Voice of the Industry

How are cross-border sales faring for UK retailers?

Thursday 18 February 2021 07:52 CET | Editor: Anda Kania | Voice of the industry

Andy Mulcahy from IMRG and  Neil Kuschel from Global-e reveal the pandemic’s impact over cross-border markets, with an in-depth look into the UK retail space

To say that 2020 has bought disruption to the retail industry would be something of an understatement. As it has become increasingly clear that the coronavirus pandemic is not going to be controlled as quickly as governments, businesses, and indeed people perhaps initially expected, all of us are having to make adjustments to our behaviour that have all of us guessing which changes might turn out to be temporary, and which are here to stay. 

For many countries, a clear consequence of the outbreak has been a notable migration of orders online. In the UK, this resulted in growth rates shooting up to 50%, whereas in 2019 it came in at 6.7% for the full year. As the nationwide lockdown eased, we have seen the rate of online growth slow slightly, but many of the trend lines are showing signs of the much-discussed ‘new normal’ being established. 

But this all relates to the domestic picture of demand; what about selling cross-border? What impacts has the pandemic had there? In September, IMRG launched a new index, based on data from around 200 retailers on the Global-e platform, tracking online sales growth from UK retail sites to cross-border destinations. This article looks at some of the trends we identified in it. 

Differences between EU and non-EU 

As the below chart shows, there did appear to be a dip in demand in the early months of the year, as some of the major ecommerce markets across Europe and the rest of the world began to slip into national lockdowns. However, demand in those markets did rebound with year-on-year (YoY) increases in sales in the second half of April and through May-August. The index data shows similar trends across all markets, with sales rebounding and even exceeding pre-pandemic figures within six to eight weeks from initial lockdowns.

While that graph covers the overall sales to all destinations, the index further breaks down by EU/non-EU volumes. When analysed to that level, the trend lines follow a similar pattern but with non- EU starting off from a higher point straight away in February and increasing the gap over subsequent months.

Over the first two months of the year, we can see that the volume growth into EU markets experienced a sharper decline than non-EU markets, which may be related to the economic situation there, or perhaps reflect the fact that many major European countries were also hard hit by COVID-19 outbreaks. Spain and Italy, for example, went into lockdowns earlier than the UK (which was in mid-March). Both lines follow a similar pattern, just with non-EU volumes responding sharper than EU, and non-EU seeing the push back into positive growth in April, which for EU it was May. 

The next graph shows the month-on-month change in export volumes, again split by EU and non-EU destinations.

Though cross-border volumes went into negative territory over the summer months, this is similar to what we have seen with UK sites overall; as people go on holiday the amount of online purchasing being undertaken comes down accordingly versus the previous months. 

It seems that volumes to EU destinations saw a MoM peak in May, which is something the UK sites overall did not experience domestically – the big shift in volumes occurred between March and April in the UK. Again, this may be related to the varying timings of lockdowns across European countries, which did not all follow the exact same pattern. 

Cross-border payments 

Another dataset that the index covers is the method used to complete payments for cross-border transactions on UK sites. Though overall credit card remains the most common method, looking into many individual EU and non-EU countries we see that in many of them local and global alternative options are dominant. iDEAL in the Netherlands, Klarna in Germany, Yandex in Russia, Cash on Delivery in the Gulf Markets, and Alipay and WeChat Pay in China are only a few examples. Generally speaking, alternative payment methods are increasing in popularity across many markets, while global alternatives such as PayPal are slightly more popular in the EU. Deferred payment options such as Klarna and digital wallets like Apple Pay are becoming the preferred option especially across younger shoppers, both in and out of the EU.

Looking at the platform through which cross-border purchases are completed (split by desktop and mobile, which covers both smartphone and tablet), desktop is still the dominant one. While there will be some variance by individual country, overall, these figures are quite different from the UK market generally, where only 31% were completed on desktop in Q2 2020 (latest data available) and the majority go through smartphones. 

The shift towards m-commerce continues, though people are spending more time in-doors due to lockdowns/higher instances of working from home etc. Looking at the trend, we expect that the rate of orders made via mobile devices will reach 50% of all cross-border ecommerce purchases over the next 12-18 months. This corelates the shift towards alternative payment options, that are adjusted to mobile. 

So, overall, this data is telling us that the pandemic did appear to have some impact on online demand from cross-border markets, but that it did return strongly. The question is where the trendlines go from here – it feels like there may be more twists to come before we emerge out of this.

This editorial was first published in our Cross-Border Payments and Ecommerce Report 2020–2021, which assesses the change of pace that occurred in 2020 and provides a comprehensive overview of the major trends driving growth in this space, being the ultimate source of information for players interested in selling across borders.

About Andy Mulcahy

Andy has worked at the heart of the online retail industry since 2010. During this time, Andy has developed strong knowledge in multiple areas, with particular expertise in Black Friday.

About Neil Kuschel

With over 20 years of experience in ecommerce and operations, Neil has worked closely with hundreds of retailers and brands and brings with him extensive knowledge on the challenges and opportunities of cross-border ecommerce. 

About IMRG

IMRG is the UK’s online retail association. We help our members understand and improve their online retail performance through a busy programme of performance benchmarking, data analysis, insight, best practice-sharing, and events. 

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Keywords: IMRG, Andy Mulcahy, cross-border payments, cross-border commerce, retail, ecommerce
Categories: Payments & Commerce
Countries: United Kingdom
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