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Table Of Contents

Executive Summary...........................................................................................1

Global Shoppers Are Active And Similar In Their Cross-Border Purchase

Behavior...............................................................................................................2

Logistics, Reputation, And Cost Concerns Curb SME Cross-Border

Competitiveness.................................................................................................4

Logistics Services And Selling Platforms Help SMEs Capitalize On Their

Natural Strengths ...............................................................................................7

Key Recommendations For SMEs .................................................................10

Appendix A: Methodology ..............................................................................11

Appendix B: Supplemental Material ..............................................................11

Appendix C: Demographics/Data...................................................................12

Appendix D: Endnotes.....................................................................................14

ABOUT FORRESTER CONSULTING

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consulting to help leaders succeed in their organizations. Ranging in scope from a

short strategy session to custom projects, Forresters Consulting services connect

you directly with research analysts who apply expert insight to your specific

business challenges. For more information, visit forrester.com/consulting.

© 2014, Forrester Research, Inc. All rights reserved. Unauthorized reproduction is strictly prohibited.Information is based on best available resources. Opinions reflect judgment at the time and are subject to

change. Forrester ®, Technographics®, Forrester Wave, RoleView, TechRadar, and Total Economic Impact

are trademarks of Forrester Research, Inc. All other trademarks are theproperty of their respectivecompanies. For additional information, go to www.forrester.com. [1-N5M8VX]


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Executive Summary

Through trends such as the rapid emergence of China as

the global eCommerce leader and quick growth elsewhere

in Asia and Latin America, online shopping has gone truly

global. The combined online retail market in countriesstudied by Forrester is projected to exceed $1 trillion in

2014 and nearly double within four years. These figures

dont include various developing countries and territories

currently experiencing dramatic ascendancy of their online

consumer bases.1

As domestic markets develop, consumers armed with

various devices and payment methods have become

increasingly familiar with the mechanics and benefits of

shopping virtually. In parallel, the Internet has raised

awareness of new online shopping destinations. Brands and

products not available in their own markets become visible,desirable, and available. What may seem like a good deal at

home sometimes doesnt look as good when compared with

superior offers from abroad that may not have been

accessible a few years ago. The result is that consumers

around the globe, armed with information and means, are

shopping cross-border, seeking hard-to-find items and

looking for deals. Small and medium-size enterprises

(SMEs) have seized upon this opportunity. For many, cross-

border trade has become a highly important revenue stream

too valuable to be ignored. However, in order to succeed in

the competitive online retail market, SMEs must address

logistical and reputational obstacles that their larger competitors dont face.

To understand global consumer behavior around cross-

border eCommerce, as well as that of SMEs with such

practices, FedEx commissioned Forrester Consulting in

April 2014 to evaluate what is accelerating and slowing

these buying and selling behaviors from both sides of the

transaction. Then, to further explore this topic, Forrester developed the hypothesis that SMEs face specific

marketing and logistical hurdles in reaching their target

customers around the globe, but they have the opportunity

to tap into this sizable and lucrative market.

In conducting an in-depth survey of 9,006 global online

shoppers, as well as interviews with 34 SMEs with cross-

border eCommerce operations in 17 countries and

territories, Forrester found that cross-border shoppers have

consistent and specific needs centered on seller reputation

and logistics as they purchase overseas. Forrester also

found that SMEs that sell cross-border realize they need to

offer services typically associated with larger companies to

overcome the concerns of international customers.

KEY FINDINGS

Forresters study yielded three key findings:

› Cross-border eCommerce is a major revenueopportunity for small and medium-size enterprises.

Online consumers in every corner of the world are

shopping cross-border for physical goods. SMEs are well

positioned to win this business by highlighting their

strengths and leveraging the availability of services that

bridge the competitive gap with larger companies.

› SMEs must differentiate by offering uniquemerchandise while providing world-class service.

SMEs are in a special position to provide hard-to-find

products and personalized service. At the same time, they

must offer great logistics and assuage concerns about

reputation that their larger competitors address through

scale. The good news is that there are third-party logistics

providers and global/regional online marketplaces that

can help SMEs with these challenges.

› Limited variability in global shopper preferencesmeans SMEs don’t need drastically different regionaleCommerce strategies. Shoppers around the world

generally discover the merchants they do business with

through similar methods and seek similar levels of

service, negating the need for multiple overarching

strategies to reach and serve them. Certain consumers,

however, have somewhat varying needs based on factors

such as where they live, what they are shopping for, and

how much they are willing to pay. Agile SMEs can further

expand their cross-border business and delight their

global customers by taking advantage of these market

nuances.

Cross-border trade is a large and growing

opportunity for savvy small and medium-size

businesses.


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Global Shoppers Are Active AndSimilar In Their Cross-Border Purchase Behavior

Global eCommerce is growing across a variety of regionsand countries, with online buying behavior currently

representing over $1 trillion in sales per year and forecasted

to nearly double within four years (see Figure 1). Through

forces such as rapid growth in emerging markets and the

proliferation of digital channels through which to search for

and engage with businesses, consumers all around the

globe are becoming online shoppers. Beyond the products

and brands consumers know locally, the Internet is

introducing them to new merchants and unique products not

readily available in their own markets. The Internet,

therefore, has unleashed a new global shopping reality: Not

satisfied with what is around the corner or online locally,

shoppers from all corners of the earth are going cross-

border seeking hard-to-find items and great deals.

Our surveys comprehensive view of cross-border

purchasing trends across a broad sample of global markets

reveals shopping behavior that, while exhibiting a few

notable regional differences, is remarkably similar. This is

good news for merchants, as consumers in various markets

want generally similar experiences from the businesses they

patronize, and thus going global doesnt require a unique

approach for each market. Specifically, we found that:

› Physical items dominate online purchases. Sixty-seven percent of global shoppers conduct at least 10% of

their monthly spending online. More importantly, 57% of

global shoppers reported that more than half of their

online purchases are of physical items shipped to them,

as opposed to digital purchases such as music files and

airline tickets. Clothing and apparel is by far the most

popular physical item consumers buy online, with 61% of

respondents reporting such a purchase, but other

categories have strong showings as well. At least a

quarter of respondents shop for books, consumer

electronics, cosmetics, footwear, appliances, andcomputer hardware online. North Americans shop for

video games more than others, while those in the APAC

region are far more likely to purchase food. North

Americans shop online for physical items the most, with

72% spending at least half their online purchasing on

physical items. Even in Latin America, where a relatively

low 44% shop cross-border, online retailers are making

notable entries into the market.2

› Cross-border shipments are a significant part of global eCommerce. Global shoppers arent just buying

physical items online — theyre buying many of those

items cross-border. In fact, 82% of global respondentsreported making an online purchase from a merchant

outside their home country. These rates vary minimally

across regions (see Figure 2). They demonstrate some

fluctuation across countries, with 90% of Canadians

reporting purchasing cross-border compared with a low of

59% of Japanese. On average, customers reported

spending about $300 on cross-border items in a given

year.3 The merchants we interviewed reported supporting

statistics: “About 80% of my business is international. I

always intended to sell internationally because theres a

relatively limited market [at home] for the items I sell,” said

the owner of a small collectable and memorabilia shop in

Australia. The owner of a small South Korean clothier

concurred: “We export about 70% of our orders. I started

the business in 2010 with the intent of selling overseas

because I saw a market opportunity to find quality local

products and introduce them to foreign countries online.”

FIGURE 1

eCommerce Has Gone Global

Source: “Forrester Research Online Retail Forecast, 2013 To 2018 (US),”

Forrester Research, Inc., March 21, 2014; “Forrester Research Online

Retail Forecast, 2013 To 2018 (Western Europe),” Forrester Research,

Inc., April 28, 2014; “Forrester Research Online Retail Forecast, 2014 To

2019 (Asia Pacific),” Forrester Research, Inc., October 14, 2014; and

“Forrester Research Online Retail Forecast, 2013 To 2018 (Latin

America),” Forrester Research, Inc., December 12, 2013


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› Primary online shopping destinations are the US,China, and the UK. While shoppers buy cross-border

from all countries included in our study, the US, China,

and the UK are the top three exporters of online

purchases. Ninety-one percent of Canadians are making

cross-border purchase orders from the US, with Latin American shoppers sourcing from the US as well,

including 68% of Brazilians. Europeans have a tendency

to order within the EU, although UK businesses ship

primarily to the US and Australia.

As opposed to typical European behavior, the main

countries ordering from China are not necessarily

geographically driven. The No. 1 source of Chinese

orders is Hong Kong (where 68% purchase from China),

followed by Brazil (where 63% purchase from China), and

then the US (where 52% purchase from China). Carrying

on this globally dispersed sourcing pattern within APAC,shoppers in Japan and Korea purchase more frequently

from the US than they do from their APAC neighbors.

› Discovery is primarily through online search. Withshoppers making so many cross-border purchases, how

do they discover merchants and products? Search is the

overwhelmingly preferred discovery method, used by 58%

of global shoppers, followed by online ads (39%) and

word of mouth (33%) (see Figure 3). Search is less critical

in Latin America, where other digital channels play a

larger role than in other regions. In fact, online

advertisements are the primary discovery method in Latin

America, with social media and email also demonstrating

levels of influence not seen elsewhere. In APAC, there

are nuances by market with online advertisements

favored by China (53%), but less so in Japan (27%) and Australia (30%).

FIGURE 2

Most Global Consumers Have Shopped Cross-Border

Base: 9,006 global online shoppers

Source: A commissioned study conducted by Forrester Consulting on

behalf of FedEx, September 2014

FIGURE 3Shoppers Discover International Merchants Primarily Through Search And Other Digital Methods


Source: A commissioned study conducted by Forrester Consulting on behalf of FedEx, September 2014


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Logistics, Reputation, And CostConcerns Curb SME Cross-Border Competitiveness

As consumers seek good deals around the globe, their biggest concerns and poorest experiences involve logistics,

such as receiving the item ordered in a timely and cost-

effective manner. A second major area of concern is

reputation. Cross-border shoppers seek out specific

products rather than particular online merchants, but they

want to do business with companies that they trust will

provide smooth transactions and delivery of authentic

goods.

› Shipping-related concerns are paramount whenconsidering cross-border purchases. Consumers have

a variety of concerns with cross-border purchases,

regardless of whether or not theyve actually experienced

them firsthand, ranging from shipping cost to transaction

fraud. Shipping and logistics, however, are top of mind, asconsumers cited shipping cost (51%) and long delivery

time (47%) as the top two concerns when considering

cross-border purchases (see Figure 4). North Americans

are more concerned than shoppers in other regions about

both costs and delivery (63% and 53%, respectively),

while Latin Americans are concerned with transaction

security (50%) and damaged products (50%). What

constitutes a long delivery time is dependent on customer

FIGURE 4

Logistics Leads The List Of Perceived And Real Cross-Border Challenges


*Base: 6,148 global online shoppers



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expectations, but most shoppers expect cross-border

delivery within one to two weeks of purchase. On the high

end of the spectrum, 45% of Brazilians, 36% of

Australians, and 33% of Americans expect cross-border

shipments to take two weeks or longer. Some merchants

also expressed frustration at fulfilling orders on time. Asthe owner of a small Italian furniture company described

it: “The transit time can change depending on the time of

year, depending on the destination . . . if [customers] buy

and I say you need to wait eight days before delivery,

people will say, ‘You guys are crazy!”

› Many cross-border shipping issues are based onexperience. Long delivery times and high shipping costs

are the two main problems that shoppers have

experienced when making cross-border purchases.

Shoppers in Latin America have the most issues with long

delivery times, especially in Brazil (52%). Delivery timeissues plague APAC, as well, with Koreans (46%) and

Singaporeans (44%) also experiencing such issues at

particularly high rates. High shipping costs are also a

worldwide impediment, particularly in India (49%),

Canada (43%), and Singapore (41%). At a regional level,

North Americans experience the most problems with high

shipping costs (39%).

Small and medium-size retailers also struggle with long

delivery times. A small musical instruments company in

Germany commented: “In some countries, the delivery

time is not as fast as we want it to be. It’s hard to deliver

to some areas. It can take too long to deliver or even find

the address.”

› Cross-border shoppers prefer multibrand retailersand online marketplaces. As a result of their concerns,

cross-border shoppers prefer to purchase from well-

known major multibrand retailers and global online

marketplaces. In fact, the majority of respondents in every

country we surveyed ranked major multibrand online

retailers or marketplaces as their first choice out of five

business types for cross-border purchases. Independent

SME retailers (i.e., those not affiliated with an online

marketplace) ranked fourth, behind brand or manufacture

websites and brick-and-mortar retailers (see Figure 5).

Shoppers in APAC are particularly reluctant to shop

directly with SME retailers, with 57% of respondents

ranking this category as their last choice. The US alsodemonstrates this hesitation, with the largest portion of

respondents (28%) ranking SME retailers fourth.

As an antidote to this hesitancy on the part of shoppers,

many SME retailers have embraced marketplaces,

recognizing the value to customers and the convenience

they offer their own operations. One supply chain and

logistics manager for a small printer and publisher in the

UK said: “We use [marketplaces] and stick with them

based on their presence, efficiency, and reliable service. I

find them to be understanding and straightforward.”

FIGURE 5

Global Cross-Border Shoppers Strongly Prefer Online Marketplaces, With SMEs Trailing




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› SMEs face reputational hurdles in addition tologistics issues. Shoppers shy away from SME retailers

for many reasons: reputation, logistics, price, and quality.

Reputation verification is the primary concern for global

shoppers (49%) and is even more pronounced in Latin

America, where 54% of respondents indicated difficultywith verifying seller reputation. For global shoppers, the

No. 2 reason for SME aversion (42% of respondents) is

the lack of reputation or recognition (see Figure 6).

Logistics are still a concern when shopping from SMEs,

with returns and shipping costs identified as the No. 3 and

No. 4 challenges. For North America, shipping costs

continue to be a challenge, with 42% of shoppers citing

this as a barrier to purchasing from SMEs.

› Duties and taxes curb cross-border activity. Whileshipping cost and delivery time are top of mind with

shoppers, duties and taxes are also a factor. Thirty-fivepercent of global respondents cited high duties/taxes as a

concern for cross-border shopping, with the most

significant numbers coming from North American

shoppers. More specifically, 62% of Canadians believe

duties and taxes are an issue — higher than in any other

country — and many have experienced this with past

cross-border purchases. Hesitation resulting from a fear

of high duties isnt limited to one region, however.

Germany and Brazil tied for the second highest level of

concern at 48%.The impact of duties and taxes was even more

pronounced when we explored creating a standard duty-

free threshold. Fifty-six percent of global respondents

would increase their cross-border shopping if purchases

under US$200 (localized) were duty free (see Figure 7).

Regionally, the hypothetical limit had the greatest impact

on Latin American shoppers, with 80% of those

respondents predicting an increase in their cross-border

shopping. At the country level, 80% percent of Chinese

respondents and 71% of Indian respondents indicated the

same. How much would they up their spending? Global

respondents estimated increases ranging from 26% to

75%. Twenty-two percent of Latin American shoppers

anticipate a staggering 90% increase over current

spending, compared with 13% of global shoppers.

FIGURE 6

SMEs Face Reputation Perception Issues In Addition To Logistics Concerns




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Logistics Services And SellingPlatforms Help SMEs Capitalize OnTheir Natural Strengths

Despite the concerns outlined above, the situation for SMEs

is encouraging. SMEs have an ability to nimbly adjust

merchandise to provide the unique or locally unavailable

goods that international shoppers seek. To address the

logistics and reputational concerns, the merchants we

interviewed, along with our consumer survey data, revealed

some clear best practices:

› Seize on advantages of item availability anduniqueness. SME retailers can differentiate themselves

by highlighting the uniqueness of the items they offer.

Shoppers are influenced by a variety of factors when

making cross-border purchases, but the most influential

reason cited is that the item is not available in their home

country, with 75% of respondents considering this very

influential or influential. Sixty-seven percent of respondents also believe item uniqueness is either very

influential or influential in buying from international

markets (see Figure 8). In North America, for instance,

where shoppers are often interested in handicrafts, art,

and jewelry from other parts of the world, uniqueness of

items is even more influential than in other regions. The

Chinese, concerned about quality of products in their own

country, are big buyers of baby products from Japan and

other countries.

SMEs have the opportunity to emphasize this item

uniqueness and availability when targeting globalconsumers. As the owner of a German musical

instrument shop stated, “We decided to sell internationally

to get higher revenue due to the fact that what we offer is

not available anywhere else, so theres no direct

competition.”

› Tackle logistics and reputation head-on. While cross-border logistics may seem complex, resolving logistics

FIGURE 7

Duties And Taxes Curb Cross-Border Shopping Volume


*Base: 5,053 global online shoppers



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and reputation concerns represent the top eight of the 15

most influential reasons to shop with a cross-border merchant (see Figure 9)

› Leverage shipping and logistics expertise. Many of thesuccessful merchants we interviewed work closely with at

least one major logistics company. Such providers can

provide global coverage, delivery speed/consistency, and

competitive cost.

What really distinguishes the preferred providers, though,

is the service and support in calculating taxes and duties,

filling out paperwork, allowing a merchant to bill upfront

for duties, and simplifying cross-border returns.

“They do everything,” said the sales and customer service

manager for a Puerto Rican beverage company about her

firms logistics provider. “Every time I have worked with

[the logistics provider], everything has gone well.” Some

merchants also see such providers as critical to their

expansion plans. As one supply chain manager at a UK

printing and publishing company noted of her international

documentation: “This is something you have to make sure

is done absolutely right. . . . its becoming very

complicated. Every country has specific taxes, currencies,payments, etc. So Im looking for somebody who may be

able to facilitate those requirements.”

› Leverage trusted marketplaces to placate reputationconcerns. Successful merchants often maintain their own

domestically oriented site while also listing at least some

of their merchandise on global marketplaces. In fact, out

of the 34 SMEs we interviewed, 24 leveraged at least one

of these sites. Among the benefits cited are global reach,

language localization, and active marketing in-country

through search engine optimization (SEO) and search

engine marketing (SEM). Additionally, and veryimportantly, they have reputation systems and often buyer

protection to build trust with shoppers. For SMEs,

reputation is paramount for consumers to become

comfortable with purchases, and the global online

marketplaces offer a quick way to establish and improve

brand reputation. Specifically, a marketplace allows SMEs

to sell through a trusted, recognized partner and generate

positive consumer reviews. “We use them because its a

FIGURE 8

Cross-Border Shoppers Seek Items Not Available To Them Locally At Competitive Prices




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good way to reach further with few risks,” described the

owner of a small German music supply shop. “We can

reach many more potential customers with no

complications; its very straightforward.” The sole

proprietor of an Australian collectibles retailer concurred:

“I have my page set up for international visibility. I like the

reach it gives me and the fact that I get reviewed.”

› Appeal to the needs of global customers. While globalshoppers may generally behave in similar ways, there are

also clear differences among and within regions. North

American shoppers, for instance, look to SME retailers for

specialty and unique items: 51% of Americans versus

34% of global respondents cited the availability of

“specialty/hard-to-find items” as a reason for shopping

cross-border. In another example, Europe, the Middle

East, and Africa (EMEA) shoppers are less concerned

with shipping times and costs, with 44% indicating

concern with long delivery times versus 47% globally.

Residents of certain APAC countries view SMEs as

having relatively low costs. For example, 57% of

Japanese and 56% of Australians indicated such a belief,

as opposed to 50% of all respondents. Finally, social

media and reputation factors in online global shopping are

more important in Latin America than in any other part of

the world, with 41% of Latin Americans using social media

to discover international merchants versus 31% globally.Latin Americans also have a significantly higher fear of

transaction fraud, a consideration for any merchant

seeking to penetrate that market.

FIGURE 9

SMEs Must Address Logistics And Reputation Concerns In Addition To Leveraging Their Strengths




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Appendix A: Methodology

In this study, Forrester conducted an online survey of 9,006 global online consumers and interviewed 34 small and medium-

size businesses with international eCommerce operations in Australia, Brazil, Canada, China, Colombia, France, Germany,

Hong Kong, India, Italy, Japan, Mexico, Puerto Rico, Singapore, South Korea, the UK, and the US to evaluate the current

attitudes toward and experiences with cross-border shopping and order fulfillment, including the challenges and concerns

faced by both groups in expanding these practices. Consumer survey participants included those aged 18 or older who have

ordered a physical item shipped to themselves or another recipient over the Internet within the past 12 months. Interviewed

business stakeholders included those at companies with fewer than 500 employees and an eCommerce practice that

consists of at least 5% of orders shipped to other countries. Questions provided to consumer participants asked about their

experience with and concerns around purchasing physical items from other countries over the Internet and factors that may

increase their frequency of doing so. Small and medium-size business interviewees were asked about the factors leading to

their decisions to start an international eCommerce business, their experiences and challenges with fulfilling such orders,

and the factors that may enable them to expand this practice. Consumer respondents were offered a small incentive

determined and administered by their respective survey panels. Interviewees were offered a small monetary reward, variable

by country, as a thank you for their time. The study began in July 2014 and was completed in September 2014.

Appendix B: Supplemental Material

RELATED FORRESTER RESEARCH

“Asia Pacific Online Retail Forecast, 2013 To 2018,” Forrester Research, Inc., November 26, 2013

“European Online Retail Forecast, 2013 To 2018,” Forrester Research, Inc., May 29, 2014

“The Evolution of Global eCommerce Markets,” Forrester Research, Inc., March 28, 2014

“The Global eCommerce Opportunity,” Forrester Research, Inc., March 28, 2014

“Five Global Marketplaces All Brands Must Know,” Forrester Research, Inc., June 9, 2014

“Identifying Partners To Help Streamline Global Expansion,” Forrester Research, Inc., September 17, 2013

“International Shipping Solutions For US Online Retailers,” Forrester Research, Inc., September 17, 2013

“Latin America Online Retail Forecast, 2013 To 2018,” Forrester Research, Inc., December 17, 2013

“Take Your eCommerce Business Global,” Forrester Research, Inc., March 13, 2014

“US Online Retail Forecast, 2012 To 2017,” Forrester Research, Inc., March 13, 2013


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Appendix C: Demographics/Data

FIGURE 10

Consumer Survey Demographics


Note: Percentages may not total 100 because of rounding.



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FIGURE 11

SME Interview Firmographics

Base: 34 global SME eCommerce decision-makers



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Appendix D: Endnotes

1 Forrester estimates the combined 2014 online retail sales of the US, UK, Germany, France, China, India, Japan, Australia,Brazil, Argentina, and Mexico at just over US$1 trillion, and projects this figure to rise to $1.84 trillion by 2018. Source:

“Forrester Research Online Retail Forecast, 2013 To 2018 (US),” Forrester Research, Inc., March 21, 2014; “Forrester Research Online Retail Forecast, 2013 To 2018 (Western Europe),” Forrester Research, Inc., April 28, 2014; “Forrester Research Online Retail Forecast, 2014 To 2019 (Asia Pacific),” Forrester Research, Inc., October 14, 2014; and “Forrester Research Online Retail Forecast, 2013 To 2018 (Latin America),” Forrester Research, Inc., December 12, 2013.

2 In Brazil, by far Latin Americas largest online market with $19 billion annual spend, online shopping has extended into themiddle class. At least one major American retailer has launched eCommerce operations in Mexico, and a German clothingmanufacturer recently went live with an eCommerce site in Colombia. Source: “The Global eCommerce Opportunity,”Forrester Research, Inc., March 28, 2014.

3 Global survey respondents reported spending an average of $300.10 annually on cross-border purchases. APACrespondents spend an average of $347.87; EMEA respondents spend an average of $269.34; North American respondentsspend an average of $368.21; and Latin American respondents spend an average of $232.85. Averages were calculated

based on midpoints of spend ranges in USD from which respondents were asked to estimate their average cross-border spend.

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