A Cross-Border Ecommerce Guide: Selling to the GCC
International commerce is exploding in popularity. A staggering 4.39 billion people used the internet in 2019, an increase of 9% compared with 2018. It’s estimated that there are one million new Internet users emerging every day. That makes the web a truly phenomenal shop window.
If you have products to sell, the internet is the place to sell them. While not everyone logs on for shopping purposes, global ecommerce spend is nevertheless growing by around 14% every year.
But making the decision to expand your online business into international markets is a big one. It’s not a case of clicking a few buttons and away you go. There is a lot to think about.
This article presents the challenges and benefits cross-border ecommerce brings, focusing on the Gulf Cooperation Council (GCC) market in particular.
What is Cross Border Ecommerce?
Cross-border is another way of saying ‘international’. In business terms, it means moving or selling goods from one country to another.
Ecommerce is business conducted via the internet. Join the two terms together and what you’ve got is the process of selling goods over the internet to customers in one or more countries.
Cross-border ecommerce can take place between a business and consumers (B2C), or a business and another business (B2B), even a customer and another customer (C2C). In all cases, the seller is in one country, the buyer in another.
Why Is Cross-Border Ecommerce Becoming So Popular?
As already mentioned, global access to the internet has a big role to play in cross border ecommerce growth, and the COVID-19 pandemic certainly resulted in an online sales boom. In the run up to Ramadan in April 2020, cross-border internet sales grew by 575% year-on-year.
A report from research firm Forrester predicts cross-border ecommerce will break the $1trillion mark in 2022. However, it’s important not to get carried away. Ecommerce still only accounts for 10% of total retail spend. So there’s still plenty of room for growth.
Technological advances are making it easier, safer, and more profitable for businesses to move into new markets. Geographical borders are less a barrier and more an opportunity. New markets mean new revenue streams and potentially larger margins.
But while the benefits of cross-border ecommerce are plentiful, there are pitfalls to be aware of too. Let’s take a look at the upsides and downsides of taking your online business into new territories.
The Pros and Cons Of Expanding Your Online Business Internationally
Too many options. Not knowing where to start. A lot to remember. Too much hassle. There are plenty of reasons why many online businesses resist the urge to sell internationally.
If you’re happy with the revenue you’re generating in your own territory, you might not need to consider cross-border ecommerce. However, if you have ambitions to expand your brand, knowing the pros and cons of cross-border ecommerce will stand you in good stead.
Advantages of Cross-Border Ecommerce
Below, we feature just a few of the benefits of expanding your business into new territories:
The biggest benefit cross-border ecommerce brings is a substantial increase in the number of people you can sell to.
New and Exciting
If your product isn’t currently available outside your native country, breaking into a new market will give you a chance to excite a new audience. You’ll have a new product people haven’t been able to buy before.
Technology is on Your Side
As we’ll show you later in this article, technology is making cross-border ecommerce easier than ever.
You Don’t Have To Go It Alone
You can delegate many of the tasks required for successful cross-border ecommerce to shipping agents, freight forwarders, and other logistics-focused entities. That gives you more time to focus on other facets of your business.
Challenges of Cross-Border Ecommerce
Statista reports that most of the major challenges merchants face in cross-border ecommerce relate to logistics. It’s important to note that while these may seem challenging to novice and experienced international shippers alike, many ecommerce businesses choose to engage a shipping agent or freight forwarder to help.
One of the major stumbling blocks of cross border ecommerce is how to get products to new customers on time, in good condition, without overspending on shipping. Supply chain inefficiencies can lead to all sorts of problems, including:
- Late deliveries
- Excessive return rates
- Increased logistics costs
- Reduced profit margins
The word customs is enough to send shivers down the spines of many merchants. Countries have specific rules and regulations when it comes to the import of goods from overseas (see the GCC’s below).
Freight forwarders are experts at negotiating the ins and outs of customs rules and regulations. That’s one of the reasons why many ecommerce businesses engage a forwarder to manage their shipping activity.
Adjusting to Different Customer Expectations
Even when products cross borders efficiently, there’s no guarantee the strategies you use to sell them will travel so well. Marketing approaches that might yield results in one territory could draw a blank in another.
You won’t be the only US or UK business to have spotted the opportunity to generate more sales via cross-border ecommerce. You should expect competition from other overseas businesses and from local companies if your product—or something similar—is already being sold in your target territory.
You will also have the big players in ecommerce to contend with. They are able to drive prices down and supply customers with ultra-fast, convenient delivery options. But don’t let this put you off. Other brands have succeeded in the competitive cross border ecommerce market, and you can too.
Getting Your Brand Known
Selling internationally is like going back to square one in many ways. However well known your brand is in your own country, you’re likely to be the new kid on the block in the new territories you’re targeting. You’ll have to market like you’re a challenger brand to get the attention of customers all over again.
Things to Do Before Going Cross-Border
Here are some of the primary elements you need to get right to succeed in cross-border ecommerce:
Get Your Pricing Right
Price your items too high and they won’t sell—too low and you’ll struggle to make a profit. If competitors are selling the same or a similar product, can you undercut them and still turn a profit?
Create A Shipping Policy
Make it clear to your customers what shipping options they have.
Work With Multiple Carriers
Relying on one carrier limits the delivery options you can offer your customers. Local or regional carriers could offer better rates. You should research carefully, picking your carriers based on:
- Tracking options
- Options for integration
- Variety of services offered
Choose a Fulfillment Partner
It can be beneficial to work with a fulfillment partner based in the country you are expanding into. This can lead to potentially lower transport costs and faster and cheaper delivery for your customers.
Determine Your Returns Policy
Returns can quickly hit your profits. There are multiple reasons for returns, such as:
- Wrong item shipped
- Customer made a mistake
- Goods are damaged in transit
Be sure your returns policy is clearly stated on your website, and do all you can to limit the causes for product returns.
Key Import Regulations in the GCC Cross-Border Ecommerce Market
The GCC (Gulf Cooperation Council) is a political and economic agreement between Saudi Arabia, the UAE, Oman, Qatar, Kuwait, and Bahrain. Businesses importing goods into the GCC from the USA and United Kingdom will be subject to tariffs, a tax levied on imports to the GCC.
Each country or union in the GCC has specific individual regulations. Generally speaking, though, a levy of 5% of the value of the goods applies to most products imported from countries outside of the GCC.
This duty rises to between 12% and 20% for goods that compete with those already in production or manufacture in the GCC.
Customs declarations must be ready for inspection at the customs entry point, with local invoices attached to verify the value and country of origin of the goods. If this sounds burdensome, it’s because very often, it is. It’s a good idea then, to secure the services of a shipping agent or freight forwarder to negotiate the minefield of rules, regulations, and paperwork for you.
Other Considerations for Expanding Into the GCC Ecommerce Market
Before launching your cross-border ecommerce drive into the Middle East, you should ensure you know the answers to these key questions:
Are Your Products In-Demand?
You must consider whether there is a market for your goods in the GCC. As a guide, some of the most popular categories of goods with customers in the GCC are:
- Children’s toys
- Beauty products
- Healthcare products
What Cultural Differences Exist?
The GCC is largely formed of Islamic nations with large populations of expats. There are stricter rules on the sale and consumption of alcohol than in the USA and United Kingdom.
Furthermore, while holidays such as Christmas and Thanksgiving are observed by some, the major event for exchanging gifts is Eid al-Fitr, a festival marking the end of Ramadan.
That said, Western shopping trends such as Black Friday and Cyber Monday are catching on in the region, and could offer a great opportunity to boost sales.
Who Are The Big Players In GCC Ecommerce?
Amazon is a big name in ecommerce in GCC. But the other big players in the region may be less familiar to you. Did you know that Noon, together with Amazon, account for over 50% of ecommerce sales in the region? Other big names include KSA and Namshi.
What’s The Local Currency?
There is no common currency in use across the GCC states, so you’ll need to make sure your online store accepts payments in multiple currencies when localizing for the region.
Which Alternative Payment Solutions Are Popular?
There are plenty of popular alternative payment options accepted in the region. We look at these in more detail later in this article.
Is Your Product Banned or Restricted?
It’s important to check whether you can legally import your product into GCC, because many products are restricted, prohibited, or require licenses or permits for importation.
Goods That Cannot Be Imported Into the GCC
Although specifics vary between the GCC states, to give you an idea, here is a list of the key products that you cannot import to the UAE. - Controlled and recreational drugs - Narcotics, including poppy seeds - Goods from boycotted countries - Products containing crude ivory - Gambling-related tools and machines - Fishing nets with three layers - Original engravings, prints, sculptures, and statues - Used or reconditioned tires - Items that contradict Islamic teachings and values (for example publications, paintings, photos, and other artwork) - Pre-cooked or homemade food - Certain breeds of dog - Protected and endangered animals
Goods With Import Restrictions
Below is a list of items that you may be able to import to the UAE, subject to restrictions. They are likely to require a license or permit. - Alcoholic beverages - Tobacco products - Pork products - Birds - Domestic pets - Medicines - Weapons
Reasons To Expand Your Online Business Into the GCC market
Using the United Arab Emirates as an example, it’s clear to see the extent of cross border ecommerce growth in the GCC. For example, 60% of UAE consumers have purchased at least once from an international online retailer. The United States is the most popular cross-border shopping destination, chiefly because of low prices and high-quality goods.
Revenues generated by ecommerce in the GCC were just $5 billion in 2015. Now they’re about $24 billion. Visits to the region’s leading ecommerce sites have risen by up to 50% since 2015 to stand at around 21 million per month. There’s more choice too, with over 150 sites offering ecommerce services.
Around 45% of residents in the GCC are tech-savvy millennials, many of whom shop online, and internet usage is growing annually by 25% in the UAE alone. Small wonder that Amazon and other ecommerce businesses are investing heavily in the region.
Popular Payment Methods in the GCC
Life would certainly be much easier for cross-border ecommerce if the whole world used the same currency. Even within the GCC, there are different currencies.
It’s important to make it easy for customers in the GCC to pay in their chosen or local currency. Many carts are abandoned if shoppers discover at checkout that they can’t pay in the currency they prefer.
Debit cards and Paypal have broad appeal with shoppers, with the latter boasting 237 million active accounts and 19 million merchants offering the payment option. But there are a number of other payment gateways popular in GCC states that you might want to work with.
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Will Ecommerce API Technology Help Your International Expansion?
An Application Programming Interface (API) is software that lets two applications talk to each other. Ecommerce APIs help you integrate your ecommerce website with a number of other sites and internet services to streamline cross-border ecommerce. Here are some of the advantages ecommerce APIs can bring to your business:
Greater Security: An API can protect your ecommerce data using security measures such as encryption.
Easy Scalability: With just a few lines of simple code, you can connect your ecommerce business to a new system and scale to handle more complex transactions.
Pick and choose: You can select elements from other apps and programs to add to your ecommerce solution and enhance it.
Get Product Information: Easily get product details from databases to add vital information to your online store.
Manage Your Orders: APIs let you sort and filter your order data according to the shipping and packaging date. You can also use APIs to process cancellations and returns, create bulk import orders, and add inventory for orders, to name just a few valuable order management options.
Update Your Inventory: You can use APIs to simplify the checking, management, and maintenance of your inventory data.
Connect With Logistics Providers: Some APIs can help you to choose the best carrier for your consignment, making your selection based on criteria such as delivery deadline, shipping rate, and location. These shipping APIs can also help you track shipments.
Ready to Expand Your Online Business Into the GCC?
Cross-border ecommerce is helping to create a one world-one market environment, and online retailers are adopting internationally-focused ecommerce strategies because:
- Technology is making it easier to expand into new markets
- The growth of internet use in international markets is making expansion more lucrative
- Help is available for merchants of all sizes wishing to engage in cross-border ecommerce
For these reasons, the GCC is one of the many global markets that online businesses from the USA and the United Kingdom are targeting. Will cross-border ecommerce be successful for your business?
Hopefully, armed with the information in this article, you are much better prepared and ready to find out.