Here, or over there?

Mar 01, 1999 10:30 PM  By

Many U.S. catalogers have realized that there’s money to be made selling overseas (31% of the participants in Catalog Age’s 1999 Benchmark Report on Marketing are selling internationally). But since fulfillment costs can eat into profits, many of these mailers struggle with finding the most cost-effective system to get catalog orders to their foreign-based customers. Should they invest in overseas fulfillment facilities or ship orders from home?

Will Lewis, director of London-based consultancy Sterling Marketing, advises catalogers to carefully consider their objectives and product line when determining how to fulfill international orders. “For example, if you’re selling computers, it makes no sense to ship from the States because the costs are horrendously expensive.” But lightweight items, such as jewelry or scarves, don’t cost as much to ship.

Lewis adds, however, that the downside to fulfilling packages individually “is the import duty you’ll have to pay on every single order. It can be costly.”

Of course, it’s even more costly to build or buy facilities overseas. In the case of Portland, OR-based children’s mailer Hanna Andersson, “we didn’t feel comfortable building a bricks-and-mortar business over in Japan,” says international marketing manager Evan Denhart. “We don’t do Lands’ End’s level of sales overseas, so there’s no point in our building a Japan-based warehouse.”

Instead, the $45 million Hanna Andersson fulfills from one centralized location in the States using the U.S. Postal Service’s Global Priority Link service, which ships merchandise to Japan and then hands it off to local delivery firms.

Outdoor gear and apparel cataloger L.L. Bean also prefers to ship its international orders directly from its Freeport, ME, facility, says spokeswoman Jolene McGowan. But its decision is prompted more by the desire for control over customer service than by economics, McGowan says. “It’s something we have done for the past 86 years.”

Taking size into consideration Obviously, size matters when it comes to international fulfillment decisions. Casual apparel cataloger Lands’ End, which according to spokeswoman Charlotte Lacomb reported $40 million in sales from the U.K. and $80 million in sales from Japan in 1997, has invested in building warehouses in the U.K., Germany, and Japan. But the $1.2 billion cataloger waited until its revenue justified the expense. For instance, when Lands’ End entered the U.K. in fall 1991, it hired a local third-party fulfillment center to take and fulfill the orders; not until 1993 did the mailer open its own facility in Oakham, England.

Likewise, Viking Office Products has invested heavily in overseas warehouse expansion, with facilities in the U.K., France, Germany, Austria, Ireland, the Netherlands, and Belgium. This makes sense for $1.3 billion business cataloger, since international sales are two-thirds of its business.

To determine your best international fulfillment strategy, Will Lewis of London consultancy Sterling Marketing offers these tips:

* Consider the weight and volume of your merchandise. If you sell large, heavy items, such as industrial equipment, you may find it’s cheaper to set up international distribution than to fulfill from the U.S.

* Be aware of customs regulations, which vary from country to country. For instance, if you have merchandise originating from China, you can’t ship it to the U.S. and then reimport it to the U.K., Lewis says. You have to store it in the U.K. if it’s meant for sale in the U.K.

* Consider your return rate. If you sell merchandise that has a high return rate, such as apparel, getting the merchandise shipped back into the U.S. can be costly enough to warrant local warehouse space.

* Research the local labor and real estate markets. “In the U.K., for example, the labor rates are not much different than in the U.S.,” Lewis says. “And if you want to be near London, it’s going to be much more expensive than operating from the hills of northern England.”