the other hand, higher quality translations can be achieved by hiring a translation company or crowdsourcing. Proactively consider outsourcing, especially if your translation workload is large or contains a lot of specialized terminology.
Issue 2: Awareness and Attracting Customers
When selling products and services through cross-border EC, recognition and attracting customers are major issues. Not only in cross-border EC, but it is difficult to get local people to recognize you because there are so many EC sites representing that country.
Even if they succeed in temporarily gaining recognition and attracting customers, they are likely to choose not to purchase the product because they do not trust it.
A corresponding measure regarding recognition and customer attraction is the use of social networking sites. With the widespread use of smartphones, the population using social networking services continues to grow worldwide.
Since the trigger for using cross-border EC is often social networking services such as Instagram and Twitter, marketing techniques using social networking services are particularly effective for sales.
The method of using social networking to induce product purchases is known as “social commerce,” and is predicted to become an important strategy in the future.
Issue 3: Risk of damage during delivery
The third issue is the risk of damage during delivery. Because cross-border e-commerce involves shipping products overseas, the situation is very different from shipping in Japan.
In addition to the speed of delivery to customers, the risk of damage during delivery is also different from that in Japan, so care must be taken. In some cases, we may receive complaints such as “the product was full of scratches.
Response｜Select a shipping company with a good support system.
To avoid the risk of damage during shipping, it is best to choose a stable shipping company that undertakes international shipping. However, since the risk of damage during shipping is not small, choose a company that can provide support in the event of damage or loss.
We also recommend that a manual for handling complaints be prepared, given the possibility of damaged goods being delivered to customers.
Issue 4: Delays in internal organization
Even if a company starts selling products through cross-border e-commerce, its internal structure may be in adequate, and in many cases, it faces challenges in managing the e-commerce site, shipping procedures, marketing, handling complaints, and many other tasks.
Measures｜Recruit the right people for the right job.
To avoid causing delays in your internal structure, make sure you have the right people for the right job. It is not effective to fill in personnel haphazardly just because you are short-staffed.
Secure the right person for the job, such as someone skilled in website construction for e-commerce site management, or a marketer for cross-border e-commerce marketing.
Issue 5: Foreign laws and rules
Foreign laws and rules can be a challenge.Naturally, foreign countries have foreign laws, and the rules are very different from those in Japan.
If you start without knowing the laws of the corresponding country, you may run into unexpected trouble.
Countermeasures｜Thoroughly investigate beforehand.
Thoroughly research in advance against foreign laws and rules. It may take time to research, but it is more efficient than causing major problems and taking up time.
If you have a partner who is familiar with the local situation, consult with him or her on a case-by-case basis to ensure that the transaction is prudent.
Laws and rules change frequently, so you should always follow the latest developments. Keep yourself informed on an ongoing basis.
Three points to focus on in cross-border EC operations
The following three main points are considered important when operating cross-border EC.
- Choose the right sales method
- Understand the sales tax.
- Anticipate problems in advance
To ensure the success of your cross-border EC operation, please confirm the following details in advance.
Point 1: Choose the appropriate sales method.
The first point is to choose the appropriate sales method. Choosing the right sales method for your product or service will maximize your sales.
Three typical sales methods include
- Sell on your own e-commerce site
- Open a store in a domestic online mall
- Open a store in an overseas online mall
Selling on your own e-commerce site allows you to promote only your own brand and to have an ongoing relationship with customers who have purchased from you once. However, setting up your own e-commerce site requires a certain level of cost.
On the other hand, if you open a store in an existing online mall, you can start selling at a low cost. Although there are disadvantages such as not being able to introduce your own particulars and incurring fees, the ability to easily start cross-border EC is a major advantage.
After understanding the characteristics of each, choose the one that best suits your company’s budget and objectives.
Point 2: Understand the sales tax.
In starting cross-border EC, it is also necessary to understand the consumption tax. Because cross-border EC sales are to foreign customers, there is no consumption tax, which is the norm in Japan.
In addition, if the final sales destination resides overseas, the business can receive a refund for the consumption tax incurred on the purchase of goods. Since conditions must be met in order to receive this “consumption tax refund,” it is advisable to check the conditions beforehand.
For more information on consumption tax in cross-border EC, please refer to “Is no consumption tax charged for providing products in cross-border EC? The conditions for receiving a “consumption tax refund” are explained in detail in the following section.
Point 3: Anticipate problems in advance.
The third point is to anticipate problems in advance. In cross-border EC product sales and after-sales support, Japanese common sense rarely applies. Laws and rules, shipping conditions, and customer support vary greatly depending on the country you are dealing with.
Before starting cross-border EC, it is important to research past problems and failures, and anticipate problems that may occur in the future.
If you have a local partner whom you can trust, ask them to teach you the rules and common sense of their country, so that you can proceed smoothly with the transaction.
So far, we have explained the challenges faced in cross-border EC operations and how to deal with them, as well as the key points that are important in selling products.
The market for cross-border e-commerce is expanding year by year, but it is not easy to enter the cross-border e-commerce market now. Because it is different from selling products in Japan, you may face a variety of challenges.
However, cross-border EC operations have not only disadvantages, but also prospective advantages such as “starting an overseas business at low cost” and “increasing the number of products sold. We urge you to consider entering the cross-border EC market after trying the measures explained in this article.