Spreadshirt CEO on progress and challenges to global online commerce.
Back in 2017, when I first wrote on this subject, it seemed like ecommerce without borders was doomed. Populist political movements were on the rise and UK had voted to withdraw from its largest market.
Perhaps not much has changed? It’s slow progress, but the EU, WTO and Jack Ma have been working on opening up ecommerce. So is it still doomed?
Cross-border issues are challenging for ecommerce entrepreneurs. The front-end of ecommerce is where the glamour is; the cool shop fronts and enticing products.
But the back-end is the headache; customs, tariffs, contracts, IP, VAT, supply chain, lead-times. These are the issues that make the idea of ecommerce without borders so appealing to entrepreneurs.
In December 2018, Jack Ma (pictured above) made another step towards his electronic World Trade Platform (eWTP) by signing up Belgium, the first EU country to join.
In collaboration with the World Trade Organisation and the World Economic Forum, the aim is to produce a new platform, which will allow small businesses and entrepreneurs to build globalised businesses.
Over at the EU, the Digital Single Market I mentioned back in 2017, is now two legislative proposals away from completion . Its aim is to make it easier for startups and existing companies to reach a market of over 500m people. It’s believed this could contribute €415m a year to Europe’s economy.
By 2020, the ‘Single Digital Gateway’ wants to provide one entry point for online administrative procedures for citizens and businesses . Already it has helped consumers and ecommerce companies in the EU with the back-end challenges of:
• Ability to pay for goods and services anywhere (with any type of card)
• More affordable parcel delivery. According to the EU, this has the potential to increase cross-border ecommerce by more than 4% and the number of firms selling online across borders by more than 6%.
• Free flow of content and data across borders, with the necessary privacy restrictions.
• Consistent online trading practices. The EU reports that 1 million EU businesses are dependent on online platforms to reach their customers. The first-ever rules on online platforms’ trading practices plan to create a fair, transparent and predictable business environment for businesses and traders when using online platforms.
However, whilst ecommerce revenues in the EU are growing at some 14% per year , consumers are still more likely to buy from a company within their own country. Inter-country sales across the EU continue to lag behind in-country sales.
A European Parliament Think Tank reports that, in 2017, 20% of EU enterprises sold online to customers in their own country, ‘but only 9% sold online to customers in other EU countries. In 2017, 87% made domestic ecommerce purchases, but only 33% from other Member States’ .
So, perhaps surprisingly, it seems that truly international ecommerce is still finding its feet. Billy Leung, a director at brokerage Haitong explained in the Financial Times that, “penetration rates in the global ecommerce industry remain low, especially in the developing world”
For a company like Alibaba, which is established at home, international ecommerce offers space for further, sustained growth. It needs to make ecommerce properly international.
Amazon, potentially Alibaba’s biggest competitor, tried that approach too, but is finding there are challenges. It has recently announced it is retreating from domestic ecommerce operations in China in July 2019, abandoning its platform for third-party merchants .
Alibaba and Amazon, along with their ecommerce SME counterparts, may find the WTO’s deliberations will help in the long term. In January this year, the WTO launched its plans for ecommerce reform, to bring its rules up-to-date.
The aim is to agree a consensus around strengthening consumer confidence in online transactions, keeping internet access open and shielding traders from attempts to restrict data flows. Already this approach has been tempered by concerns from India about customs duties and China about data security.
So do I think ecommerce without borders is a doomed idea? I’m always optimistic. We’ve seen a huge rise in sales in the last few years, and a lot of this comes from cross-border buying. And we can’t be the only ones.
Another element helping ecommerce is the concerted effort by government and trade organisations to address the tangible, back office challenges of delivery, taxes, value and security.
Globally I don’t think ecommerce without borders is doomed in the long term. But not every country is participating to the same level or at the same speed.
It’s a shame that the UK, always an enthusiastic participant in ecommerce, is not leading the way with this trend though. Ecommerce without borders may not be doomed, but it could become more of a struggle for UK ecommerce entrepreneurs.
Philip Rooke is CEO of Spreadshirt
Is Ecommerce Without Borders Still Doomed?