E-commerce: Booster for Internationalization

E-commerce: Booster for Internationalization

It is said that in the midst of every crisis, lies great opportunity and that can be showcased by the fact that during this economic crisis, when internal demand has dropped, large and SMEs have seen internationalization as a chance to pull through.  

In a nutshell, internationalization can be defined as a process or strategy in which companies carry out part of their activities (purchasing, production, distribution, or sales) in a country other than the original. By doing so, companies look forward to benefits including reducing costs, increasing revenue, gaining new customers, and spreading the risk. 

Although internationalization of companies has increased in the last years, there are still misconceptions that it is an extremely time-consuming activity, involving high investment, even an international trade department within the company is essential for success, along with other misleading statements that prevent companies from going international. For example, Juan Romero, Director of the Spanish Agency for the Competitiveness of Companies – Acció, assured that gaining a client in a foreign market requires 2 years of previous work and a minimum investment of 20.000€.

Whilst there are obstacles during the process, the truth is there are several simple and affordable ways to internationalize. For instance, the internet has been the biggest accelerator of SMEs establishing an international presence. Practices such as digital marketing and e-commerce are some of the options available.  

While many activities have been affected by COVID pandemic lockdowns, e-commerce has been one of the few that benefited overall. According to research developed by the United Nations Conference on Trade and Development (UNCTAD), global e-commerce reached $26.7 trillion in 2019, representing an increase of 4% compared to the previous year. In addition, online retail’s share of total retail sales increased from 16% to 19% in 2020.

The same study revealed that in 2019, around 1 of 4 online buyers made cross-border purchases, and the tendency is that it will increase in the upcoming years, validated by the fact that the share of cross-border online shoppers increased from 20% in 2017 to 25% in 2019.

Between 2019 and 2020, e-commerce penetration grew in 90 days, the equivalent of the growth it had in the last 10 years, as stated by McKinsey. Another report, developed by Kantar, revealed that 60% of consumers will continue to buy online as much as they do now, even after the pandemic is gone. And a study conducted by eBay indicates that cross-border e-commerce accounted for one-third of all sales in the world by 2020 and that it is expected to triple in the following four years. 

All previous data, reflecting e-commerce growth is likely to continue, acknowledges that internet-based business models allow companies to expand internationally without having branch offices in targeted markets and might incite companies that haven’t started their internationalization through cross-border e-commerce yet.

If your company is interested in undertaking internalization but does not possess the know-how, feels unsure on which target market is adequate for your product/service, do not have the capable internal staff, or simply would like to receive assessments on internationalization related topics, Broggini has extensive experience in the field, assisting companies in the search of international partners, conducting researches to determine suitable markets and determining entry strategies. 

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