The Future of Cross Border DeliveryOctober 9, 2019 in Ecommerce Tips, Marketplaces, Parcelhub, Partners
With eCommerce slowly gaining ground on more traditional retail, the draw of finding what you want and buying it is starting to become borderless and global. In fact, such cross border eCommerce is set to be a $1 trillion industry by 2020, according to research by Invesp.
Already, 54% of US digital shoppers reported making online purchases from foreign site in the past, the research finds, with 67% of global consumers who shop abroad buying because prices are lower outside of their own country or to get their hands on brands or goods not available in their own markets.
These trends are also something driving vast swathes of Chinese shoppers to start shopping cross border: looking for Western goods, particularly brands and items that are specifically ‘British’, and are prepared to pay a premium for them.
In fact, a recent PayPal survey finds that 9% of Chinese consumers are actively buying UK goods online on a regular basis. Even 15% of Germans are buying British, the study also shows.
In short, cross border eCommerce is booming.
However, while this is great for eCommerce it is a challenge for delivery. From a consumer point of view, the Invesp research suggests that high shipping costs – or the fear that shipping costs will be high – and long delivery times are what puts them off buying cross border.
From retailers’ and carriers’ points of view, these two are also an issue, along with a whole host of other things that make cross border delivery a challenge. That said, however, with such a large and growing propensity for cross border eCommerce, it is a challenge that needs to be risen to.
So what are the issues with cross-border eCommerce shipping and what can be done to ameliorate them?
Cost and delivery time
Let’s get the main ones out the way first. The cost of cross-border shipping and the inherent extra timeline of going, literally, the extra mile or hundred are big headaches for retailers and shippers. The simple fact is that the faster you want to send it, the more that costs – and if you do it cheaply, it takes ages to arrive.
So what can be done? An effective and reliable logistics setup is key and that involves bringing together logistics players right across the board – from domestic to international to local. It also involves running a mixture of shipping options – land, sea and air – and getting them to work in perfect harmony.
Costs here can also be made more efficient by scale.
So, much like running a domestic shipping operation, using third-party tools to manage carrier options is key for anyone looking to run cross border shipping.
While delivery is a key, so are returns – and that is doubly true for cross-border eCommerce logistics. Many people may buy your stuff from all over the world, but not all of them will want to keep it and many will want to return it. So how do you do that?
The most reliable way to handle international returns is to again manage your returns using third-party platforms that can draw on any number of options, often looking to tap into carriers bringing goods back the other way.
It is also worth looking at how to use local returns provider that will aggregate the returns for a country or region, handle refunds with the customer then send back to you – you pay them for the service and for the refund.
Another growing trend in international returns is simple: ‘right off’. Given the costs and complexities of running returns internationally, many retailers see it as cheaper and more convenient to simply refund the customer and let them keep the goods.
Customs, tariffs and taxes
Part of the complexity of sending – and returning – goods overseas lies in what happens when goods cross borders (customs) and the tariffs that that can incur. There are also the tax and VAT considerations to bear in mind too, as each country and region is likely to have its own customs, tariffs and taxes on goods sold outside its borders and imported therein.
One of the biggest issues is VAT compliance when trading cross-border. With some 800,000 online stores in Europe alone, it pays to find out what VAT rules apply to any regions you are looking to do cross-border business in.
SimplyVAT.com published a handy guide to how to work out VAT liability for cross border training earlier this year and it suggests that keeping up to date with VAT rules and rates in all countries that you operate in and to keep ahead of the game when it comes to making sure you know what VAT schedules in each country what you are selling come under.
It can be a changeable roster of tariffs – and Brexit (see below) is likely to shake that up even more, so keep tabs on that– and it pays to keep up to date on a host of Government and EU VAT websites, including the European Commission or Web Retailer, as well as this free VAT checker.
One other area of note when it comes to cross-border VAT is that of storing goods in other countries. If you choose to use a fulfilment centre in the EU to sell to private consumers and businesses, you must VAT register in that country regardless of whether it is done through a marketplace such as Amazon (see below).
For example, if you use Amazon’s Pan EU programme – where goods could be stored in up to seven EU countries – you would automatically need to VAT register in seven different countries. Failure to do this could result in penalties, hefty backdated payments and if you use an online marketplace your account could be shut down.
In a recent report by Tamebay, the European Commission has proposed new standards on transparency and fairness for online platforms in a bid to help small and medium businesses, so watch this space.
As mentioned above, marketplaces – particularly Amazon – can help not only to sell goods into international markets, but can also be used for logistics, warehousing and returns. In fact, marketplaces offer the ideal way for any etailer to get stuck into international selling, taking much of the risk out of getting going – the marketplace does the local marketing, often handles the tax and VAT issues, as well as handling warehousing, delivery and returns. What more could you ask for?
However, Amazon isn’t the main player in many European countries – not elsewhere – and so for many retailers looking to gain an overseas foothold via the marketplace route, you still need to understand who the main players are in those markets and what they can do for you – often with the same lingual, custom and practice issues associated with trying to set up your own site there.
That said, tapping into a marketplace can yield advantages in handling delivery and returns. For this reason, four leading marketplaces including eMAG, Cdiscount, ePrice and Real.de have teamed up to launch a pan-European marketplace in an effort to support merchants sell cross-border as they expand into the European territories.
The move will see the International Marketplace Network (IMN) uniting four marketplaces into an interface to enable merchants to use a single point to sync their products and sell in real-time, granting sellers access to more than “230 million potential customers.”
Brexit is the massive elephant in the room when it comes to cross-border eCommerce logistics. At the time of writing what that elephant looks like precisely is hard to determine, however, and when the UK leaves the EU there will be changes to how cross border eCommerce works for both UK retailers and shippers sending into Europe and for European retailers heading the other way.
Beyond Brexit there lies other issues likely to impact cross-border trade. A little-known aspect of Brexit is that it will see trade deals being struck between the UK and other non-EU countries, which will also change how UK retailers deal with selling and shipping to these countries. What that will look like is even less clear right now than the UK’s relationship with the EU.
Reciprocal deals with the US, Canada and Australia are on the cards and the UK’s trading relationship with the likes of China will also change in the decade ahead – changing just what we can and can’t export to these countries. But that is for another day.
There can be no doubt that the future growth for retail is going to come from international expansion into cross border trading. The internet makes it very easy to reach across borders and access all those new customers, but getting the goods to them can have its challenges.
Language is always a barrier, but don’t underestimate the power of local customs have over how retail works.
From a delivery point of view, cross border adds more time and greater costs to getting goods to customers. However, clever use of third-party logistics providers, tapping into marketplace services and doing the ground work in the countries you want to target can help you turn your local business into one that is global – and with Brexit set to change the game in terms of how the UK trades with other countries, now is the time to strike.
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