Factors Affecting Cross-Border E-Shopping.

• Author: Bandyopadhyay, Soumava

INTRODUCTION

Cross-border e-shopping refers to consumers shopping at a foreign online store where the product is shipped for delivery from outside the customer's country of residence. Lower prices, lower opportunity costs, better selection, unique products, and better product quality are some of the major reasons why consumers may engage in cross-border e-shopping (Saleh, 2016; Valarezo et al., 2018; Huang & Chang, 2017). The global cross-border B2C market is estimated to grow from USD 304 million (361 million cross-border e-shoppers) in 2015 to almost USD 1 trillion (943 million cross-border e-shoppers) in 2020 (Saleh, 2016). A study by McKinsey (2017) predicted that cross-border e-commerce would account for one-fifth of worldwide e-commerce transactions by 2020. Against this backdrop, we explore the factors that influence the consumers' decisions to e-shop across borders--both positively and negatively. We then propose strategies that would enable online retailers to address these factors to their advantage and achieve higher sales, profits, and growth.

KEY FACTORS IMPACTING CROSS-BORDER E-SHOPPING

Consumer Trust

Trust is considered to be a crucial factor in the success of e-commerce (Wakefield, Stocks, & Wilder, 2004; Lim, 2013; Vos et al., 2014). The definition of trust has been worded in different ways. We will use the definition provided by Schurr and Ozanne (1985) who defined trust as "the belief that a party's word or promise is reliable and that a party will fulfill its obligations in an exchange relationship." Trust is particularly important for e-commerce, because the buyer has no physical contact with the seller, may be located a great distance away, and is not able to see, touch, or otherwise examine the product physically before buying. These issues become more critical when e-commerce transactions occur across national borders. Ha (2004) identified several factors that influence buyer's trust in the e-commerce environment, such as security, privacy, brand name, word-of-mouth, good online experience, and quality of information. The absence of these factors leads to the lack of trust and the perception of increased risk and vulnerability for online shoppers (Hogg, Howells, & Milman, 2007). The greater the perceived risk and vulnerability, the less is the probability that consumers will engage in cross-border e-shopping.

Shopping Costs

A study (Saleh, 2016) indicated that 67% of cross-border online shoppers buy from foreign online stores because the prices are lower outside of their home countries. Beyond the lower nominal price, consumers may also benefit from substantial reduction in distance-related trade costs (Martens, 2013), since physical distance between buyer and seller is less important in online transactions than in offline transactions. The main source of distance-related trade cost reduction comes from lower product search costs since consumers do not have to travel to examine the product. Some components of distance-related trade costs may be higher, however, for cross-border e-shopping. These include parcel delivery costs and customs duties (Valarezo et al., 2018). VAT and customs charges are often complicated and shoppers may not always be able to determine the final total cost of an item, which may end up being significantly higher than the nominal price on the selling website. Consumers will be encouraged to participate in cross-border e-shopping only if the cost reductions can outweigh possible cost increases.

Product Selection and Uniqueness

People often shop on foreign websites because they cannot buy a particular product in their own country (Huang and Chang, 2017). Some desired products which are commonly available in other countries may not be easily found in a consumer's home country. These are unique products that can differentiate themselves from other products (Gielens and Steenkamp, 2007). Such product uniqueness could be an important driver of cross-border e-shopping adoption (Huang and Chang, 2017).

Barriers to Cross-Border E-Shopping

Several barriers to cross-border e-shopping have been identified (Valarezo et al., 2018; Kawa & Zdrenka, 2016; Gomez-Herrera, Martens, & Turlea, 2013; Van Heel, Lukic, & Leeuwis, 2014). As we will see, some of these barriers discourage consumers from e-shopping across borders because of perceived higher costs and risks.

Delivery time and reliability: In e-commerce, consumers seek shorter and more reliable delivery windows. This expectation is not always met with cross-border shipments due to transportation infrastructure problems in the country-of-origin or-destination. Dissonant customs practices in different countries can also create delays and uncertainties...