Over much of the past decade, US-based e-commerce grew at 20 to 30% per year due to increases in broadband access and consumer confidence. However, these growth curves flattened during the economic downturn. Today, with a 10% compound annual growth rate (CAGR), US online retail sales are forecasted to reach $248.7 billion by 2014, according to research firm Forrester.
At the other end of the spectrum, international e-commerce is on the upswing. Worldwide Internet usage is rapidly approaching the two billion mark. Asia now comprises 42% of Internet users in the world while Europe consists of 24% of users. In many ways, global market conditions echo the US conditions at the early part of this century. This includes an increase in tech savvy consumers, an increase in Internet access and growing confidence in payment security and privacy.
Understanding the Challenges of International Shipping
International shipping is more complex than domestic package handling. Organizations that fail to address challenges upfront could end up with a poor customer experience, low sales revenue and higher-than-expected costs. As a result, it is important to understand what makes international shipping intricate.
For example, understanding local laws and regulations is critical for success since each country has its own import and export laws. International shippers should make sure they know in advance whether they can legally ship their goods to a customer in another country. Currency, livestock and radioactive materials are prohibited almost everywhere. Each country also has a long list of prohibited and restricted items. For example:
• Argentina prohibits furs, radios, televisions, phonographs and ready-made clothes.
• Australia prohibits goods produced wholly or partly in prisons or by convict labor.
• Brazil’s list includes canes and umbrellas.
• China prohibits walkie-talkies, wrist watches, cameras, bicycles and sewing machines.
• Fiji prohibits dyes and coloring materials.
• Iran does not allow games involving dice, musical instruments or brown sugar.
• Italy’s list includes bells, clocks, leather goods, playing cards and typewriter ribbons.
• Nepal prohibits cameras, cinnamon, photographic paper and watches.
• Pakistan requires that fountain pens and toys be mailed in insured parcels.
• Peru does not allow gloves, household linens or wooden utensils.
• Sri Lanka prohibits leather goods including handbags, volleyballs and footballs.
• United Arab Emirates does not allow pork products or imitation pearls.
• In Tanzania, Japanese shaving brushes are prohibited.
This captures only a small fraction of the restrictions. However, it shows the variety and complexity of international import laws. For additional information, visit the U.S. Environmental Protection Agency’s website at www.epa.gov/compliance/international/importexport.html.
It is also critical for international shippers to follow and comply with US rules regarding cargo transported on passenger aircraft. For example, the Cargo Screening Mandate, which went into effect in August 2010, requires 100% of all air cargo to be screened at the piece level prior to being loaded onto passenger aircraft. This law was established by the 9/11 Commission Act of 2007 and is critical for ensuring the security of the air cargo supply chain and making it safer to transport packages and mail on passenger aircraft.
To help meet this goal, the Transportation Security Administration (TSA) established the Certified Cargo Screening Program, which allows shippers and mailers to screen cargo earlier in the process through trusted, vetted and audited facilities. This can help organizations expedite their mail and packages safely and on time to their destination. For more information and a list of facilities that participate in the program, visit the TSA’s website at http://www.tsa.gov/assets/pdf/cert_locations_b.pdf.
Another area that organizations should pay close attention to is rules established by local postal administrations that impact how shipments are addressed and prepared. In addition to customs forms, value limits and size limits, many countries do not follow the US standard of street address, city, state and ZIP.
Proper addressing helps ensure that parcels reach the intended recipient, but also sends a
message that a retailer understands and values its customers’ business.
Some retailers look to simplify shipping by engaging a single high-cost carrier who provides door-to-door service. In most cases, these unnecessary shipping expenses can make the overall cost too expensive. It is not unusual for ready-and-willing shoppers to bail out of shopping carts when shipping costs are revealed, especially when lower-cost shipping alternatives are readily available.
Organizations that succeed will be the ones who can manage shipments across multiple carriers and take advantage of reliable, efficient postal networks.
Further Complexities
While retailers are familiar with managing tax rates across multiple states and jurisdictions in the US, these challenges are multiplied when it comes to international e-commerce. Organizations need to know the appropriate rates for taxes and duties by country, then calculate, collect, remit and manage these funds.
Two factors add to the complexity:
• Shipments must be coded using the HS (Harmonized System) number. These classification numbers are assigned to individual products and are used by customs authorities around the world for the application of duties and taxes. These numbers are typically six to 12 digits long. The first six digits are standardized worldwide, while additional numbers are used by some governments to further distinguish products in certain categories.
• Shippers also need to confirm the country of origin for the goods being shipped. Regulations and fees are often based not on the location of your company or warehouse – but on the locale of the original manufacturer. Retailers who sell goods that were produced in countries around the world need to create a mechanism to identify, capture and communicate that information as part of their shipping documentation.
Another key component of international e-commerce and shipping success are returns and special handling. Most companies that sell via the Internet understand the importance of a good returns process. However, international returns processing can be far more intricate. Procedures established for outgoing shipments must also be created in reverse.
Establishing a process for documentation, cost-effective shipping and returns back to the US is only part of the challenge. For returned goods, the customs authorities in most countries will refund up to 100% of the original duties and fees paid upon import. However, customs will only refund duties and fees under the drawback program to those claimants that can substantiate the importation and re-exportation of the duty-paid merchandise. Therefore, it is imperative that organizations maintain the proper records for the required period of time, so drawback claims are fully supportable in the event of a customs audit. Adding to the complexity, this same detailed record keeping required for duty drawback on re-export is necessary for the re-entry or import of the returned goods into the US on a duty-free basis.
The last key area for international e-commerce and shipping success is maintaining a positive customer experience. In earlier days, customers might deal with bumps and glitches in the process because e-commerce was new and the added convenience a real benefit. Today, online shopping experiences have been enhanced and expectations are high. To serve customers well and tap into the growth in international e-commerce, organizations must communicate accurate information to customers at the point-of-sale and then deliver on their promises.
Failure to manage these challenges will translate into customer dissatisfaction. At a minimum, retailers need to reassure shoppers that they can:
• Handle payments in the currency preferred by the shopper;
• Correctly calculate shipping costs, taxes and duties in advance;
• Offer a clear, easy-to-understand process for returns and after-sales service;
• Provide accurate estimates of delivery dates; and
• Honor the price quotes provided with no hidden fees or surprises.
Fortunately, new technologies and services are making these requirements easier to manage.
Building Expertise without Building Infrastructure
Over the past few years, aggregators and systems integrators have introduced technologies that support international e-commerce. Given the vast revenue opportunities, even the largest retailers have opted to outsource key aspects of the shopping experience to deliver a world-class customer experience.
E-commerce platform providers make it easy for retailers to automatically present and settle transactions in foreign currencies, handle international payments processing and simplify logistics.
These aggregators and systems integrators have also collaborated with leaders in international shipping.
The integration of third-party shopping carts and international shipping solutions enables retailers to fulfill orders by shipping goods to a centralized facility in the US. This eliminates the need for cross-border infrastructure or up-front capital purchases to help increase efficiency and capabilities without risk or expense. Retailers should select international service providers who deliver end-to-end support, with scalability and the flexibility to lower costs and improve customer satisfaction at every step.
Choosing Where to Invest and Cut Corners
Once an organization is equipped with the capabilities to sell internationally, there are still decisions to be made. Choosing where to invest and cut corners can play a significant role in overall profitability and growth potential. Areas to consider include:
• Product variety. Some organizations choose to offer international shoppers only a subset of their full product catalog. While simpler, it can send the wrong message. Even though sales may be concentrated in a limited number of SKUs, it is often the range and variety of products that attract buyers in the first place. Visitors can easily see what you offer to US shoppers, and when they are redirected to a sitelet where only a fraction of these products are available, a second-class status becomes self-evident.
• Nimbleness. Some retailers are thrilled when their international e-commerce sites are up and running, but fail to manage these properties the way they would their domestic stores. They test and measure a variety of offers domestically, but are content with a static checkout experience elsewhere. Market leaders do not assume that what works at home will work overseas. Test whether costs for duties should be included in the product value, shipping cost or charged separately. Determine if customers prefer speed or cost when it comes to shipping. Overall, retailers should experiment and identify what works best in each market.
• Co-opetition. Technology firms and shipping services eliminate barriers to international e-commerce, but retailers still need to attract customers. The first step is to recognize the limitations of your brand. Some companies are well-known in the US but are completely unknown in other countries. To reach new markets without breaking the bank, many look to portals, marketing alliances and cooperative databases — often with competitors — to attract attention.
Retailers looking to tap into the enormous growth potential of international e-commerce no longer need to navigate the complexities alone. New technologies and international shipping services have eliminated logistics barriers, so retailers can now concentrate their efforts on sales, marketing and merchandising.
Organizations must choose their e-commerce and shipping solutions with care to achieve the levels of speed, scalability and flexibility essential for success. Market leaders will work with suppliers who understand the complexities of international e-commerce and shipping, and provide for seamless processes, market insight and well-executed customer experiences.
Andrew Manning is Vice President, Operations, International Services, Pitney Bowes Inc. Visit www.pb.com for more information.
At the other end of the spectrum, international e-commerce is on the upswing. Worldwide Internet usage is rapidly approaching the two billion mark. Asia now comprises 42% of Internet users in the world while Europe consists of 24% of users. In many ways, global market conditions echo the US conditions at the early part of this century. This includes an increase in tech savvy consumers, an increase in Internet access and growing confidence in payment security and privacy.
Understanding the Challenges of International Shipping
International shipping is more complex than domestic package handling. Organizations that fail to address challenges upfront could end up with a poor customer experience, low sales revenue and higher-than-expected costs. As a result, it is important to understand what makes international shipping intricate.
For example, understanding local laws and regulations is critical for success since each country has its own import and export laws. International shippers should make sure they know in advance whether they can legally ship their goods to a customer in another country. Currency, livestock and radioactive materials are prohibited almost everywhere. Each country also has a long list of prohibited and restricted items. For example:
• Argentina prohibits furs, radios, televisions, phonographs and ready-made clothes.
• Australia prohibits goods produced wholly or partly in prisons or by convict labor.
• Brazil’s list includes canes and umbrellas.
• China prohibits walkie-talkies, wrist watches, cameras, bicycles and sewing machines.
• Fiji prohibits dyes and coloring materials.
• Iran does not allow games involving dice, musical instruments or brown sugar.
• Italy’s list includes bells, clocks, leather goods, playing cards and typewriter ribbons.
• Nepal prohibits cameras, cinnamon, photographic paper and watches.
• Pakistan requires that fountain pens and toys be mailed in insured parcels.
• Peru does not allow gloves, household linens or wooden utensils.
• Sri Lanka prohibits leather goods including handbags, volleyballs and footballs.
• United Arab Emirates does not allow pork products or imitation pearls.
• In Tanzania, Japanese shaving brushes are prohibited.
This captures only a small fraction of the restrictions. However, it shows the variety and complexity of international import laws. For additional information, visit the U.S. Environmental Protection Agency’s website at www.epa.gov/compliance/international/importexport.html.
It is also critical for international shippers to follow and comply with US rules regarding cargo transported on passenger aircraft. For example, the Cargo Screening Mandate, which went into effect in August 2010, requires 100% of all air cargo to be screened at the piece level prior to being loaded onto passenger aircraft. This law was established by the 9/11 Commission Act of 2007 and is critical for ensuring the security of the air cargo supply chain and making it safer to transport packages and mail on passenger aircraft.
To help meet this goal, the Transportation Security Administration (TSA) established the Certified Cargo Screening Program, which allows shippers and mailers to screen cargo earlier in the process through trusted, vetted and audited facilities. This can help organizations expedite their mail and packages safely and on time to their destination. For more information and a list of facilities that participate in the program, visit the TSA’s website at http://www.tsa.gov/assets/pdf/cert_locations_b.pdf.
Another area that organizations should pay close attention to is rules established by local postal administrations that impact how shipments are addressed and prepared. In addition to customs forms, value limits and size limits, many countries do not follow the US standard of street address, city, state and ZIP.
Proper addressing helps ensure that parcels reach the intended recipient, but also sends a
message that a retailer understands and values its customers’ business.
Some retailers look to simplify shipping by engaging a single high-cost carrier who provides door-to-door service. In most cases, these unnecessary shipping expenses can make the overall cost too expensive. It is not unusual for ready-and-willing shoppers to bail out of shopping carts when shipping costs are revealed, especially when lower-cost shipping alternatives are readily available.
Organizations that succeed will be the ones who can manage shipments across multiple carriers and take advantage of reliable, efficient postal networks.
Further Complexities
While retailers are familiar with managing tax rates across multiple states and jurisdictions in the US, these challenges are multiplied when it comes to international e-commerce. Organizations need to know the appropriate rates for taxes and duties by country, then calculate, collect, remit and manage these funds.
Two factors add to the complexity:
• Shipments must be coded using the HS (Harmonized System) number. These classification numbers are assigned to individual products and are used by customs authorities around the world for the application of duties and taxes. These numbers are typically six to 12 digits long. The first six digits are standardized worldwide, while additional numbers are used by some governments to further distinguish products in certain categories.
• Shippers also need to confirm the country of origin for the goods being shipped. Regulations and fees are often based not on the location of your company or warehouse – but on the locale of the original manufacturer. Retailers who sell goods that were produced in countries around the world need to create a mechanism to identify, capture and communicate that information as part of their shipping documentation.
Another key component of international e-commerce and shipping success are returns and special handling. Most companies that sell via the Internet understand the importance of a good returns process. However, international returns processing can be far more intricate. Procedures established for outgoing shipments must also be created in reverse.
Establishing a process for documentation, cost-effective shipping and returns back to the US is only part of the challenge. For returned goods, the customs authorities in most countries will refund up to 100% of the original duties and fees paid upon import. However, customs will only refund duties and fees under the drawback program to those claimants that can substantiate the importation and re-exportation of the duty-paid merchandise. Therefore, it is imperative that organizations maintain the proper records for the required period of time, so drawback claims are fully supportable in the event of a customs audit. Adding to the complexity, this same detailed record keeping required for duty drawback on re-export is necessary for the re-entry or import of the returned goods into the US on a duty-free basis.
The last key area for international e-commerce and shipping success is maintaining a positive customer experience. In earlier days, customers might deal with bumps and glitches in the process because e-commerce was new and the added convenience a real benefit. Today, online shopping experiences have been enhanced and expectations are high. To serve customers well and tap into the growth in international e-commerce, organizations must communicate accurate information to customers at the point-of-sale and then deliver on their promises.
Failure to manage these challenges will translate into customer dissatisfaction. At a minimum, retailers need to reassure shoppers that they can:
• Handle payments in the currency preferred by the shopper;
• Correctly calculate shipping costs, taxes and duties in advance;
• Offer a clear, easy-to-understand process for returns and after-sales service;
• Provide accurate estimates of delivery dates; and
• Honor the price quotes provided with no hidden fees or surprises.
Fortunately, new technologies and services are making these requirements easier to manage.
Building Expertise without Building Infrastructure
Over the past few years, aggregators and systems integrators have introduced technologies that support international e-commerce. Given the vast revenue opportunities, even the largest retailers have opted to outsource key aspects of the shopping experience to deliver a world-class customer experience.
E-commerce platform providers make it easy for retailers to automatically present and settle transactions in foreign currencies, handle international payments processing and simplify logistics.
These aggregators and systems integrators have also collaborated with leaders in international shipping.
The integration of third-party shopping carts and international shipping solutions enables retailers to fulfill orders by shipping goods to a centralized facility in the US. This eliminates the need for cross-border infrastructure or up-front capital purchases to help increase efficiency and capabilities without risk or expense. Retailers should select international service providers who deliver end-to-end support, with scalability and the flexibility to lower costs and improve customer satisfaction at every step.
Choosing Where to Invest and Cut Corners
Once an organization is equipped with the capabilities to sell internationally, there are still decisions to be made. Choosing where to invest and cut corners can play a significant role in overall profitability and growth potential. Areas to consider include:
• Product variety. Some organizations choose to offer international shoppers only a subset of their full product catalog. While simpler, it can send the wrong message. Even though sales may be concentrated in a limited number of SKUs, it is often the range and variety of products that attract buyers in the first place. Visitors can easily see what you offer to US shoppers, and when they are redirected to a sitelet where only a fraction of these products are available, a second-class status becomes self-evident.
• Nimbleness. Some retailers are thrilled when their international e-commerce sites are up and running, but fail to manage these properties the way they would their domestic stores. They test and measure a variety of offers domestically, but are content with a static checkout experience elsewhere. Market leaders do not assume that what works at home will work overseas. Test whether costs for duties should be included in the product value, shipping cost or charged separately. Determine if customers prefer speed or cost when it comes to shipping. Overall, retailers should experiment and identify what works best in each market.
• Co-opetition. Technology firms and shipping services eliminate barriers to international e-commerce, but retailers still need to attract customers. The first step is to recognize the limitations of your brand. Some companies are well-known in the US but are completely unknown in other countries. To reach new markets without breaking the bank, many look to portals, marketing alliances and cooperative databases — often with competitors — to attract attention.
Retailers looking to tap into the enormous growth potential of international e-commerce no longer need to navigate the complexities alone. New technologies and international shipping services have eliminated logistics barriers, so retailers can now concentrate their efforts on sales, marketing and merchandising.
Organizations must choose their e-commerce and shipping solutions with care to achieve the levels of speed, scalability and flexibility essential for success. Market leaders will work with suppliers who understand the complexities of international e-commerce and shipping, and provide for seamless processes, market insight and well-executed customer experiences.
Andrew Manning is Vice President, Operations, International Services, Pitney Bowes Inc. Visit www.pb.com for more information.
