Have you ever heard the term “cross-border e-commerce?” This refers to e-commerce businesses operating online stores that cater to customers overseas. Simply put, cross-border e-commerce is the sale of products and services across national borders through digital platforms.

As more businesses in Japan look to expand their reach beyond the domestic market, cross-border e-commerce is gaining significant attention. By tapping into international consumer demand, businesses can unlock new sales opportunities beyond Japan and reach a much broader audience.

In this article, we’ll cover the fundamentals of cross-border e-commerce, including its market size, its key advantages and disadvantages, important considerations, and successful business examples from Japan.

What’s in this article?

• What is cross-border e-commerce?
  
• Market size of cross-border e-commerce: Current situation and future potential
  
• Advantages of cross-border e-commerce
  
• Disadvantages of cross-border e-commerce
  
• Preparing to start cross-border e-commerce
  
• What to know about cross-border e-commerce
  
• Examples of successful cross-border e-commerce in Japan
  
• Frequently asked questions (FAQs) about cross-border e-commerce
  
• Keys to success in cross-border e-commerce
  

What is cross-border e-commerce?

As previously mentioned, cross-border e-commerce refers to online businesses that sell products and services beyond Japan’s borders. It involves e-commerce businesses targeting customers outside Japan – such as those in the United States, China, and Europe – rather than focusing solely on domestic customers.

If you’ve ever travelled abroad, you might have come across a product you loved but struggled to find once you returned home. Traditionally, certain products were only available in their country of origin, making them difficult to obtain elsewhere. However, with cross-border e-commerce, customers can now easily purchase and receive these items no matter where they live.

For e-commerce businesses in Japan, this means an opportunity to showcase their products to a global audience while leveraging the strong reputation of Japanese brands.

Market size of cross-border e-commerce: Current situation and future potential

Cross-border e-commerce is growing every year. This is happening for several reasons: increased awareness of cross-border e-commerce, consumer interest in products not available in their respective countries, products that can be purchased at lower prices overseas, and trust in manufacturers and product quality. Another factor behind the expansion of e-commerce is the proactive efforts of online shops that are targeting customers from around the world and attempting to expand their businesses.

Let’s take a look at the global share of the e-commerce market according to a report published by Japan’s Ministry of Economy, Trade, and Industry in September 2024.

China and the United States alone account for more than 70% of the global market share, and China, in particular, accounts for more than half of the total market. When considering the cross-border e-commerce market as a whole, it is therefore very important to understand the market share of these two countries.

The same report also predicts that the global cross-border e-commerce market will grow to $7.938 trillion USD by 2030, with an average annual growth rate of about 26.2%. The data also suggests that the cross-border e-commerce market has the potential for even more growth beyond 2030.

Advantages of cross-border e-commerce

Cross-border e-commerce has several advantages – let’s take a look.

Sales can be made to customers outside Japan

The biggest advantage of cross-border e-commerce is that, as a business owner, you can sell your products to customers outside of Japan. In other words, you can expect to have a wider range of sales opportunities because you are attracting customers outside Japan, rather than just inside Japan.

For example, if you conduct cross-border e-commerce in a country with a much larger population than Japan, such as China, you will be able to promote your products and services to a much larger audience. Moreover, if the product is well liked in that region, awareness of the product will increase, potentially leading to increased sales.

In addition, inbound tourism demand has been growing in recent years, which has further increased foreigners’ awareness of Japanese products. Tourists who visit Japan and buy products sometimes return to their home countries and order those products via cross-border e-commerce. As a result, businesses in Japan can experience repeat sales.

Online shops are easier to run than physical stores

Cross-border e-commerce is essentially a business conducted over the internet. As such, opening an e-commerce store tends to be smoother and easier compared to setting up a physical store as a satellite location outside of Japan. In addition, unlike physical shops, you don’t have to pay for land and building expenses, or pay wages for shop staff.

There might be less competition

The level of competition in cross-border ecommerce can vary depending on the product category, but in some cases, there are fewer competitors when selling to overseas customers compared to the domestic market in Japan.

For example, products that are already widely recognised in Japan – those that are familiar to almost everyone – often face intense competition within the domestic market. However, if these same products are relatively unknown abroad, they might encounter little to no competition when introduced through cross-border e-commerce, as the market for them has yet to be established.

Disadvantages of cross-border e-commerce

Despite its pros, there are also some disadvantages to cross-border e-commerce.

High transport costs

Because cross-border e-commerce targets overseas markets, one of the disadvantages is that the cost of shipping is higher than for businesses that only deliver within Japan. In addition, if overseas customers have to pay most of the shipping costs, it can cause them to abandon their purchases.

Administration-related burdens related to foreign laws, business practices, etc.

When doing business with customers outside Japan, it is essential to comply with the laws and regulations of their respective countries. This means that you must have a thorough understanding of the legal requirements in your target markets and ensure full compliance. For instance, the General Data Protection Regulation (GDPR), which applies across the European Union (EU), imposes strict regulations on personal data protection, making it crucial to handle customer information with care.

The operational demands of cross-border e-commerce also vary depending on the country or region, which can become a significant challenge for businesses unfamiliar with international markets.

Moreover, when catering to overseas customers with different cultural backgrounds and business practices, companies must adopt a flexible approach – both in customer service and product development – rather than relying solely on what is considered standard or common knowledge in Japan.

Increase in fraud due to going global

Fraudulent credit card use outside of Japan is also a concern for businesses. While being able to attract a wide range of customers overseas with your business is a great advantage, this also increases risk of fraudulent activity by malicious individuals or organisations outside of Japan.

To avoid such problems, it is very important to take thorough measures to prevent fraudulent use of cross-border e-commerce payments.

Preparing to start cross-border ecommerce

In order to carry out cross-border ecommerce, it’s important to understand how to adopt a cross-border ecommerce business model. This means being up-to-date on the systems and mechanisms involved and making the following preparations:

• Deciding how to set up a shop or gallery of products: Choose the business model that is best suited to your company.

• Preparing inventory: Make sure you have an adequate supply of inventory, and create a shipping plan that is compliant with local customs, import and export laws, and regulations.

• Establishing support for multiple languages: To provide localized services in the language of the country you’re expanding into, you must hire customer representatives that can work in multiple languages.

What to know about cross-border e-commerce

In addition to the disadvantages previously outlined, there are also some major points you should note about cross-border e-commerce. It’s important to do the following in advance:

• Investigate whether the product you plan to sell is suitable for cross-border e-commerce and whether it meets local needs.

• After setting up a store or product gallery, create your marketing strategy and sales plan, and prepare your internal systems.

• Make sure that you accurately manage your income and expenditures, including fundraising and cash flow.

Examples of successful cross-border e-commerce in Japan

Now that you know the basics of cross-border e-commerce, let’s look at some companies in Japan that have successfully launched their own cross-border e-commerce sites.

Hokkaido Souvenir Exploration Team

The Hokkaido Souvenir Exploration Team is a well-known cross-border e-commerce site specialising in popular Hokkaido souvenir products such as Shiroi Koibito, Rokkatei, and ROYCE’ chocolate – favourites not only among tourists but also within Japan. The site is operated by Yamato Ogasawara Shoten Co., Ltd., a company based in Chitose City, Hokkaido.

To better serve international customers, the site uses advanced translation functions for seamless communication. Additionally, by having Chinese- and English-speaking staff manage overseas sales, the company has successfully created a smooth and reliable shopping experience for customers based in other countries.

Tokyo Otaku Mode Shop

Tokyo Otaku Mode Shop is a cross-border e-commerce site that sells Japanese anime- and game-related merchandise to customers in over 100 countries. The site primarily attracts overseas fans from the United States, Canada, and France, catering to those deeply interested in Japan’s anime and gaming subcultures.

To connect with its target audience, Tokyo Otaku Mode Shop actively uses social media, sharing content centred on pop culture in Japan. By using this marketing strategy to engage fans and direct them to its site, the company has successfully boosted sales and encouraged more purchases from international customers.

MUJI

MUJI, a home goods and apparel store with many fans in Japan, is steadily gaining overseas customers by establishing a cross-border e-commerce site. MUJI’s simple product design, transparency of information, and commitment to quality are considered success factors. Further, overseas customers who are concerned about environmental issues are attracted to MUJI’s commitment to sustainability.

MUJI’s marketing strategy involves catering very thoughtfully to overseas customers. This kind of approach is an important element of successful cross-border e-commerce sites.

Frequently Asked Questions (FAQs) about cross-border ecommerce

What is the difference between cross-border ecommerce and local e-commerce?

The main difference between cross-border e-commerce and local e-commerce is where the goods are shipped from and to. As the term suggests, cross-border e-commerce involves shipping beyond Japan’s borders to overseas destinations. Local e-commerce, on the other hand, involves shipping products from and to the local area. In addition, payments for local e-commerce are made in the local currency, while cross-border e-commerce is always made in Japanese yen.

Is consumption tax charged on cross-border e-commerce?

Consumption tax is applied to items purchased and consumed in Japan. Since cross-border e-commerce involves products intended for sale outside Japan, there is no consumption tax. This is called export tax exemption.

Who pays the customs duties for cross-border ecommerce?

Customs duties apply to goods sold overseas. Regarding customs duties for cross-border e-commerce, the buyer is responsible for paying these fees in most cases, but depending on the circumstances, the e-commerce site operator or store owner might need to cover them instead.

When the buyer is responsible for customs duties, it’s best to factor these costs into the overall pricing. Ideally, the total price, including duties, should be clearly displayed on the e-commerce site so that customers can confirm the final cost before making a purchase.

Keys to success in cross-border ecommerce

Cross-border e-commerce involves selling to customers outside of Japan. As a result, you must understand the cultural differences of your target audiences and be able to communicate effectively in multiple languages – not just Japanese. Additionally, conducting thorough market research in the country you plan to expand into is essential for ensuring your products meet local customer needs. Before moving forward, it’s important to analyse market trends, assess whether your products are a good fit for overseas customers, and evaluate the potential for business growth.

As discussed in this article, understanding the business model and structure of cross-border e-commerce is also crucial. This includes familiarising yourself with local laws and regulations, establishing reliable logistics networks, and ensuring a seamless payment system. Above all, for international customers, a smooth and secure purchasing experience directly influences their trust in your service and their willingness to buy. Proper preparation in these areas is key to success.

Stripe Connect, allows you to efficiently manage payments with multiple business partners and provides a number of helpful functions such as sales distribution, handling fee processing, and support for international transactions. If you’re looking to strengthen your payment capabilities and simplify the payment flow on your own e-commerce site or marketplace that involves multiple parties—such as stores and customers – you can use Connect to make your business run more smoothly and efficiently.