Cross-border eCommerce 101: A guide for wholesale and retail SMEs

After years of establishing your wholesale or retail SME locally, it’s time to achieve your global ambition by expanding to international markets. Of all the market entry methods, cross-border eCommerce remains the most cost-effective and accessible to Australian SMEs, while offering high business growth potential. 

Discover how to move from local dominance to international prominence, the hurdles you need to overcome, and how Airwallex can help you thrive in the digital economy.

What is cross-border eCommerce? 

Cross-border eCommerce, or international eCommerce, simply means selling products or services overseas through your own website or through a digital marketplace and online shopping sites like eBay, Shopify, and Amazon. 

Global eCommerce is critical to our economy’s growth. Our Cross-Border eCommerce Report found that over the next 6-12 months, 54% of global consumers will increase their spending and now more than ever, digital wallets are being used as the preferred payment method. 

Why is cross-border ecommerce important for wholesale and retail SMEs?

When people talk about cross-border trade, they usually imagine large, well-established enterprises that serve ‌mass markets. However, wholesale and retail SMEs have much to gain from cross-border eCommerce…

Unlock overseas revenue streams

With cross-border eCommerce, retailers and wholesalers can both access global markets and reach wider customer bases, tapping into new revenue sources.

You’ll also find that some products might fetch higher profit margins in certain markets due to different demand dynamics, perceived value, or lower competition.

Diversify risk

Expanding internationally lets you minimise the risks that come with putting all your eggs in one basket. If one market faces political instability or economic downturns, revenue streams from other countries can compensate. It also insulates you from changes in the domestic market that can negatively impact your business.

Better inventory management

Products that might move slowly in one market could be in high demand in another, which shortens inventory holding periods and reduces stock stagnation. Cross-border eCommerce also helps you extend your product lifecycle. Introducing the product to new markets or discovering a new use for the product in a new context can breathe new life into its lifecycle, even if it’s already declining in the Australian market. 

Easy setup through digital tools and platforms

Digital tools and eCommerce marketplaces have levelled the playing field, allowing SMEs to access global markets without hefty initial investments. For example, marketplaces like Amazon or Shopify let you create B2C storefronts with relative ease. Payment solutions like Airwallex simplify cross-border transactions through Global Accounts that make it easy to receive payments like a local bank account holder.

These innovations handle the complexities of operating an international business, which lets you focus on your core competencies and product offerings.  

How to get started with cross-border eCommerce

Identify and uncover opportunities in key markets

Before anything else, discover where there’s demand for your products using local market research reports, online businesses data, and interviews with your target audience. The goal is to identify which markets have a large customer base and estimate local and online sales volume. 

You’ll also want to dive deep into the following to evaluate the feasibility of entering a market:

• Competitors. Obtain the market share of your direct competitors (businesses that offer similar products) and indirect competitors (similar businesses who satisfy the same customer need). Knowing this can aid in formulating a go-to-market strategy and allocating resources effectively.

• Product availability. Understand which products are in demand, which are saturated, and which might have potential for growth in the target market.

• Consumer behaviours. Entering a new market means building trust, which can be a challenge due to geographical distance. Understanding local behaviours can help businesses bridge this gap, for example, by offering locally preferred payment methods.

Get to know the market’s legal and regulatory landscape

Before entering a new market, it’s important to understand its commerce regulations, which might include:

• Tax regulations: Each market and jurisdiction will have their own eCommerce tax laws and tax registration processes. Find out what kind of business licences you need to obtain and the tax jurisdictions that apply.

• Import duties: Each country has its own set of import regulations, tariffs and duties. Understanding these can help you price products appropriately and minimise hiccups in the shipping process.

• Product regulations: Ensure that the products you're selling have no restrictions or are fully compliant with local regulations. Some product categories may also require licences and permits.

• Data protection and privacy: ACL in Australia, GDPR in Europe, CCPA in California, and similar local laws regulate the way businesses collect, store, and use consumers’ personal data. Non-compliance can lead to significant financial penalties.

Plan your go-to-market strategy

A go-to-market (GTM) strategy is a plan for how to introduce your SME to a new market. Start building your GTM strategy with these four key pillars:

• Product-market fit. This simply means the degree to which your product satisfies a need or solves a problem in a particular market. Achieving product-market fit means you’ll have an easier time launching your product in a new market. 

• Target customer. Define your ideal customer – the people who experience the problem your business solves and are willing to pay for a solution.  

• Competitive landscape. Examine the regions or audiences your competitors own, and try to spot underserved areas. This is also a time to define your value proposition – what makes you unique from existing solutions, and what you can offer that competitors can't.  

Marketing and eCommerce channels. Knowing your target customer also means knowing where to build your digital storefront. You also want to make sure you’re advertising on the social media channels where your customer is present.

Five challenges faced by cross-border eCommerce businesses in Australia

Although the growth opportunities are significant, cross-border eCommerce also comes with unique challenges for SMEs in Australia. 

Language barriers and cultural gaps 

A good cross-border strategy requires a localised customer experience. Before entering a consumer market, consider cultural factors like family structures or religious beliefs. For B2B eCommerce, it means understanding local business etiquette.

Shipping delays and logistics considerations

Customers expect to receive their orders on time, which makes shipment delays in customs a real challenge. These delays are caused by factors like frequently changing import duties or incorrect documentation. Things like transit times and order tracking can also be difficult to manage due to multiple carrier handoffs.  

When it comes to international delivery, it helps to work with a logistics partner that specialises in cross-border eCommerce. You can send your items to a local delivery hub, and they’ll do the heavy lifting of preparing your items for export and assuming the risk of being the exporter on record. 

Complexity of handling foreign currencies

Among a variety of factors that affect cart abandonment, shoppers note that poor user experience, poor design, and limited payment methods in local currencies affect them the most. 

For SMEs, the foreign exchange risk that comes with automatically converting foreign currency into AUD may be a deterrent from offering local currencies to customers. 

Consider getting a Business Account from a fintech like Airwallex instead. Airwallex’s multi-currency account with market-leading exchange rates can help businesses accept payments with ease, as long as it can support the currencies in the markets they serve.

With Airwallex, businesses can also hold funds in their international customers’ preferred currencies, so they can avoid forced conversions and ‌fees. This also lets businesses mitigate currency risk, and gives them full control over when to convert based on favourable rates.  

Lack of localised payment methods

Customers in the USA or the UK are used to paying through card networks like Visa and Mastercard. But in regions like Southeast Asia, every country has their own preferred payment methods, such as bank-transfer apps in Malaysia or cash-on-delivery in the Philippines.  

Offering localised options can instil confidence in potential buyers and boost checkout rates. However, just 13% of APAC eCommerce players offer local payment options, likely due to the operational costs and technical complexity of integrating multiple payment modes.

Integrating local payment methods into your checkout might be easier than you think. Airwallex’s payment gateway supports over 160 global and local methods, including Alipay and Gopay in APAC, ACH direct debit in the USA, and Giropay in the EU. 

Payment delays and hidden fees

Cross-border payments can take up to five working days to clear, and many banks can’t guarantee when your payment will arrive. These prolonged wait times can disrupt your cash flow, making it harder for you to replenish your inventory or cover operational costs. Accepting cross-border payments also come with large fees due to the complexities of processing international transactions.  

A fintech solution like Airwallex’s Global Account lets businesses accept payments like a local in the USA, UK, and 10 other territories, without needing to set up a local entity or visit a local bank.

Instead, users get a local bank code and dedicated account number in their business’ name. This lets them accept payments as though they were a local business, which eliminates delays and minimises transfer fees. The funds are then funnelled into their Airwallex multi-currency account, which businesses can convert, hold, or spend as needed. 

Ready to take your big ideas to the world?

We’d love to be your financial partner! We’ve helped Aussie retail businesses like Threadheads, Poppy Lissiman, and Vinomofo expand with ease. 

Seeking a snapshot of what’s possible? Check out our customer success story with Kat the Label. 

Disclaimer: This information doesn’t take into account your objectives, financial situation, or needs. If you are a customer of Airwallex Pty Ltd (AFSL No. 487221) read the Product Disclosure Statement (PDS) for the Direct Services available here.