E-commerce is claiming an ever-larger share of commerce in more and more regions. One reputable source says that, for 2014, e-commerce was 8.2% of retail in Asia-Pacific; 6.7% in Western Europe; and 6.3% in North America. By 2018, these figures are forecasted to be 18%, 10%, and 9%, respectively. Now, however, a new story is beginning to unfold: the growth of cross-border e-commerce.
Cross-border e-commerce doesn’t yet get much popular attention, because it’s currently still small. You’ll get 150 times the results on Google for “regular” e-commerce as for the cross-border kind. But it will be profoundly important, because cross-border trade’s cultural effects do much more to change the world than in-country trade does.
How prevalent is cross-border e-commerce today? In a recent online survey, we discovered that 57% of respondents in 24 countries in six continents had shopped from an overseas site in the last six months, with some country numbers well into the seventies. I’m betting these are higher numbers than many realize – in particular, many Americans, who get most of what they want at home.
Meanwhile, connectivity is growing explosively everywhere. About three billion people have Internet access today. 2020 estimates vary from about four billion to as high as 7.5 billion. Even at four billion, penetration growth of 33% combined with even modest per-person growth will be transformative. A recent report suggests the global business-to-consumer cross-border e-commerce market will reach $1 trillion in 2020.
Companies should jump on this. Many bricks-and-mortar companies lost ground to pure-play e-commerce companies by being slow to develop in-country online strategies. They should not miss the international boat, too, even if it means working hard on in-country and cross-border e-commerce in parallel.
It’s hard to say precisely how the cultural effects of cross-border e-commerce will play out, but they will likely be considerable.
The first wave of globalization, from the mid-19th century to World War I, was a time of Western dominance. So Anglo-Saxon political and cultural ideas followed trade from West to East. It won’t be so simple this time. China’s e-commerce market appears to have moved into first place two years ago, and China Internet users double the entire U.S. population. So we will see plenty of movement from East to West. Most likely, cultural ideas will diffuse out from many different centers of economic activity.
Some thirty years ago, Ted Levitt, who popularized the word “globalization,” announced in The Harvard Business Review that the day of the multinational corporation was over, and that the global corporation would operate “as if the entire world were a single entity,” selling the same things in the same way everywhere.
To some extent, he was right. There are brands whose names are recognized all over the world – Apple, Microsoft, Coca-Cola, IBM – that do sell essentially the same product worldwide. But even Fortune’s top-500 “global brands” represent at most just over 1% of publicly-traded companies worldwide, and not everyone listed has name recognition that would allow them to sell the same products everywhere.
You’d think e-commerce would promote this process, and we’d finally see a global market in which the world’s largest companies grow massively as they access vast numbers of additional consumers, including the hundreds of millions in China’s lower-tier cities.
Not necessarily. You see, in a bricks-and-mortar world, scale wins because it drives down unit costs. It’s also the key to distribution: Just a few years ago, selling all over China required big investments only scale players could afford. Today, a very inexpensive storefront on Alibaba’s Tmall Global allows just about any company anywhere to deliver products to Chinese consumers in days.
Absent political barriers to digital trade, then, cross-border e-commerce is likely to be a great equalizer. Just as the physical process in which Western multinationals headed East has already been disrupted by Chinese “local giants” that matched the multinational corporations on Chinese ground and are now headed in the other direction, so e-commerce is likely to give birth to players selling across borders in every direction. As for culture, Western ideas heading East might well meet Eastern ideas and influences heading in the other direction. In time, similar effects are likely on the world’s North-South axis.
Who will be the winners in this global contest? As noted, the world’s largest companies may be able to leverage the brand recognition they have built up over years and behave like “global” companies for a good while to come. But new would-be-global players are likely to find a more crowded and difficult path.
We’ve all seen how quickly Internet businesses can grow at home. Cross-border e-commerce multiplies the potential, as it multiples the size of the potential market. Scale barriers come down. Markets become more competitive. Greater choice emerges – and more power flows to the consumer.
There is a considerable irony here. Previous waves of globalization brought only a limited number of Western companies to developing countries, because of the complexity and investment required. So a relatively small number of big Western companies and their brands had an outsized influence on consumers around the world. This time, as cross-border e-commerce lowers barriers everywhere, the explosion of choice will put consumers everywhere in charge. As they purchase at will from the biggest shopping mall the world has ever seen, they are likely to put their local stamp on the companies that seek to serve them. This next globalization of commerce may be the most local wave yet.
This article originally appeared on Forbes. Mitch Barns is CEO of Nielsen.