Cross-Border Ecommerce: Assessing the Risks for SMBs

cross-border ecommmerce globe and boxes

According to the SBA, nearly 96% of consumers live outside the U.S., and two-thirds of the world’s purchasing power is in foreign countries. However, less than 1% of the 30 million companies in the U.S. export—opening the door for small and medium-sized businesses (SMBs) to increase revenue, reach new customers and reduce market dependency through cross-border ecommerce.

However, as you look to grow your footprint and offer international shipping, you need to be prepared for the associated complexities of cross-border ecommerce logistics. Businesses that have successful international expansion stories are often those that took the time to lay the critical groundwork, ensuring they were well prepared to handle and address emerging risks.

Common Risks in Cross-Border Shipping

A top risk with cross-border shipping is the lengthened supply chain movement. International shipments can often amplify common risks, such as the possibility of goods being lost, stolen or damaged, especially if there are multiple handoffs, long stops or holdovers where items may not be closely monitored. Cross-border ecommerce shipping also brings with it specific risks, such as delays and disruptions in the destination country. This is commonly due to the complexity of navigating both the customs process and geopolitical risks.

Before entering a new international market, you need to understand what’s necessary for successfully clearing customs, as each country may have a different set of standards, regulations and procedures. For example, many customers tell us Brazil and Russia have stricter, more complex customs processes than most other countries. Therefore, it’s important to partner with an experienced carrier that knows the ins and outs of cross-border transport for that country. Choosing the right carrier can help eliminate confusion and frustration over paperwork or tariffs during the customs process, offering peace of mind that shipments will have a better chance of smooth delivery.

Additionally, the political climate varies widely from country to country, and current events can potentially influence the supply chain. Common challenges include port shutdowns, shipping backlog, labor shortages and so on—all of which can impact the cross-border transport process. A common phrase in the industry is, “Shipments at rest are at risk.” If goods are sitting longer in transit due to delays or disruptions, they’re more at risk of loss, theft and damage. With proper shipping insurance, SMBs can help offset these risks by providing a financial backstop should these things occur in transit.

When determining which new market to enter, you can leverage a few critical resources. The World Bank provides ranking of countries based on customs complexities and ease of doing cross-border business, while the U.S. Commercial Service provides a multitude of market intelligence reports that highlight opportunities for U.S. exporters in various sectors. Specifically, their Country Commercial Guides provide details on market conditions, opportunities and regulations, which helps to identify potential complexities associated with entering a new market.

Bolstering the Cross-Border Customer Experience

After ensuring the right partners are in place to help mitigate delivery risk, it’s also important to understand potential issues that may pose challenges to providing a positive customer experience. Consumers don’t want to be slapped with extra or surprise fees after a package arrives at their door. Therefore, it’s beneficial to offer solutions that provide transparency of the total landed cost prior to purchase. This includes the product price plus international fees associated with transportation, duties and taxes.

Tracking the overall item cost from inventory to the buyer’s doorstep is not only smart but important to your reputation and bottom line as it keeps customers happy. A customer doesn’t need to know all the steps it takes to get a product to their door, but they do need to know the total cost of getting it there.

Partnerships Prove Essential

According to Statista, it’s predicted that cross-border will account for 22% of ecommerce shipments in 2022, up from 15% in 2016. Through this huge international opportunity, SMBs are looking to attract new customers, generate more revenue and reduce their reliance on the U.S. market.

However, before you begin shipping internationally, it’s important to understand the risk for each new market. Factors like supply chain volatility, geopolitical challenges, and complex customs processes need to be considered against the actual market opportunity.

To help, get the right partners in place to support your supply chain needs, and consider shipping insurance to protect in-transit goods in the event of loss, theft or damage. This type of protection can help give you the confidence to quickly reship or refund the customer in the event of a shipping mishap, thereby creating an improved customer experience.

Eduardo Lopez-Soriano is Vice President at UPS Capital