Thanks to international carriers, internet-savvy postal providers and clever software, handling cross-border sales is increasingly straightforward. However, there can still be unexpected problems. Penelope Ody reports
It often happens by accident and it’s not always quite what was wanted or intended. Whether an e-tailer plans international growth or not, sooner or later overseas customers will land on the company's site and, in these straitened times, it is difficult to refuse the business when it does arrive.
“It is especially true for smaller players who may be less proactive in focusing on overseas markets,” says Andrew Starkey, head of e-logistics at IMRG . “People will find you in web searches and, as merchants have said to us, ‘You can’t stop the Australians ordering.’”
Australia currently heads the IMRG/MetaPack Delivery Index of outbound e-parcel destinations, accounting for more than 14 per cent of UK e-tail dispatches, marginally ahead of the USA and followed by France, Germany and Ireland.
Shipping to Australia and the USA may seem straightforward: both are English speaking, so no need for multilingual customer-service departments and both have high duty thresholds, so few consignments will attract additional charges. However, both countries are a long way off. “It can take up to 14 days for the standard post to reach Australia,” says Starkey, “and the longer orders are in the delivery pipeline, the more chance there will be that things can go wrong.”
Shipping long distances can also be expensive – especially for retailers making their first tentative steps into cross-border when sales volumes are low. Providing a cost-effective solution is the aim of Worldnet, a start-up co-founded in January 2012 by Stuart Hill, formerly head of international operations for ASOS. “It is too expensive to put stock in every country,” says Hill, “so internet retailers have the choice of using the mail – with no tracking and lengthy lead times – or they can opt for express carriers, which is expensive.”LOCAL NAMES
Hill argues that international shoppers like to see a familiar brand delivering their goods so Worldnet is partnering with a range of in-country carriers with parcels from a number of e-tailers consolidated by country in the UK, then bulk shipped to the relevant country and handed over to the local distributor for in-country delivery. Worldnet is gradually expanding the countries it services with an initial list of 25 headed by the USA, Australia, New Zealand, Germany, France Italy, Spain, Ireland, Benelux, Portugal, Denmark, Sweden and Finland. Retailers using the system include ASOS, eBay, River Island and Aurora, while the company’s first year turnover will exceed £20million.
“The ecommerce market wants a low-cost option with tracking and three-to-five-day delivery,” he says, “so we have created an independent offer to provide that. Using an in-country carrier increases customer confidence and satisfaction. We try to go for the best in-country provider so postal services are often our first choice.”
The growing importance of online delivery is something that many national postal businesses are already taking to heart: in the UK, for example, Royal Mail has announced a £75 million investment over four years to expand its Parcelforce business to cope with the rising tide of online retail sales.
In Belgium bpost has gone rather further, developing a consolidation service which allows shoppers to order from a number of local and national e-tailers and have the goods delivered in one pre-scheduled consignment by the postman. As well as delivering the shopping the postman will also collect parcels to be posted and collect and deliver laundry, dry cleaning and shoe repairs.
“One day, people themselves will no longer travel to pick up or drop off goods,” says Peter Somers, CEO, bpost parcels and international. The Shop & Deliver scheme is currently on trial in three areas and Somers is confident of national roll-out in 2014. Delivering cross-border orders in the same pre-booked two-hour window as well would clearly be a possibility for e-tailers shipping via bpost.THE CHALLENGE OF RETURNS
As well as efficient deliveries international shoppers often need reassurance about the ease of returns or after-sales services. Most sites spell this out clearly – although sometimes finding precisely where takes perseverance. “A poor returns offer will stop people buying,” says Andrew Starkey, “and many shoppers will look for the delivery offer even before they start to browse a site, especially for cross-border purchases.”
Until the advent of Worldnet, the obvious choice for would-be cross-border retailers was to work with an international logistics company that could provide a local returns address and the ability to process and bulk return goods “Others are finding it useful to partner with a local bricks and mortar retailer in the region,” says Dean Wyatt, vice-president business development, retail UK, at DHL . “Such collaboration can allow them to tap into the distribution network of the partner as well as allowing UK retailers to offer click-and-collect and returns services, without the risk of a large capital investment.”
At the top end, where the retailer already has a physical presence in the market, the challenges can be rather different. “At the luxury end shoppers can be very demanding,” says Alek Adamski, associate partner at Kurt Salmon . “If someone is spending £1,000 on a handbag then the arrival of a man-in-a-van can be a disappointment.”
As Adamski points out, while many top-end fashion retailers already have international franchisees or physical stores overseas – thus making local outlets an obvious channel for returns or click and collect – the complications of ensuring consistent international stock options can be challenging. “Franchisees may selectively buy stock so could have a variable offer from the corporate website and systems are generally not smart enough to link international stock records so they act as a disabler.”
If fulfilment from a local stockist is difficult, handling top-end returns is not: “Luxury firms are currently riding the wave,” he says, “so liquidating stock locally is straightforward and it is not worth shipping it back to the UK. For middle-market fashion players it is more challenging: is the product value sufficient to return the item and cover the cost of refurbishment?”
Returns for online fashion can be as high as 40 per cent for women’s wear and the problem is compounded with international orders as cross-border sizing can be so variable. Equally with all retailers cutting inventory levels to reduce costs and minimise markdowns having so many lines in-transit can be a major problem – especially in the fast fashion sector. The time between despatch and return is also set to grow: the EU’s Consumer Rights Directive is currently completing its consultation stage and will mean that EU consumers will have 14 days rather than seven, from receipt of goods, to return them and be entitled to a full refund including the cost of delivery. Allowing for initial despatch, 14 days delay and then return post, it could mean that up to 40 per cent of a fashion e-tailer’s stock could be unavailable for weeks at a time.
An EU green paper has also recently been issued on cross-border delivery charges which might bring further standardisation. While online delivery charges vary enormously, companies such as ASOS put great emphasis on free delivery for international orders while others do not always bother to collect duty from customers preferring to absorb whatever customs charge themselves. This is not always as generous as it seems since many online retailers do not deduct VAT from overseas orders. For non-EU business – all those consignments to Australia and US where most orders are below the duty threshold – the 20 per cent thus saved on export sales easily covers the postage costs.WORKING OUT DUTY
Where duty does need to be charged then companies such as MetaPack now offer duty calculators that can be integrated within the checkout process so that the customer pays up front when placing an online order. “Companies do need to make sure that all the relevant documents are available and will be sent back with any returns by customers,” adds Patrick Wall, CEO of MetaPack, “so that they are not charged duty on the goods when they re-enter the UK.”
While many suggest that cross-border sales to EU countries are far simpler with no need to worry about customs and duty in the single market, managing the VAT issues can be a nightmare. There is no problem when sales are low but as soon as the business with any one EU country reaches the national VAT threshold – generally around €35,000 although for some countries, including Germany and the Netherlands it is €100,000 – then rather than charging consumers UK VAT at 20 per cent e-tailers must register for VAT in the countries involved, charge their nationals VAT on orders at the relevant rate and make VAT returns to the relevant authorities. In some countries this can involve establishing a legal entity within the country concerned. In addition once sales to the EU reach £250,000 a year there are monthly Intrastat reports to complete. “Retailers think that duty is a huge barrier to cross-border sales,” says Stuart Hill, “but Intrastat is even more complex as is managing VAT returns and payment in numerous countries.”
Not surprisingly, he adds, most e-tailers end up outsourcing the entire money management business to specialist accountancy firms capable of coping with the complexity.
While selling to the developed world has its problems, entering emerging markets – such as the BRICS countries and the Middle East – can be even more challenging. Distribution infrastructure may be poorly developed so while the major logistics players, such as DHL, may have a presence in the region choice of carriers may be limited and lead time lengthy. Goods can be held up at customs, while in some countries desirable items may never actually emerge from the customs shed; elsewhere certain types of goods may be effectively barred by complex regulations. “China can be very difficult,” says Patrick Wall. “There used to be a grey area enabling unauthorised goods through but China Post has been tightening up these channels. Russian customs can also be a problem. Both these markets have huge potential for e-tailers as they lack production of high-quality branded consumer goods.”
For most would-be cross-border e-tailers managing those “accidental” sales to the EU, Australia and the USA is only the start of what can be a very steep learning curve.Speaking from Experience
GETTING THE GOODS THERE
“It is easy to open a webshop for a country and fairly easy to do the language. The barrier is sending the parcels to the customers.”Stuart Hill, managing director and co-founder, Worldnet
“Those ‘accidental’ international orders can at least give e-tailers a good idea of potential markets and the gaps in product assortment – what may not be readily available locally. If the local market has a lot of good retailers, products and cheap prices why would shoppers buy cross-border?”Andrew Starkey, head of e-logistics, IMRG
THE STATE OF THE MARKET
“It’s really only in the last two for three years that e-tailers have been targeting cross-border. Most are still testing the market to assess the level of demand and identify which parts of their range will take off. Very few are at the point where they would consider local warehousing “ or shipping direct from suppliers into new markets.”Alek Adamski, associate partner, Kurt Salmon Recent developments
New software and services offerings are appearing to help streamline duty collection and reduce shipping charges through consolidation. There is also growing interest in collaborative initiatives – forming partnerships with overseas retailers for such things as click-andcollect. Delivery to developing countries remains difficult although many carriers are improving services here.