Are retailers ready to react?

The world economy has faced many upheavals in recent years, including economic and geopolitical shocks, inflation, and energy crises, to name a few. However, all of these events have cemented the enduring appeal of e-commerce to consumers.

I recently spoke with Matthew Merrilees, North America CEO of Global-e (Nasdaq: GLBE) about the rise of DTC’s cross-border e-commerce, what is shaping global consumer behavior, and how brands are (or should be) responding to it.

Gary Drenik: What commonalities do we see when we examine the behavior and preferences of online shoppers around the world?

Matthew Merrilees: Consumers around the world want to buy directly from brands, and data clearly shows this. In fact, a recent survey we conducted found that almost 60% of respondents prefer to buy products directly from a brand’s website. This is particularly noticeable among younger consumers, as 68% of online shoppers aged 25-34 prefer to shop directly on the brand’s website.

Online shoppers around the world are motivated by price, variety and quality – and will choose to buy direct from a brand outside of their market if they can get it. A recent Prosper Insights and Analytics China survey provides a prime example, showing that Chinese consumers’ preference for US and European apparel brands increased by 1.6 and 2.2 percent year-on-year, respectively, while their preferences for domestic brands increased actually declined.

What is consistent for online shoppers around the world is their desire for a seamless and transparent shopping experience. Our survey shows that shipping costs, return options, the ability to see prices in their currency, the ability to use their preferred payment method, and full transparency regarding the ultimate cost of their purchase all influence buyers’ decision to place an order.

drenik: How do consumers discover and interact with brands at home and abroad?

Merriläen: In the digital age, consumers are increasingly interacting directly with brands on social media.

Our data found that 75% of consumers bought from a brand because they engaged with it on a social network. If we dig deeper into specific demographics, we find that nearly 1 in 3 respondents aged 16-34 say social media has led them to buy from a seller outside of their home market.

It’s also important to note that the influence of social media extends across product categories. A recent survey by Prosper Insight & Analytics found that female consumers between the ages of 18 and 34 bought apparel and clothing (30.3%), beauty products (29.4%) and electronics (27.2%) ) decided after engaging with brands on a social media platform.

The implications of this are fascinating as social media drives a digital landscape without borders. This represents an exceptional opportunity for brands to reach and connect with consumers worldwide. However, international markets differ in many aspects, from language and currency to import regulations and preferred payment methods. Therefore, better understanding local consumers’ purchasing preferences and delivering a streamlined, localized experience that meets their expectations is key to converting global online traffic into sales.

drenik: If we take a closer look at social media, which platforms do consumers most often use to connect with global brands? Do different age groups prefer different channels?

Merriläen: Our survey shows that Instagram is the top social media platform consumers have used to interact with brands. Over 60% of respondents who said they made a purchase after engaging with a brand on social media said they did so on Instagram.

However, when you dive into age groups, the data becomes even more interesting. Unsurprisingly, Facebook is leading among older consumers (45-54, 55+) and TikTok is taking the younger generations by storm. In fact, 60% of Gen-Zs bought from a brand after engaging directly with it on TikTok, compared to 35% for groups aged 35-44.

This reinforces the notion that the devil is in the details – it’s probably not enough for brands to be present on social media; If you really want to benefit from the offers of these platforms, you should think carefully about who you want to address, how and through which medium.

drenik: You mention cross-border e-commerce. What are the main reasons why online shoppers would be willing to buy products outside of their home market? What are these products?

Merriläen: Our survey found that consumers are overwhelmingly willing to buy almost any product imaginable across borders. While fashion and apparel remain by far the leading categories in terms of consumer preferences, other categories are also attractive, including toys, sports and leisure, etc.

The top three reasons online shoppers buy from international brands are price (47%), variety (37%) and quality (28%). While price is the main reason for buying online internationally, younger consumers (aged 16-24) are strongly motivated by variety. Fast and affordable shipping and returns are among the top five reasons to buy from a non-domestic seller, underscoring the importance of an attractive and transparent proposition when selling to international consumers.

drenik: What can US retailers gain by expanding their cross-border e-commerce operations? What are the best practices for this?

Merriläen: What I’m seeing is that more and more retailers are saying that domestic markets are saturated and brands are looking for new ways to increase sales and reach consumers in more and more geographies. And there are enormous possibilities. One only needs to look to countries like Latin America, where online retail sales are projected to reach a staggering $160 billion by 2025, to understand the almost limitless potential of tapping into a global consumer base. For example, Mexico was the leading market in terms of cross-border e-commerce revenue growth in 2022 according to our company data. We have also seen significant growth in Gulf and APAC markets such as Singapore, underscoring the growing potential in many markets worldwide.

In terms of best practices, brands should have a holistic, localized Approach to differentiate in competition and transform international traffic. This means the entire shopping experience – everything consumers care about, from price to delivery – is seamless and frictionless feels local, regardless of where the buyer and seller are physically located. This is a challenge, but in the digital and technological age, it’s a challenge that brands are good at. How? Overall, the key is a combination of a globally oriented mindset and the right solutions that offer advanced technological capabilities and local market know-how.

drenik: Matthew, thank you for sharing your insights on how consumer behavior is changing, what matters to them, and how retailers should respond. The landscape is extremely competitive and expectations are changing fast, so it’s very interesting to see how this translates into the data. 2023 is sure to be an eventful year for DTC E-Commerce.