What are the risks of Cross-Border Ecommerce?

Operational: Bad ROI because of an inflexible business model


Selling in a new market demands investment. In order to become profitable within a reasonable amount of time, a number of measures need to be taken, including the localization of the website, providing a language-proficient customer service and streamlining the logistics processes, including returns.


Insourcing these activities means that retailers may be faced with costs for personnel, a new office and maybe even a warehouse. Providing for these things requires substantial investments which can often not be easily adapted if the sales on the new market differ from what was expected. On an operational level, inflexibility is thus a crucial risk. In order to adapt to the performance realized in the new markets, retailers should pay attention to the scalability of their business model.


Financial: Fraud


A very important risk to tackle in international ecommerce is fraud. Fraud can cost retailers money in various ways: the loss of goods, charge-backs of fraudulent transactions, missed revenues from genuine orders blocked by fraud detection software, and the money spent on fraud protection in general. Fraud prevention should of course not exceed the cost of fraud itself.


Legal: Different rules, different fines


Legal differences can constitute a high risk for online retailers on various levels. On the first hand, it is costly and undesirable to deal with the authorities in a foreign country because of non-compliance with rules. On the second hand, some governments apply strict fines in case online shops do not comply with local rules. In Germany for instance, if the legal terms and conditions are not correct, anybody can hire a lawyer and have Abmahungen (warnings) sent to the operator of the site. Usually, in order to settle the dispute, the site owner has to pay a certain fine. Competitors sometimes crawl new sites searching for flaws like this in order to harm new players.

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