Many brands and merchants often ask one question when discussing cross-border eCommerce website building service providers. Why do we need to pay for a commission per transaction with initial outlay investment as well? Silly? Shopify is just charging a fixed monthly cost, which is not eating business profit margin all the time since day one. Shopify is not a burden along with your business being scalable.
Obviously, their thoughts are correct. But this type of mindset and thought is mainly from those brands and merchants who are operating one, or two head cross-border markets. Regardless of their domestic market, they are still doing cross-border eCommerce business, for example, a Chinese brand sells products to the USA and Canada. Shopify absolutely is able to meet your demands and be fulfilling the feature. But the point is how come if you capture global demand?
In this article, I would share my points of view if you want to capture as many demands as possible globally, why the head market plus longtail market mindset is critical for your cross-border eCommerce business. With this mindset, you can learn the commercial value among Shopify, Global-e, Lingble, etc cross-border eCommerce website SaaS platforms or service providers.
- eCommerce Head market is the right term instead of the domestic market
- Why Longtail Markets of Cross-border eCommerce Strategy Is Important
- Global or longtail cross-border eCommerce Website Domain approach
- Wrap up
eCommerce Head Market is the Right Term Instead of Domestic Market
You might hear often saying Shopify is for the domestic markets. In fact, not less of brands and merchants start selling products online using Shopify. Shopify is an easy-to-use SaaS eCommerce store building platform. It has five plans for you to select depending on your business needs. Normally brands and merchants would select the advanced plant for US$79. From a marketing and finance perspective, it’s not pricey, and also is a flat or fixed cost. Particularly it’s suitable for primary or head markets the business aims to develop, grow and scale up from a finance point of view.
It’s totally feasible to use Shopify no matter if you are doing online business in your country (domestic market) or some foreign countries (cross-border markets). So the right term to describe your eCommerce business’s primary markets is using the head market.
Why does it matter? It’s because Shopify is totally fine for you to sell cross-border markets and it’s a key mindset you can clearly compare the longtail market concept in a moment.
In a way, it’s a very powerful and easy-to-use platform. For example, a Chinese brand can use Shopify to sell and ship to the USA. And if you are running Amazon USA and using FBA, Shopify can integrate with Amazon FBA and automate the Shopify order feed to FBA to fulfill. So if you say Shopify is just for domestic markets, it sounds incorrect. So head markets mean it can include domestics and cross-border eCommerce markets you are primarily focusing on. This is the right term.
As Shopify account creation will determine your account country nature, location, product catalog and payout currency, you can create one Shopify account for the domestic market and one Shopify account for the USA market. Meanwhile, this account creation and payout structure for each country is the bottleneck of Shopify in cross-border eCommerce, and I would elaborate more in a moment.
Why longtail Markets of Cross-border eCommerce Strategy Is Important
Normally a brand will not have all markets globally as the head markets. 80% of GMV might come from 20% of head markets. For example, if you are selling cameras to the USA and Canada using Shopify and doing well, basically they are your head markets. So, there are two primary reasons why longtail markets are important
1. Lump-sum GMV are big from all longtail markets
Your camera is in demand from the rest of the world as well. There is no convincing point if you give up the demands when your product design and certification can also comply with the other markets.
2. Approaches to find your next head markets
And you also like to observe the next head markets, the question is how to dilute or reduce the risk to test a new market, as well as how you test a product by using a crowdfunding platform.
Because of these two reasons, the long tail market is important. Traditionally, brands usually enter longtail markets by offering reseller programs and collaborating with distributors. But if D2C is your longtail market strategy, rolling out your head market operation strategy, for example using Shopify, and approaches to longtail markets obviously is not a commercial-wise smart decision.
Using Shopify is not a cost-efficient way to capture longtail market demands. There are two reasons:
1. One is about the account payout currency.
Shopify payout currency is determined by the option you select on the day one you create the Shopify account. It’s changeable, but you can select only one. That implies you would have a risk of loss due to currency fluctuation. The loss between the money you receive from the customer locally, and the payout you can get.
2. The other is a local product catalog.
.com GMV does heavily rely on digital marketing channels, such as Google Shopping, Facebook Commerce, etc. For example, Google Shopping would reject your product listing if you use the SG catalog on the USA Google shopping channel. So basically you can’t accumulate international Google Shopping SEO, although you can set up multi-language using one Shopify plugin. But in fact, it’s for one market using one product catalog.
Shopify per account can only provide one location product catalog or one location POS. If you want to add more, per location charges US$89/month. It can be pricey in longtail markets, such as 100 markets. Otherwise, I suggest you define it as the head market.
The question is how to capture these longtail market demands and collect intelligent insight for your next head market deployment in an efficient format. The answer is to select one real cross-border eCommerce .com solution provider.
Shopify vs Global-e vs Lingble
Obviously, it’s not comparable between Shopify vs Global-e or Shopify vs Lingble. They are not the same thing. You will not compare apples with oranges. I believe Shopify’s exclusive partnership with Global-e and Shopify acquiring a stake of 7.75 million shares or roughly 6.5% of Global-e’s stock prior to its IPO, has proved this fact.
You might not like to use a cross-border eCommerce platform to run a head-market normally, as in a way you need a very strong reason to continue sharing profit to a .com solution moving forward. However, for Longtail markets, it’s a different story. You need a real cross-border eCommerce website that can offer cost-efficiency. For example, it can offer you multi-currency, multi catalog, shared-risk model, etc. So from the table, as shown below, there are three key elements you should look into and compare when you select a longtail market cross-border eCommerce solution, instead of being for the head market one.
1. No Website Building Fees, plus Commission-based Model
The longtail market implies each standalone country at the beginning might contribute very little GMV, or your brand awareness is low although your product demand might be high. In a way, it’s not smart to invest too much-fixed cost upfront to capture longtail demand in the very early stage.
Commission-based models, on the other hand, do fit a brand’s commercial need. No matter Global-e or Lingble, they both can share the investment risk of entering into a new market, or longtail market. If there is no sales or GMV, normally this platform can’t earn a commission. What’s more, they don’t charge any website building and set up fees upfront as well.
However, from a brand point of view, you don’t want to use this model in the head markets, as it is a barrier to getting profit scalability. It’s because the commission can’t go away along with your sales exponentially going up in the head markets. It’s not a smart decision for brands unless you can have convincing and reasonable points to tell the story. The loss of profitability from commission can cover other costs you might pay more without Global-e or Lingble.
2. Multi Product Catalogue, Pricing, Currency, Payment Methods, Language
The bottleneck of Shopify users is obviously on two things. They have a limited product catalog and might have currency fluctuation risk. I take Shopify vs Lingble as an example of the multi-product catalog cost a brand might bear.
For Shopify, one additional local product catalog or what they call POS costs a brand US$89/month. So if your cross-border eCommerce longtail market has 50, you need to pay an additional US$4,500/month. This cost is only for multi-local POS. It doesn’t include additional local payment methods added on, or adding APPs to do local language translation.
On the other hand, Lingble charges a brand serving fee of US$2,500/month, which includes an unlimited local product catalog. It’s obvious which one has a better ROI. This is regardless of payout currency.
Again, even if you pay for additional POSs in Shopify, you still bear the risk of loss due to the currency fluctuation. One Shopify account can only select one payout currency. On the other hand, Global-e or Lingble can offer a multi-currency payout that directly connects with your local product pricing currency. Trust me, you don’t want to create hundreds of Shopify accounts.
Last but not least, Shopify advanced or above plan can provide multi-country product pricing. As you know, the advanced plan charges you US$299/month. However, it just can help from the P&L perspective, as at least the pricing you show in the local market makes sense to earn the target profit margin. However, it doesn’t resolve the single product catalog limitation and payout currency. In the end, you are still suffering the organic marketing limitation and currency fluctuation loss.
3. Shipping and Digital Marketing
It’s not realistic to set up a warehouse in the longtail markets because your original purpose is to capture longtail demands and observe bigger opportunities. It’s too early to rent warehouses and stock inventories upfront there. So normally cross-border eCommerce webstore solution providers can provide great shipping services, instead of just integrating with 3PL in Shopify.
For example, Global-e can provide guaranteed landed cost, which covers the shipping and customs tax cost. It’s very competitive and stabilizes your profit margin when doing business in the longtail markets.
What’s more, digital marketing strategy and conversion rate optimization are the key elements to be successful in the longtail markets. After all, your brand might not have great brand awareness at the moment, capturing low funnel demands requires great skills to operate and optimize SEM, social commerce, KOL marketing, etc. Lingble, for example, provide marketing consultancy services. They can refer you to the local market agency and help you monitor the agency’s marketing execution.
Understanding the definition of the head market and longtail markets and keeping them in mind is critical for cross-border eCommerce strategy and operation. It deals with your product, logistic, and marketing strategy to maximize new customer acquisitions and maintain business profit margin and cash flow. What’s more, it also cleans up your mind to make the right decision to select a D2C webstore solution provider. It can be a different provider between head markets and longtail markets from a brand perspective.
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