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As promised, here are some additional insights from the field work we’re conducting in conjunction with the International e-Commerce Study.
Regardless of how one ships internationally (freight forwarder, International cart, or do-it- yourself with a leading transportation carrier), pushing unexpectedly high international shipping costs onto the consumer can dramatically reduce conversion and repeat orders.
No real surprise there. High shipping costs are clearly a common pain point in the international customer experience, especially when commonly-used shipping calculators tabulate a much lower landed cost estimate for the end-consumer.
The day-to-day variance in the actual costs that domestic shippers (UPS, DHL, FedEx, USPS, Pitney Bowes, etc.) charge companies that ship direct to consumers can be startling. Ask around and you’ll hear horror stories about how the very same product arriving at the very same international destination costs $30 one-day and $109 the next ― for no apparent reason.
Nothing degrades the post-purchase experience quicker than duties and shipping /handling charges costing equal to or more than the cost of the product itself.
This frustrating variance in taxes, duties, customs clearance and related handling costs results in unhappy customers (when costs are passed on to recipients) and wasted resources spent by retailers (and their shipping partners) investigating the unexplained daily cost swings.
These costs may also be absorbed by international ecommerce solution providers who are using major commercial shippers for logistics instead of developing in-country solutions with regional players. Absorbing these costs makes their business model difficult to maintain. In the case of Comerxia, this contributed to a rapid and painful exit from the marketplace with more than a few unhappy retailers left in their wake.
What Works?
International shipping/logistics solutions where the customs clearing process offers shippers a competitive advantage instead of a costly headache can offer a win-win-win. International online shoppers buy more due to significantly lower landed costs, online retailers sell more products (and can trust that their customers receive a reasonable shipping rate and a good overall experience) and international ecommerce solution providers can run a long-term, profitable business.
The lessons today for online retailers and consumer brands shipping product internationally?
1. International e-commerce requires a lot more than just “flipping on the shipping switch” with their established domestic transportation partner. Even when these shipping partners can point to a global footprint, don’t assume this means they can deliver the same value (and operational focus) they deliver within the 48 states.
Relative to their domestic business, most domestic shippers aren’t yet shipping enough volume globally to justify the time and effort required to develop and maintain in-country, custom clearing partnerships in developing global ecommerce markets.
2. Make sure your shipping partner has built or is building dedicated distribution channels into global markets. As international ecommerce growth drives up international order volume, unbilled cost variances will cut painfully into the margins of shipping/logistics partners that simply outsource shipping to the major domestic carriers and rely on the “pre-bill” model (where the shipper has to absorb unexpected shipping variances).
It is true that building shipping and distribution channels into global markets from the ground up takes time and resources. But by establishing on-the -ground relationships with in-country custom clearing partners in global markets, international ecommerce solution providers and shipping/logistics partners can dramatically reduce costs and eliminate the unexplained ─ and unexpected ─ variances in shipping charges that drive international online shoppers crazy.
An added plus is that investing in these distribution and final mile relationships often leads to similar relationships in adjacent international markets that open new and cost effective trade routes to global consumers.
3. Shipping e-commerce and direct orders internationally doesn’t have to be expensive! Providing a total landed cost estimate is a very different from executing on that estimate. Today, control of the customs clearance process at the local level is poor at best. As the volume of international ecommerce shipping grows, online retailers that can tightly control the customs clearance process in their targeted global markets will emerge as the next engines of retail growth.
E-commerce sites and direct marketers that work with shipping/distribution partners that “own” direct channels into global markets will find that their landed costs drop dramatically, especially compared to what the major domestic carriers charge. Even when third party shipping partners receive volume discounts from these carriers, the landed costs charged by other shippers with proprietary distribution channels are still substantially lower.
On-the-ground relationships that smooth out the variances in the customs clearance process improve delivery times significantly and can dramatically lower costs.
Most importantly, by surpassing the expectations of the global consumer, the international e-commerce experience is vastly improved.
What has your international shipping experience been like to date? Let us know.
Thanks all,
The J C Williams Team
4 Comments
Nice article.
When implementing International Shipping for a UK Retailer, the biggest headache was actually collecting all the sales data from Legacy Back-end Systems, in an appropriate format, to satisfy EU and UK Customs reporting regulations.
The logistics piece was relatively straightforward. We used the Metapack DMS solution to perform Carrier selection based upon the attributes of the consignment – the outcome was that the most cost-effective carrier/route was selected.
Nice to see some new analyst thinking on this, Kent et al.
On the point of providing a total landed cost, it’s also important to mention a couple of additional things.
Guaranteeing a total landed cost–in the customer’s currency–throughout the entire buying process (including a potential return weeks later) is essential to a positive customer experience.
Even more importantly, guaranteeing the *lowest possible* landed cost goes a long way to maximizing conversion. Rounding up to a safe number is easy, but doesn’t convert. The ability to guarantee the lowest possible landed cost requires accurate data on duties, taxes, and shipping costs for every country and currency you’re doing business with.
I think this complexity is part of what makes the “do-it-yourself” approach to international expansion so daunting and potentially unsuccessful.
Great to see bloggers and merchants looking into international shipping.
I recently wrote a two part blog post on Selling Internationally for Practical E-commerce’s blog focusing on how merchants can now move a small amount of inventory into a country like the U.K. (Big market close to Europe) or Canada and then ship locally to international buyers. [I don't think I can put the blog link in here and still have this comment listed.]
By moving inventory in bulk to a fulfillment service internationally merchants can truely know their total landed cost and what price points they need to sell at. By moving in bulk you save on shipping, pay CDT (Customs Duties Tax) upfront and then have inventory close to the buyer in your targeted international market.
The benefits:
* Know your total landed cost for your inventory before you sell it so you can ensure your mark it up/discount it correctly
* You already paid tax and duties so price it in for the customer.
* Local shipping for these products (big impact on some large marketplaces that punish internationally shipped products in listings)
* Easily compete against local sellers
* To Nolin’s point…returns are handled locally.
* Model scales well with growth
* Happy customers (Product arrives fast and can be returned)
This works for merchants that have some inventory depth and can move some best sellers internationally (Not your whole product catalog).
Questions to ask yourself
– How complex is your product catalog?
– What are your top sellers?
– Will your top sellers do well overseas?
Start small and focused
– Identify the top 5-10-30 products in your catalog
– Reduce your inventory requirement
– Higher value products that are hard to get
You can even modify your online stores to have a Canada or U.K./Europe category to point buyers to local products. Buyers understand that they can get local products faster and they appreciate it. You may even sell more of your Internationally shipped products.
Alternatively, look at consolidated shipping as a way to save some costs.
Nate Gilmore
Shipwire.com
Order Fulfillment from warehouses in the U.S., Canada and U.K.
Is there a central repo of up-to-date international customs/tariffs laws and procedures, accessible via a REST API, country by country?