This article appeared in the Fall 2018 International Issue.
There are many reasons to focus on international marketing and distribution, and if you ignore this segment, your business could be missing out. Global parcel shipping has increased by 48% over the last two years, and it is expected to grow by over 20% this year. Ninety-five percent of all consumers live outside the US. Finally, in comparison to a domestic order, the average order value of an international shipment is 17% higher, meaning that you get more revenue for each order.
In spite of these opportunities, shippers feel that there are significant obstacles to international shipping, with high shipping costs, additional fees at delivery, and lengthy delivery times being among the most cited. But, as with many things in our industry, these concerns can be mitigated with careful planning.
Implementing a Strategy and Reducing Common Concerns
The centerpiece of your strategy starts with the fact that customers like shipping options. Given that fact, any international shipping programs must include options. Primarily, the most important options for customers are choosing between higher or lower shipping charges, faster or slower delivery times, more or less shipment visibility, and how to pay the duties and taxes.
When working with your carriers, make sure that they offer you both an international express service as well as a deferred global postal consolidation option. The cost between these services is staggering, with the express option costing two to three times more than a deferred solution. The main reason for these cost differences is that the express option is a door-to-door pick-up and delivery with expedited, formal customs clearance in the local country. Consolidation, on the other hand, is an option where your package is picked up, grouped together with other packages, forwarded to the local country, and injected into their local postal system for delivery to your customer.
These cost differences and forwarding processes also mean very different transit and delivery times to your customers. When utilizing an express service, you can expect delivery to your customer within one to three days. With consolidation, delivery times are usually four to seven days, depending on the service you select. Transit times also differ greatly by destination country, so you will want to work with your carrier on which lanes and countries provide the best deliveries.
When evaluating these different shipping options, also consider that they offer very different tracking and shipping visibility for your customers. International express shipping provides your customers with frequent updates, including a pick-up scan, in-transit scan, customs, out for delivery, and proof of delivery. With a postal consolidation option, you will have very limited visibility that may or may not include proof of delivery.
When offering these choices to your customers, it is crucial that you fully explain the many differences in service between express shipping and consolidated shipping thorough your website, at check out, and with your customer service. Most surveys show that if you set customer expectations up front, they are willing to accept longer transit times for significantly lower shipping costs.
Offering your customers choices in shipping costs and deliveries will have a major impact on your overall growth, as the order volume usually grows significantly when less expensive shipping options are offered.
Duties and Taxes
The last area of concern for most international shippers is how to handle duties and taxes for your customers. Primarily, most shippers have utilized a deliver duty unpaid (DDU) option, which means that duties and taxes are paid by the customer at time of delivery and determined by the destination country. This approach does eliminate the need for shippers to calculate duties and taxes at point of shipping. However, the downside is that the carriers may charge extra fees for collection of the duties and taxes, and the customer may refuse the shipment when they see the additional costs. Collecting duties and taxes at delivery can often lead to longer delivery times.
Another approach which is becoming more common is for shippers to utilize a deliver duty paid (DDP) service where the duties and taxes are prepaid and charged to the customer at point of sale. In order to do this, shippers must calculate real-time duty and taxes for their products based on a number of factors, including country of origin, a harmonized code, and the fully landed cost of the total order value. While this may sound overwhelming for shippers, there are many carriers and services that can facilitate this, including DHL ICart, UPS i-parcel, and FedEx Cross Border, as well as many others. Most surveys have shown that utilizing a DDP service leads to better customer satisfaction and a smoother delivery.
Keep in mind that whatever approach you take, you, as the shipper, are responsible for accurate duties and taxes collection.
There are many ways that you can take advantage of global growth and reach new customers. As we have discussed, the key is to plan and communicate your international strategy before you start shipping. Partner with your carriers to come up with the right shipping strategies that offer your customers choices and cost-effective ways to get your products to your international customers.
Tim Sailor, DLP is the founder of Navigo Consulting Group, which specializes in contract optimization, distribution analytics, and strategic sourcing. Since 1995, Navigo has reduced its clients’ shipping costs by 20%-30%. Tim has contributed to the transportation industry for over 30 years. You can reach Tim at 562.621.0830 or Tim@NavigoInc.com.