Why Cross-Border E-Commerce Will Be Crucial to the Future of Manufacturing

Manufacturers that want to remain in profit for years to come, or even scale up, must adapt their operations to the new standards of business—and the key to this will be cross-border e-commerce.

Mnet 107794 Ecommerce

When you’re riding a wave, you don’t notice how quickly you’re scaling the heights, until one day it peters out and you glance back at the chasm that now lies behind you. We’re still riding the digital wave that is the internet, so we often look past how monumentally it has changed the fundamental nature of industry. Is there any field that hasn’t been affected?

If there is such a field, it certainly isn’t manufacturing. The unparalleled global connectivity that we have today is both a blessing and a curse for manufacturers: on one hand, it enables easy and widespread promotion (making it possible to attract clients from anywhere), but on the other hand, it generates competition that makes it harder to maintain a simple local operation.

Evidently, manufacturers that want to remain in profit for years to come, or even scale up, must adapt their operations to the new standards of business—and the key to this (and to manufacturing as an industry) will be cross-border e-commerce. Why? Allow me to explain.

It Grants Easy Access to Developing Economies

The value of a manufacturing operation is purely contextual, because the worth of a product (or a production process) is determined by the relevant market. This isn’t a problem when you’re manufacturing something in reliable demand, but demand in the Western world isn’t anywhere near as reliable as it once was.

There are two reasons for this: the rise of 3D printing has made manufacturing more accessible to consumers, and most varieties of consumer electronics are commonly imported to cut down on costs. The inevitable result is that Western manufacturers wanting to sell to Western buyers must have compelling cases to compete.

But cross-border ecommerce makes it easy to respond to the international trade threat in kind, making it a less destructive phenomenon. While Eastern manufacturers can generally offer much cheaper prices for certain types of product, there are invariably gaps in developing economies for manufacturers of all kinds and nationalities to target, and selling online skips the intense inconvenience of needing to set up local premises and deal with complex legalities.

It Blurs the Line Between Manufacturer and Merchant

It’s typical in the manufacturing world for there to be a fundamental disconnect between sellers and manufacturers. The reason for this is obvious: it takes different skills to produce something than it does to sell it, and there isn’t usually an overlap between manufacturing experts and salespeople.

Traditionally, this has been a convenient arrangement. The manufacturer gets to focus entirely on maintaining its production quality, while the seller can concentrate on presentation and communication. But it isn’t always ideal. In a time of Amazon crushing competition beneath its feet as a monolithic distributor, it’s easy to see why both manufacturers and merchants might want larger pieces of the pie.

E-commerce, and international commerce in particular, makes it vastly easier for a manufacturer to also become a merchant. Initial online retail presented the option of creating a storefront and listing products without even having to create a dedicated sales team, but the escalating viability of selling to other countries mitigates another of the usual reasons for working with a seller: that being the need to handle localization.

Why is this the case? Well, it isn’t really the option of selling internationally that has made localization easier—it’s the advent of user-friendly sales platforms. Through investing in an e-commerce platform with global reach, any manufacturer can achieve low-cost localization without having to significantly split the profits. The manufacturer of the future, then, has so many more options about how to operate, granting it much-improved flexibility.

It’s Cost-Effective at Low and High Price Points

There are certain products that generally have very slim profit margins. They’re typically expensive enough for the cost to matter, yet cheap enough to be ubiquitous and thus easy to find, and they’re sufficiently generic that it’s hard to showcase them differently. Those products are tough to profit from through cross-border ecommerce—but that’s not a problem.

You’ll already know that international manufacturing is cost-effective at very low price points. Consider phone cases, for instance: one case can sell for a particular price on one site and then sell for four times that price on another, all because the difference between $50 and $2 won’t register as very significant for many shoppers (certainly not significant enough to warrant shopping around). That isn’t the only path ahead, though.

Indeed, high price points are also perfectly suitable for cross-border ecommerce. Here’s why: shipping costs depend on size, shape, weight, speed, and safety requirements—and plenty of today’s high-price items come in generic and hardy packaging in addition to weighing fairly little (heavy product shipping is getting better as well, but is still relatively expensive). Consumer electronics are once again the key: as technology develops, gadgets get smaller and lighter, making them more convenient to ship internationally.

Here’s the takeaway: with international shipment costs being fairly static (and growing more sophisticated through the development of superior logistics systems), it’s eminently possible to make a decent profit through manufacturing and selling a broad range of items. The key is profit margin, and many products (whether ultra-cheap or ultra-costly) are suitable—optimize your pricing, and you’ll have a great chance of succeeding.

Kayleigh Alexandra is a senior writer at MicroStartups.  

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