Retailers, direct-to-consumer brands, marketplaces and marketplace sellers riding the lockdown boom in cross-border ecommerce are getting a massive wake-up call today as global postal rates into the United States start to soar up to 150% or more.
The Universal Postal Union’s (UPU) decision to allow the U.S to set its own inbound postage rates is an attempt to eliminate market distortion and create a more even playing field for global postal rates. It’s a historic turning point for a cross-border market forecast by Forrester to hit $627 billion by 2022, or 20% of ecommerce as a whole.
For the Trump administration, the UPU’s stand-down is nothing short of a triumph, or at least sound economic policy. China’s UPU status as a “developing” country meant it was cheaper for Chinese sellers to ship to the U.S. than for the same products to travel within the U.S. The outcome doesn’t entirely close the gap but the USPS will no longer effectively be subsidizing deliveries of Chinese goods to the 50 states.
Cross-Border Shipping Costs Soar with Ecommerce
The change comes as millions more buyers have converted to ecommerce, with many stores shut to comply with COVID-19 reduction directives and shoppers leery to return. For a retail sector threatened with a projected global loss of $2.1 trillion in 2020, ecommerce remains a saving grace and possibly the single source of income in an otherwise stagnated sales environment.
As global postal rates are rocketing, retailers, ecommerce sellers and marketplaces must accept that despite fuller shopping baskets, the level of competition means consumers will continue to vote with their plastic. Some will pay more for faster delivery times, shipment visibility and peace of mind but unless sellers find alternative, more cost effective ways to ship their goods, their margins that will start to dissipate – and that’s before the other 191 member countries in the UPU get to set their own rates for foreign parcel services in 2021.
If you’re one of these companies, what’s to be done?
The first thing we know is that the growth of cross-border ecommerce is not going to slow down, for two simple reasons:
- Buyers who can’t find what they’re looking for in their home market will find a website that ships from somewhere else. You can find everything on the internet, but it’s probably made in another country.
- You find what you want in your home market but with a little bit of Googling and scrolling, you find it cheaper elsewhere.
Never underestimate how savvy online shoppers have become. Processing of international cross-border packages began booming in May because retail and ecommerce companies knew higher global postal rates were heading their way. So, if you can’t pass on your higher costs, what should you be doing?
Help Is Available
There are solutions available that can protect your bottom line as global postal rates go into orbit over the next 6-12 months and beyond. In fact, if you do your homework, you’ll find options that not only offer postal-like services and rates but offer customer-friendly perks like tracking visibility and customer service.
Businesses taking a more holistic approach are already evaluating their global ecommerce shipping strategy and dealing with questions such as:
- What am I trying to accomplish by selling into the U.S. and does it look different now?
- Should I hold inventory in the U.S. to accelerate delivery timeframes?
- In a new world where supply/demand chain resilience is king, what is more important? Continuity of supply, or velocity, convenience and cost? Or all of the above?
- If I produce goods in Asia, is it more economical to drop ship parcels to the U.S., avoiding higher duty and taxes on B2B shipments for domestic fulfillment?
If you haven’t had these conversations, you should, sooner rather than later. I would also encourage you to:
Evaluate your carrier mix and profile: If you’re using a postal entity of any kind to ship internationally, make sure you have other options before it impacts your bottom line.
Use the right tech stack and ensure your solution is scalable to support quick onboarding of new business. Integrating with a major ecommerce platform and leveraging a shipping software solution will give you flexibility to grow quickly.
Reconsider delivery lead time to U.S. customers and meet the desired lead time by selecting a freight-to-post option via multiple gateways in the U.S. to reach your customers faster.
If your glass is half empty, changes in global postal prices – so soon after all the COVID disruption – present yet another unwanted cost and complication. But, if it’s half full, this is a timely opportunity to modernize and speed up your delivery experience – the name of the game in ecommerce when it comes to customer lifetime value.
And, never forget those savvy online shoppers. Having made their purchase, the thing they all crave is being certain when their order drops on their doorstep, and many will pay more for a better delivery experience.
From here on, the economics of cross-border ecommerce will be different. But, don’t despair! If the global lockdown has taught us anything about consumer behavior, it’s that more and more consumers are migrating online. Just make sure you’re not paying a heavier price for their convenience.
Brian Bourke is Chief Growth Officer of SEKO Logistics