Bowman: E-commerce is new normal for international trade
As a global commerce professional, I’ve seen a lot of innovations that have fueled the growth of international trade. A few of the most impactful developments, in my opinion, are the modernization of ocean cargo transportation, the expansion of trade agreements and the lowering of duty and tax rates. But perhaps most significant in helping globalize companies is the Internet, allowing international buyers and sellers to communicate more effectively and economically.
And, thanks to the Internet, e-commerce is opening the door to another huge chapter in global trade, evidenced by online transactions growing from $3 trillion in 2006 to $5.4 trillion in 2012, according to the U.S. Census. The Centers for Strategic and International Studies estimates that by 2017, one-third of all U.S. business-to-consumer and customer-to-customer e-commerce transactions will be with foreign counterparts. Currently, it’s 16 percent so we’re expecting to see significant growth in a short timeframe.
Whether it’s domestic or international e-commerce, there are several key reasons for this growth.
It’s my opinion that the deteriorating relationships between product suppliers and the world’s large retailers are greatly contributing to this increase. Companies that supply major retailers are subjected routinely to invoice payments exceeding 90 days, in addition to chargeback for returns and forced discounts to move their products. I have also worked with suppliers who are told they must buy their product back at retail if it doesn’t sell.
These types of situations make e-commerce so much more appealing. Imagine comparing the previous scenario with that of dealing direct to the customer, where returns are low, risk is low and payment is relatively immediate compared to aggressive large retailer buying tactics.
The other key reason for e-commerce’s success, and the more positive one, is opportunity. For example, the online payment system PayPal forecasts that China, whose commerce buying activity was over $40 billion in 2013, is on pace to exceed $160 billion by 2018.
“In other countries, e-commerce is a way to shop. In China, it is a lifestyle,” Jack Ma, owner of China-based Alibaba, is quoted as saying. This is fueled by both increasing consumer demand and a hunger for high-quality products from Western countries.
This trend is a huge call to action for our small- and medium-size product producers and retailers, who could sell their goods at a good margin and increase their client base around the world.
So what is needed to go global?
It’s important to understand that Asia — China, in particular — is driving this trend. As a business, you will need to become familiar with e-commerce platforms such as Alibaba’s “Taobao” and “T Mall,” in addition to social media/e-commerce communications platforms like WeChat (China’s version of Facebook).
Make sure you maintain dependable distribution to fulfill orders; this can be facilitated through third-party logistics companies that specialize in Asian e-commerce and order fulfillment. This is important, considering that most U.S.-based logistics companies have a hard time with Chinese addresses.
Many of the regulations that keep businesses from selling large orders to places like China often do not apply when selling low-value business-to-consumer orders, which is great news for our region’s businesses wanting to expand into global e-commerce.
If you’re interested in exploring beyond bricks-and-mortar selling, there are some great resources to help you better understand the brave new world of international e -commerce.
I recommend checking out the U.S. Department of Commerce in Los Angeles, which has specialists in this area and offers workshops.
• Ray Bowman is the director of the Small Business Development Center of Ventura and Santa Barbara Counties.