The cross-border e-commerce market is gaining popularity as a way for businesses to expand their customer base. A growing number of business owners in Japan are adopting this model to increase their range of sales opportunities.

As a business owner, you might be interested in using cross-border e-commerce to increase sales opportunities, but you might also be unsure of where to start. In this article, we’ll explain how to get started with cross-border e-commerce. We’ll also look at the current state of the e-commerce market, future opportunities, and key points for success.

What’s in this article?

• Current state and future of cross-border e-commerce
  
• Getting started with cross-border e-commerce
  
• Considerations for cross-border e-commerce
  
• Key points for a successful cross-border e-commerce business
  
• Preparing your business for cross-border e-commerce
  

Current state and future of cross-border e-commerce

With the internet now part of our everyday lives, and the rise of smartphones and social networking sites, people are able to buy and sell products from other countries more easily than ever. Growing consumer interest in overseas products has also driven the growth in cross-border e-commerce.

In Japan, the coronavirus pandemic led to year-on-year growth in cross-border e-commerce. This was due to people staying at home – and consequently shopping online – more than usual. Even customers who preferred shopping in physical stores before the pandemic began enjoying the ability to shop from home. In particular, the ease of buying products from overseas increased the demand for cross-border e-commerce. And although pandemic restrictions are now over, consumer interest in overseas products remains high, and the number of cross-border e-commerce sites continues to grow.

In 2024, Japan’s Ministry of Economy, Trade, and Industry (METI) released a report on the state of the global e-commerce market that showed the following business-to-consumer (B2C) market share rankings by country in 2023:

• 1: China (51.3%)
  
• 2: United States (19.5%)
  
• 3: United Kingdom (3.6%)
  
• 4: Japan (3.4%)
  
• 5: South Korea (2.1%)
  

The report also forecasted that the global market size for cross-border e-commerce will reach $7.9 trillion USD by 2030.

Getting started with cross-border e-commerce

Cross-border ecommerce is on the rise, but how can you get involved? Below, we explore different business models that can help you get started.

Build a unique B2C e-commerce site in Japan that is accessible to overseas customers

To set up a cross-border e-commerce business in Japan, you can either create a new e-commerce site or make your existing one available in multiple languages. This will open your site up to overseas customers who don’t speak Japanese.

There are two ways to build a unique cross-border e-commerce site: develop your own without using an existing template, or use an external service that supports cross-border e-commerce.

Open a store in a B2C e-commerce mall in Japan that caters to international customers

Another business model option involves opening a store in a Japan-based e-commerce mall that supports cross-border e-commerce. This business model is the easiest of the methods introduced in this article and is ideal for business owners taking their first steps to acquire international customers.

Businesses with existing online stores for customers in Japan can create dedicated pages to provide services to overseas customers. There are no complicated processes – businesses can easily enable cross-border e-commerce by applying the “international sales” function available on the e-commerce malls they already have stores in.

Some e-commerce malls offer a function that automatically generates machine-translated versions of product pages for customers overseas. In some cases, e-commerce malls might let businesses open stores on international sites that the malls own. These options can give businesses more opportunities to sell products to international customers.

Open a store in a consumer-to-consumer (C2C) or B2C e-commerce mall in your target country

Another option is to open a store or exhibit products in an e-commerce mall in the country you wish to expand into (i.e. your target country). Barriers to entry can be high, as you’ll need to communicate with local e-commerce mall owners and enter into legal agreements before you can open a store or list items. If you’re not used to working with businesses overseas, it can be helpful to use an agency.

Open a store in an e-commerce mall in your target country using a bonded warehouse

Open a store in an e-commerce mall in your target country using a bonded warehouse

A bonded warehouse is a warehouse used to temporarily store goods that are subject to a customs bond, a legal contract meant to ensure that an importer follows the target country’s customs regulations. Normally, goods imported from overseas are subject to customs duties (i.e. import taxes), but in a scenario where a bonded warehouse is used, goods wait in the warehouse and the authorities temporarily suspend customs duties until the customs clearance process finalises. Note that areas designated as “bonded zones”, which contain bonded warehouses, are usually near ports and airports.

In this business model, a business owner transports goods to a bonded warehouse in their target country and stores them there. When the business receives an order from a customer based in the target country, it delivers the goods directly from the bonded warehouse. Unlike typical cross-border e-commerce, businesses do not deliver goods directly from Japan, but rather ship them straight from the country where the customer is based, thus reducing shipping costs for customers and the time from order to delivery.

Open a store in an e-commerce mall in your target country using general trading operations

In this business model, you conduct business using exporters in Japan and importers in your target country, and you sell your products in an e-commerce mall in that target country. Products are sold through general trading operations – including storing goods in a general warehouse (i.e. not bonded) – via a local e-commerce mall.

Build a unique B2C e-commerce site in your target country

In this business model, you build your own website in the country you’re expanding into. This option is easier to implement if your company’s products are already well known internationally, you’re able to build and operate an e-commerce site, and you have the right people to develop your business overseas. However, building a website from scratch and running it in a foreign country requires a significant investment. You need technical expertise and multilingual staff, which makes this model more suitable for business owners with sufficient financial resources.

Furthermore, because different countries have their own e-commerce laws and regulations, and the marketing required to attract local customers is so significant, this is one of the most difficult cross-border e-commerce models overall.

Considerations for cross-border e-commerce

Let’s take a look at what you need to do to prepare to launch your cross-border e-commerce business.

Select products and research overseas markets

Products that sell well in Japan aren’t necessarily popular overseas. Tastes and customs vary by region, so customer needs also differ. Bear this in mind when choosing products to sell, and conduct market research in your target country to identify what sells well there.

Developing a successful cross-border ecommerce business in a country with a large e-commerce market, such as China or the US, increases your potential for generating higher profits than in other countries. However, it’s important to understand the needs of customers in the places you’re planning to expand into, especially when there is a large market involved.

It’s also important to be aware that some raw materials might be prohibited in your target country, and that some products aren’t allowed to be sold at all. Do your research beforehand to avoid breaking any laws or regulations later on.

Make sure you understand the rules around customs duties and overseas shipping

The main difference between cross-border e-commerce and domestic e-commerce malls and ecommerce sites is that cross-border e-commerce involves customs duties, overseas shipping, and the legal regulations of target countries.

Most prohibited items aren’t importable in the first place. However, it can be helpful to check the JETRO Basic System for Imports and Exports for details on importing and exporting to your target country to make sure you don’t attempt to import any prohibited items.

If you want to look into overseas shipping options, you might also find it useful to refer to the Japan Post list of items that cannot be sent as international mail.

Additionally, it can be helpful to widen your understanding of customs duties for overseas shipping. You can check the tariffs for typical items likely to be of interest to individual importers in Japan’s customs product tariff rate guidelines document.

Key points for a successful cross-border e-commerce business

Below are some key points and respective questions to ask yourself if you want to establish a successful cross-border e-commerce business.

Strategy and business model

• Product strategy:

  • Do you want to provide products and services based on market and customer needs, or products rooted in the company’s vision and philosophy?
    

• Channel strategy (distribution strategy):

  • Have you established the purchasing methods and means required to get products and services to customers?
    

• Marketing strategy:

  • Can you analyse trends and developments in overseas e-commerce markets, including what your competitors are doing?
    
  • Have you established measures to raise awareness of your brand and identify factors to increase sales?
    

• Established systems:

  • Before entering your target country’s market, have you made sure your company’s internal systems are fully implemented? If you’re outsourcing specialist talent (e.g. engineers or developers), have you fully established relationships with your partners?
    

• Income and expenditure management:

  • Have you secured the means to raise funds?
    
  • Are you managing your cash flow?
    

• Pricing strategy:

  • Will you keep the same price for your product or service, or sell at a price that matches consumer needs and market trends in your target country?
    

• Risk from exchange rate fluctuations:

  • Are you prepared for large fluctuations in exchange rates due to world events and politics that could affect sales?
    

Legal systems, languages, customs, and cultural values

• Acquiring certifications:

  • Have you obtained the necessary certifications and permits for selling your products in your target country?
    
  • Have you labelled product ingredients properly? Have you labelled products with their country of origin?
    

• Compliance with laws and regulations:

  • Are you fully prepared to deal with the local legal system of your target country?
    
  • Will local laws or those of the target country be applied? Which country will have jurisdiction in legal matters?
    

• Support for multiple languages:

  • Are you able to provide services in a language customers in your target country can understand?
    

• Responding to different business practices and cultural values:

  • Do you understand that business practices and cultural backgrounds in your target country might be different from Japan, and are you able to respond accordingly?
    

Logistics and customer support

• Business model:　

  • Are you choosing a business model that suits your company and accounts for logistics?
    
  • Will you manage inventory in your target country or deliver directly from Japan?
    

• Quality control:

  • Does the distribution centre you plan to use have appropriate air conditioning, hygiene practices, and product quality controls?
    

• Understanding transport costs:

  • Do you understand your transport costs, and have you worked out a balance between services and costs for your logistics?
    

• Number of days for delivery:

  • Can you reduce the time it takes to deliver goods to customers?
    

• Handling of returns and exchanges:

  • Are you able to respond to order cancellations, returns, and exchanges?
    

• Customer support:

  • Do you have a business manual and measures for supporting customers?
    

Customs

• Prohibited items:

  • Have you checked the list of prohibited imports for your target country?
    

• Inconsistent customs procedures:

  • Are there any inconsistencies in customs clearance, and if so, is your company able to respond to problems such as delivery delays?
    

• Anti-fraud measures:

  • If a supplier puts a price on an invoice that is lower than the actual price paid in an attempt to save you money on customs duties, the goods might be undervalued at customs, resulting in your company under-paying the applicable duties. Are you prepared to refuse any such offers from your suppliers?
    

Note that undervaluation is an illegal trade practice in which a business declares to customs the price of goods at a lower price than the actual price in order to lower customs duties.

Payment environment

• Payment method:

  • Do you offer a variety of payment methods?
    

• Payment security measures:

  • Do you have measures in place to prevent credit card fraud?
    

• Currency:

  • Will you offer the ability for customers to convert Japanese yen into foreign currencies, and is your target country’s currency supported?
    

Stripe Connect makes it simple to manage payments with multiple business partners, and provides a number of functions, including sales distribution, collection of handling fees, and international transaction support. If you’re looking to strengthen your payment functions and simplify the payment flow on your own e-commerce site or marketplace involving multiple parties – such as stores and customers – you can grow your business more smoothly and efficiently by using Stripe Connect.

Preparing your business for cross-border ecommerce

In this article, we explained how to get started with cross-border e-commerce, including business models and key points to help achieve success. Cross-border e-commerce expands your business beyond the domestic market and into overseas markets. For businesses in Japan, it’s also important to know that the inbound market (i.e. tourists visiting Japan) is expanding. The influx of overseas customers provides more opportunities for businesses in Japan to introduce their unique brands and products to the world.

Businesses expanding overseas must have the right staff with the right skills and language proficiency to effectively build cross-border e-commerce sites from the ground up. This can be a big hurdle to overcome, so newcomers will find it easier to start off using e-commerce malls based in Japan that also operate internationally and to pay attention to international sales trends.

For those considering entering the cross-border e-commerce market, it’s important to understand the factors that play roles in successful cross-border e-commerce businesses. It’s important to have a thorough understanding of things like logistics, customer support, customs duties, and payment systems.