Cross-border sales, from one country into another, are the new frontier in Southeast Asian e-commerce. A growing middle class and high internet adoption rates in the region have laid the foundation for this trend.

The Business-to-Business (B2B) model dominates in cross-border sales, where one company sells in bulk to another, which then organizes domestic distribution. Most of the time, goods enter into Southeast Asia from places with cheap manufacturing, like China.  Its cross-border e-commerce retail turnover is expected to exceed RMB 3.6 trillion (USD 520 million) by 2020, in which exports will take up RMB 2.1 trillion.

But theoretically, an online shopper in Indonesia or Thailand can buy directly from an individual seller or an online store in China, or anywhere else, through e-commerce. These types of transactions, C2C or B2C, are also a growing trend.

According to Google’s Consumer Barometer Survey, which dates back to 2014/15, two out of three Singaporeans purchase products online from overseas, followed by Thailand where 49% of the consumers have made international purchases.

International e-commerce platforms are at the forefront of this trend because they can assist merchants with cross-border sales and create ways for shoppers to discover products from elsewhere. Amazon China just shifted its focus entirely on cross-border activities, shutting down its domestic marketplace.

Southeast Asia’s e-commerce giants are not passing up this opportunity. Shopee, the e-commerce app that’s part of NYSE-listed Sea, says it has been building out cross-border capabilities since 2016.

The firm just held a cross-border sellers summit held in Bangkok. Shopee had gathered sellers from China who already target Southeast Asian buyers and gave them a tour to help these vendors better understand the Thai market.

Taking logistics into its own hands

The number one pain point for cross-border e-commerce is logistics. It’s especially challenging in Southeast Asia due to the region’s geographical complexity. International transactions can lead to delayed delivery, which undermines the selling point of e-commerce–that it’s fast and convenient.

That’s why e-commerce providers tend to pay extra attention to their logistics partners. Some even build logistics capacity in-house to increase reliability. Shopee developed its own Shopee Logistics Services (SLS) delivery network to connect sellers in China with logistics partners across Southeast Asia.

SLS currently operates in seven markets in Southeast Asia and claims to have shipping costs “up to 30% lower than typical market rates”. Products from China can be delivered in three days, owing to its collaborations with major airlines such as Cathay and Singapore Airlines which allows for quick transfers between Shopee’s warehouses in China and delivery destinations in Southeast Asia,  said Shopee’s head of cross-border e-commerce, Liu Jianghong during his presentation at the summit.

The e-commerce platform also recently inked a deal with DHL e-commerce to help grow SLS. With this new partnership, Shopee sellers in China can now deliver products to buyers across Thailand more quickly and reliably.

Preventing fraud 

Tight control over logistics operations improve the user experience, but also help reduce the risk of e-commerce fraud, which can include payment fraud, identity fraud, and counterfeit goods.

Shopee Taiwan was embroiled in a fraud scandal in 2017 that saw 14 individuals, part of a fraud ring, stealing a total of NTD 1.5 million (USD 49,381) from 36 buyers in seven months, Taipei Times reported. Despite a tip-off, it still took more than six months of monitoring and investigating the transactions before local authorities tracked down the suspects.

This was a domestic fraud case. Authorities have to face much more difficult coordination efforts when it comes to cross-border fraud investigations.

Counterfeit goods, in particular, are a significant problem in Southeast Asia. The sale of fake goods has reached alarming levels in the region, South China Morning Post reports, citing Piotr Stryszowski, a senior economist at the Organisation for Economic Co-operation and Development (OECD). Cross-border e-commerce is a big contributor because it makes the origin of goods difficult to trace.

Shopee states that it has a strict and thorough measures to ensure products on its platform comply with the local laws and regulations of the markets it operates in.

At the summit, Shopee didn’t spend much time discussing the technologies or processes it’s harnessing to prevent fraud. Instead, it emphasized the need to build trust between sellers and buyers.

In an interview with KrASIA after the event, Liu shared a bit more. “On the more technical side, Shopee also has various features to prevent fraud. One example is our rating system, where we rate sellers so that the buyers would know how reliable the sellers are. At the same time, the sellers also rate the buyers. As a platform, we help build trust between sellers and buyers to reduce fraudulent behaviors,” he said.

When asked if Shopee blacklists buyers who trade counterfeit goods or run scams, Liu said that this is an extreme measure Shopee rarely resorts to.

Shopee later followed up with KrASIA, adding that it has in place rigorous screening and detection measures that can immediately identify and remove listings for infringing and counterfeit products. The identified seller’s account and other associated accounts would be flagged for a review process, which may result in them being terminated.

The company added that it is constantly innovating to enhance its ability to spot and eliminate potential threats and fakes, such as having a team of more than a hundred data scientists and fraud experts who “provide a vital layer of human expertise and experience in their local markets”.

Language barriers

Since Shopee first started developing ideas to facilitate cross-border flows of goods between China and Southeast Asia in 2016, it set up offices in various parts of China such as in Shanghai and Shenzhen from where it can work directly with potential sellers. In 2018, Shopee launched China Marketplace, an online platform that lets users browse Chinese products from sellers who normally would sell on Taobao and other Chinese sites.

China Marketplace provides cross-border sellers in China with a one-stop-shop solution, offering logistics, payments, translation, data and other forms of assistance to help them venture into Southeast Asian markets.

Shopee currently has an AI-powered translation tool which provides translation service to its cross-border sellers at zero cost. This allows sellers to instantly list their products in any of the seven markets that Shopee is operating in.

But despite efforts to use local languages for parts of the process, language is still a barrier in cross-border transactions, especially when social components such as live-streaming and chats between sellers and buyers come into the equation– and those are important factors that help to build trust. In a survey conducted by Shopee, 39% of the respondents perceived language barriers as a pain point.

A Chinese seller asked at the summit if Shopee will provide translation services to help vendors sell in Thailand via live streaming.

While acknowledging language as a hurdle, Shopee did not have an immediate response but said that it’s “open to exploring this issue”.

Moving forward, Shopee’s goal for 2019 is to expand cross-border e-commerce further in Malaysia, the Philippines, Vietnam, and Singapore, while the focus will remain on Thailand and Indonesia. It also plans to continually improve the efficiency of its logistics arm SLS.

The article was edited to include additional information provided by Shopee about its logistics network and fraud management processes.