The global cross-border B2C e-commerce market was valued at $784.6 billion in 2021 and is projected to reach $7.93 trillion by 2031. These numbers make cross-border expansion an attractive proposition.

Working capital and recurring revenue are the lifeblood of these businesses and become prime considerations to make cross-border expansion work. A calculated runway of 18-21 months for one market has to be adjusted to accommodate the burn rate for the expansion and variables of a second or even third.

Even with healthy cash reserves, businesses fail to achieve their expansion goals. Here are some variables to consider and pitfalls to avoid for e-commerce companies that want to succeed in their cross-border efforts.

The e-commerce space is hyper-competitive

The cost of digital implementations and setting up e-commerce stores is getting lower, and e-commerce platforms and marketplaces are incentivised to get as many sellers on their platforms. Today, e-commerce platforms have made it easy for merchants to get started with as little as $500. Other similar models, such as dropshipping require little capital and offer little risk, have opened the floodgates for anyone to start selling online.

The hidden costs of cross-border e-commerce

With cross-border e-commerce, buyers have to contend with payment methods and currencies across multiple markets. These have payment gateway rates attached, such as FX rates and cost-per-transaction fees.

Sellers have to deal with customer acquisition costs that have risen by 60% across the last five years. Sellers often look at larger marketplaces and e-commerce platforms to assist in their expansion overseas. Amazon is considered the world’s largest e-commerce marketplace, and a closer look at the different fees involved paints a realistic picture of the potential gulf between profit and revenue. Success in these marketplaces usually requires spending more on advertising and bumping their products to make sales.

When it comes to payment across territories, your mileage will vary.

Saving for the short term – don’t skimp on logistics

Understanding the squeeze faced by both the e-commerce companies and their customers, it is understandable that sellers will want to save on certain costs to stay competitive while preserving their margins.

The e-commerce delivery benchmark report by Metapack found that the importance of delivery costs (27.4%) weighed almost as high as delivery speeds (26.6%) for their considerations. Slow delivery accounts for 22 percent of online shoppers abandoning their carts.

Logistic fulfilment is an aspect that cannot be overlooked. With two similar products close to quality and price, the speed and condition of the product upon delivery can be a deal breaker.

Cost, speed, and convenience of deliveries were cited as key considerations.

Spending for the long term – invest in localization

E-commerce companies need boots on the ground to be in sync with local habits. It is a priority that has to be factored into the financial runway for cross-border expansions. NAVER trumps Google if a company wants to be found in South Korea, LINE messaging app lets a team effectively connect with potential customers in Thailand, and iDEAL is the preferred payment method in the Netherlands.

“Can’t Read, Won’t Buy – B2C”, a research survey by CSA asked consumers in 29 countries and found that 76 percent prefer to buy products with information in their native languages, and 40 percent would not make a purchase in other languages.

Customer support in the native language for better service, targeted SEO for the local market, ensuring the accuracy of any legal documents, and marketing content that captures the essence of the company while maintaining the cultural nuances. Localisation is essential for e-commerce companies to stay ahead of the challenges in a new market.

Not all recurring and predictable cash flow is ideal

Cash flow and capital are the lifeblood of e-commerce businesses. Without them, these businesses would not be able to work on any of the approaches we covered. Founders have to carefully consider their options, and it is essential to plan ahead. For some businesses facing a shortfall of cash, and some loans needing 90-120 days for approval, it can be too little too late.

The earlier the company can plan for cash flow issues and the sudden need for cash injections, the better the terms they can negotiate. Some funding terms come with strings attached. It can be a loaned amount with set repayment timelines and interest rates. Fixed repayment rates, however, may not be ideal for e-commerce businesses that experience income variations. Having to pay a fixed amount when sales are seasonal can put pressure on cash flow.

It can also result in the lender taking a percentage of equity in the company. Lenders who have equity in the e-commerce business will sometimes have a say in how the company spends their funds. And those decisions might not be aligned with the business direction.

Finding the ideal financial partner for e-commerce business expansion

Access to reliable funding is just the start of what an ideal financial partner should provide to help an e-commerce business expand across borders. Understanding the challenges and opportunities in the target market and having a network of partners are vital to making the expansion successful.

The financial partner has to trust the company to make the final decisions, and offer flexibility in repayment options that align with the company’s long-term goals.

Ultimately, with cross-border expansion, many aspects can be unpredictable. The best way companies can mitigate and plan for it is to have enough capital on hand to be able to do cross-border well and weather the costs needed for it.

Percy Hung is an entrepreneur and investor based in Singapore. He is the co-founder and Chief Executive Officer of Choco Up, one of Asia Pacific’s largest revenue-based financing and growth platforms that offers fast-track, data-driven funding to fast-growing companies that require rapid capital deployment. Percy leads the sales, marketing and business strategy at Choco Up, aspiring to bring this innovative funding solution to the Asia Pacific.

Percy firmly believes in the power of technology to disrupt the outdated, complex and rigid financial system, making funding simple, transparent and truly growth-centric. Under his leadership and mission, Choco Up’s team is dedicated to making obtaining funding a quick, efficient and founder-friendly process.

Percy is an alumnus of Georgia Institute of Technology where he studied Aerospace Engineering. He spent his early career as a product engineer at multinationals, including Azbil Corp (Yamatake) in Tokyo, focusing on operational efficiencies and performance capabilities.

Always curious and fascinated by the fast-changing and innovative world, Percy later pursued a start-up venture in online sportswear customization — a decision that kickstarted his entrepreneurship journey. He later co-founded Healthy Chicken, one of Hong Kong’s earliest health concept restaurants.

As a serial entrepreneur with multi-sector experience in automotive, apparel and consumer tech, he gained great determination and the ability to stay agile and adapt. The knowledge he garnered from trial and error granted him insight into a key factor for successful start-up companies — funding.

In 2018, Percy co-founded Choco Up with the company’s Chief Operations Officer, Brian Tsang, as a financing solution for their fellow entrepreneurs. Percy and Brian met in college 15 years ago, and together they established Choco Up as a leading data-driven financing and growth platform that offers flexible non-dilutive funding solutions and business analytics across 8 markets and 10 sectors. Choco Up leverages data analytics and vast integration to automate growth fund deployment and risk management to invest in rapidly scaling companies with domain expertise, established products, and proven demand. This provides companies with recurring access to growth capital without equity dilution.

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