2017 has seen a reinvigoration of the worldwide ecommerce market, with the cross-border market developing faster than domestic online retail. In fact, the compound annual growth rate predicted for cross-border ecommerce for 2017 to 2022 now stands at 17%, higher than the 12% growth rate for ecommerce overall. Below are some of the most interesting trends and shifts that are driving the market.
1. ONLINE MARKETPLACES DOMINATE THE INTERNATIONAL SCENE
In 2017, online marketplaces have continued their rapid growth worldwide. By 2020, 39% of the world’s entire ecommerce market will be controlled by marketplaces, while, already, 53% of cross-border sellers in the US use online marketplaces. In China, Alibaba Group, the Asian ecommerce giant whose portfolio of websites includes the marketplaces Alibaba.com, Taobao and AliExpress, became Asia’s most valuable company and by August its market cap had reached USD442 billion.
By subverting the traditional retailer consumer relationship and acting as a link between the buyer and the seller, online marketplaces have created a level of security and usability for all involved parties that would be very difficult to establish otherwise. For emerging merchants looking to move cross-border, an established marketplace offers all the tools they need.
In 2018, marketplace operators will be heavily affected by the revised Payment Services Directive (PSD2), which obliges any operator that, at any stage in a transaction, is handling another party’s money to be licensed as a payment institution, with all that it entails from a financial, regulatory and operational angle. The quicker and more cost-effective option for dealing with PSD2 is to outsource control of some or all of your funds to a licensed payment, such as Acapture – already compliant with PSD2. This way, marketplaces will not need to make huge system changes to continue operating as normal. For those interested, here are some easy-to-read reports on the implications of PSD2.
2. CONSUMER TECHNOLOGIES DRIVING GROWTH OF ECOMMERCE
While consumer technology is making the buyer more accessible to the merchant, it is also making the buyer more demanding, with a greater expectation for personalized shopping experiences and flawless logistics. To deliver such services, the big brands are utilizing the most popular technology trends, of which these five are the most prominent: data science, AI and machine learning, virtual reality, blockchain and the Internet of Things (IoT).
By the end of 2016, the worldwide data market was worth USD23.8 billion. By the end of 2017, it will have nearly doubled to USD43.3 billion. Driving this growth is a need for businesses to better understand their buyers in order to better personalize shopping experiences and better optimize their service. For cross-border merchants, the ability to track the behavior of international buyers is invaluable when crafting an expansion strategy. It will, however, be crucial that all efforts in this area are made in line with GDPR from next May onwards.
Artificial Intelligence and Machine Learning
AI and machine learning bridge the gap between collecting data and putting it to use in the real world. With high quality AI software, merchants can truly personalize the customer experience with bespoke suggestions based on previous shopping behavior and deliver smart messages, tips and insights at the right time. Over the next three years, the AI industry will reach a valuation of USD70 billion.
With 171 million active users worldwide, VR is becoming increasingly attractive to merchants looking to give their consumers a unique, immersive shopping experience. While omnichannel retail has traditionally meant a combination of in-store, mobile and online shopping, VR shopping represents an evolution of the concept, adding a new, compelling channel to the mix.
Valued at USD210 million at the end of 2016, the blockchain market is expected to soar over the coming years and hit a valuation of USD2.3 billion by 2021. The key effect blockchain’s popularity will have on ecommerce is how simple it makes international online payments. Currently, the cost of cross-border remittance is between 5% and 20%. With blockchain, this cost is reduced to just 2% or 3%, while also guaranteeing the real time payment. Don’t miss my latest piece on cryptocurrencies and blockchain.
The Internet of Things (IoT)
In 2017, it is simply impossible to separate ecommerce from IoT. 82% of worldwide enterprises express an interest in IoT, with 23% using an IoT solution of some kind and a further 29% planning to implement one in the near-future. From energy efficiency to quicker time to market, cleaner inventory management and improved productivity, the potential benefits of IoT to international ecommerce merchants are nearly endless.
3. THE TRANSFORMATION OF THE PAYMENT SERVICE PROVIDERS (PSPs)
To go beyond the initial role of a PSP to facilitate a transaction, a retailer’s PSP can offer crucial assistance in three areas. This support will not only enable the retailer to grow its business, but also propel the PSP on the much-desired position of a trusted advisor.
Leveraging payment data for a new level of consumer insight
In the omnichannel era, retailers have an ever-increasing amount of payment data streaming back to them from various sources – in-store, online, mobile and social. This massive volume of information is one of the modern merchant’s most valuable assets to optimize their business. And yet, properly leveraging payment data requires expertise and a lot of time. The forward-thinking PSPs put data at the heart of their solutions for never-before-possible insights that enhance the customer experience and maximize revenue. For instance, at Acapture, we specialize in tailoring the checkout process to the merchant’s specific industry. This way, we can ensure merchants accrue as much potentially valuable data as possible without spamming the target audience.
Higher authorization rates
Transactions are often rejected when one of the banks involved demands stringent security standards that are not being met. For example, they might block payments coming from banks registered in certain countries or use particularly tight security checks. So, even though the consumer is totally honest, the payment never reaches the retailer. Using data science, we can increase the chances of every legitimate transaction being authorized, leading to better authorization rates and higher revenues.
Locking out fraud
When it comes to fraud, PSPs perform a delicate balancing act. Their platform must be secure enough to keep the fraudsters at bay while being flexible enough to accept as many legitimate transactions as possible. In the past, PSPs have been overly cautious. For example, they have blocked the IP address of entire countries where fraud is prominent, cutting out millions of potential genuine customers in order to stay protected. Through intensive data mining we can reduce the chances of false positives.
For more facts & figures on the global development of ecommerce, get your free copy of the 2017 Key Business Drivers and Opportunities in Cross-border Ecommerce report.