A global surge in cross-border e-commerce activity spurred by the pandemic is expected to continue as consumer buying behaviors have accelerated the international online purchasing of products. In 2022, the B2C e-commerce market was worth an estimated USD 991.25 billion, and by 2030 it’s expected to reach USD 5,908.29 billion. Cross-border e-commerce is not just a trend, but a permanent change in consumer purchasing behavior. Companies not participating in the international market are truly at a disadvantage both today and in the future.
From a retailer’s perspective, one of the biggest challenges of cross-border e-commerce is simply having the confidence to make the decision to ship internationally. No matter the size of your business, entering the international market can be intimidating. Before diving into cross-border e-commerce, it’s important to understand today’s top delivery trends for both customers and brands to develop actionable steps to either begin or expand your international presence.
Delivery Trends Today: Customer vs. Brand
Naturally, there are some similarities and differences between customers and brands when it comes to values in the cross-border e-commerce delivery experience. Largely, customers are looking for fast delivery, low shipping costs, and an easy returns process. While speed has always been an important consideration, e-commerce has completely changed the game. Today, 90% of consumers expect two-to- three day shipping domestically and five-to-seven day shipping internationally, with 32% of global shoppers willing to abandon their carts if they believe the estimated shipping time is too long. This shift can largely be attributed to the “Amazon effect” and a business model based on fast, free shipping. As a result, customers expect the same experience from other retailers, with cross-border no exception. Customers also prioritize low shipping costs and easy returns, which can place a burden on brands. Approximately 10% of consumers returned all or part of their recent cross-border e-commerce purchase (75% for free and 23% at a cost) with the highest countries for returns being China (25%), New Zealand and Switzerland (22%), and the US (21%). Today, keeping shipping costs low and offering free/low-cost returns can present an even bigger challenge due to inflation, unpredictable fuel prices, and labor costs.
Brands, meanwhile, prioritize aspects such as on-time performance and having a one-stop shop for their delivery experience. Tracking on-time performance is arguably the most important KPI for brands to assess their cross-border e-commerce fulfillment strategy and how well it’s working, and retailers should look for 98.5% as a standard. On-time order fulfillment and delivery is one of the best ways to earn brand loyalty and build trust with the consumer (particularly with cross-border e-commerce customers who can naturally be more uneasy during the purchasing journey). Additionally, small- to medium-sized brands are looking for providers who can support a one-stop shop strategy, including those who can manage product classification, duty and tax calculation embedded on their web shop, and more for a seamless cross-border e-commerce delivery experience.
Balancing Speed and Cost
With an understanding of today’s top customer and brand cross-border e-commerce delivery trends, the next step is for retailers to be aware of their available carrier options. Brands have a number of options ranging from those with extremely fast shipping that tends to be more expensive to others with slower shipping but lower costs. Generally, product price points will guide a brand’s shipping rate. For example, higher-priced, higher-margin goods typically translate to brands being able to offer a higher-priced shipping service model. The carrier choices generally fall into one of three buckets: 1) integrators, 2) direct-to-consumer non-asset based last-mile and 3) parcel/postal consolidators. Integrators offer the fastest shipping, but at the highest cost. The second category averages cost and delivery time, and parcel/postal consolidators offer the lowest cost, but longest shipping time. Once deciding on a desired delivery experience that works for both your company and customers, it’s time to compare the actual rates and transit times offered in your selected carrier category and ask specific questions that will allow you to better understand the capabilities of your options.
Asking the Right Questions
Ideally, brands should select a carrier that offers a relatively fast delivery service at a reduced cost that is reliable. There are starter questions to ask during the selection process to best understand how a carrier can meet your individual goals related to key service areas.
On-time Performance Rate: Does the carrier have the ability to deliver on time, consistently? It’s important to ask for performance reporting by service type and country along with total end-to-end transit days reporting by country to which you’ll be shipping internationally. It’s also critical to request performance rates on delivery exception types including damages, undeliverables, and gateway holds. Other areas to discuss are a carrier’s speed vs. cost model as well as how they plan to conduct test shipments, which is critical to execute prior to making a final decision.
Carrier Network Structure: First, find out if a carrier is asset-based or non-asset based. An asset-based carrier will have more control over its network but cost more. Non-asset based carriers will have less control over the entire network, but cost less. Additionally, ask where the carrier’s US gateways are located. Gateways closer to a brand’s desired shipping location will translate to lower first-mile transit times and lower first-mile costs. Other important questions to ask involve how a carrier manages end-to-end visibility along with its integration capabilities with major shipping platforms along with specific e-commerce or enterprise resource planning systems. If custom integrations are required, it will likely be more expensive and time consuming.
Product Classification, Duty and Tax Calculation, and Customs Clearance: Navigating the complexities of each country’s laws and regulations is a huge component of cross-border e-commerce and ultimately affects the price of goods and shipping. Brands need to be aware of changing laws and regulations to maintain a competitive advantage. Important questions to ask prospective carriers include, can you classify (HS code) your product portfolio? Are you able to calculate duty and tax based on the HS code of the shipment and destination country? Do you provide a delivery duty unpaid (DDU) or a delivery duty paid (DDP) service? DDU services tend to burden brands’ customers with additional fees, duties, and taxes at time of delivery, while DDP avoids this.
Cross-border e-commerce is not only here to stay, but is projected to experience explosive growth in the years ahead. It’s imperative to stay updated on today’s delivery trends and create a cross-border e-commerce shipping strategy with the appropriate carrier that best aligns with consumer demands and your business needs by asking the right questions during the selection process. Doing so will set your brand up for success as cross-border e-commerce continues to boom in the coming years.
Michael Lamia is the Senior Vice President of GEODIS MyParcel and GEODIS eLogistics. GEODIS MyParcel is a small parcel shipping service that currently ships from the U.S. to 26 European countries, the UK and Canada. For more information, visit geodismyparcel.com.
