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Cross-border e-commerce: resources for exporting to the United States of America

Chapter 3: Cross-border to the US, e-commerce models, channels and challenges

Global e-commerce strategic framework

The evolution of Global Ecommerce Leaders Forum's (GELF) International E-commerce Framework over the past decade reflects the overall growth of the global e-commerce revenue opportunity as well as the business models and digital channels that leading retail brands have adopted to overcome the complexities and challenges associated with international expansion. The three primary international e-commerce models illustrated in the GELF Framework below offer Canadian retail brands e-commerce alternatives to store-centric and catalog-based market entry and expansion models that predate the rise of e-commerce.

International marketplace channels: mass and specialty plays offer turnkey opportunities

Make no mistake, Amazon remains the #1 mass marketplace player in the US; the online behemoth generated just shy of 50% of all US e-commerce sales in 2020. For the 2020 fiscal year, Amazon's sales of $386.06 billion were a 37.6% increase from $280.52 billion in 2019. These totals combine sales of products and services that Amazon sells directly (e.g., first-party or "1P" sales, which increased 34.6% to $215.92 billion from $160.41 billion in 2019) and revenue from commissions earned from outside merchants that sell on Amazon marketplaces ("3P sellers" where sales grew closer to 40% in 2020):

Overall Amazon's North American net sales of $236.28 billion were up 38.4% from $170.77 billion in 2019; accounting for about 61.2% of total net sales in 2019 (69.4% of sales excluding Amazon Web Services). Amazon's International net sales totaled $104.41 billion in 2020, up 39.7% from $74.72 billion in 2019; accounting for about 27% of total net sales in 2020 (or 30.6% of sales excluding AWS).

"Global-first" digital native, specialty & DTC sites thrive in the US

Although Amazon monopolizes the US marketplace conversation, more domestic and international e-commerce players are selling online in the US than ever before; by doing so they are reducing Amazon's share of US e-commerce growth. Consider that in 2020, Amazon "only" generated about a third — 31.4% — of all U.S. e-commerce sales growth even though it generated almost half of all US e-commerce sales. Amazon's share-of-growth in 2020 was significantly lower than Amazon's 43.8% share in 2019.

US DTC and marketplaces channels converge as consumer expectations raise the bar

Global e-commerce leaders that enjoy "reading the tea leaves" see the two traditionally distinct US online channels -- direct e-commerce sites and marketplaces -- increasingly merging. Canadian retail brands should incorporate elements of both channels into their cross-border planning.

Looking ahead: social discovery driving the next wave of e-commerce channel growth

Another US digital sales channel opportunity evolving rapidly is social commerce. Business Insider/eMarketer believes the strong growth of US retail social commerce sales, which grew 38% in 2020, will continue. In 2021, social is projected to grow 34.8% to over $36 billion, comprising 4.3% of all US retail e-commerce sales.

Looking beyond multi-channel: preparing your e-commerce business to thrive in a multi-platform world

Winning e-commerce companies spent much of the last decade testing and investing in different multi-channel strategies: e-commerce websites, click-and-mortar stores, marketplaces and comparison-shopping engines. E-commerce winners in the decade ahead will face more complexity; retail success will require global reach and local relevance. The retail battleground is quickly evolving from multi-channel to multi-platform - with global ecosystems rising on the competitive horizon. Amazon, Shopify, Google, Alibaba, Tencent and Facebook are investing heavily to evolve their platforms into ecosystems. Tomorrow a retail brand's ability to thrive successfully within e-commerce ecosystems will separate the winners, the laggards and the losers.

Overcoming US/Canada cross-border challenges

Although global e-commerce is booming - today 35% of all traffic to Shopify sites originates from international visitors - cross-border e-commerce challenges persist globally. High international shipping costs and long delivery times continue to negatively impact conversion rates. High duties, tariffs and taxes also frustrate cross-border shoppers as do higher overall costs due to currency exchange rates. Even after a decade of investment by leading retailers to calculate more accurate total landed costs at checkout, almost a quarter of cross-border shoppers remain concerned that they will have to pay unexpected additional costs once their cross-border order arrives at their doorstep.

Chapter 3 checklist

If you are interested in learning more, please contact exportecommerce-commerceelectroniqueexport@international.gc.ca for a particular chapter or the full guide.

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