In the first few years of the Internet boom, cyber pundits promised a world where consumers would be able to buy anything, anywhere, anytime. Inexperienced dot-com executives, confusing the ability to reach customers anywhere with the ability to fulfill their orders, often stumbled into expensive mistakes, according to global shipping experts.
But that disaster is a few years behind us now, and some trade analysts are saying that despite the risks, there are several reasons today might be a good time for online retailers to try filling more cross-border orders again.
First, parcel delivery keeps getting better. In the South Pacific, mail reportedly still arrives every four weeks or so on the island of Yap, but for much of the world, sending stuff from here to there is a bit less romantic and more reliable than it used to be. Need to move a package to Samarkand or Zanzibar? Give DHL a call. Absolutely, positively want to serve a customer in India? Logistics expert Ram Ramachandran, managing director of Red Eagle Shipping Agencies in New Delhi, says you should call FedEx or UPS.
Darren Maynard, COO of NextLinx, a Rockville, MD-based customs-tracking software company, says he finds he can send packages to relatives in Sri Lanka and have them arrive in a week. “I’m incredibly impressed with the reach of UPS and Fedex,” Maynard says. “I send things to my family in Sri Lanka, which is a very small island, and I can put the home address. And even though it takes longer — it’s seven days or something like that — it always gets there.”
Although those brown trucks are not as ubiquitous in most parts of the globe as they are in the U.S. (the entire Asia Pacific division of UPS boasts just 600 vehicles, according to company figures, compared to 149,000 worldwide), UPS and its competitors do have offices in most countries. DHL, for example, flies regularly to every country in Africa. One rough proxy of just how many more parcels are flying around now: Boeing Company analysts estimate that through the 1990s, global air cargo shipments increased by 6.2% every year, as measured by revenue miles per kilometer.
With package consolidation, cheaper shipping options are available as well. For example, bulk shipping can cut the cost of sending a 2-lb. box to Portugal from $40 to $7, according to Simon Zisman, CEO of DoUWantIt.com, a trade compliance software company based in Hallendale, FL. In India, Ramachandran says, one cheaper alternative is to ship a large load of goods to a warehouse in a special economic zone, where duties don’t have to be paid on landing, and then use local couriers or India Post to deliver goods once they are ordered.
Second, the global payment processing system keeps getting stronger. Although credit card fraud reportedly remains a problem in some markets, the good news is that in many parts of the world, consumers don’t like credit cards. Many prefer to use some kind of debit card or bank transfer, according to René Frappier, of Pacific Network Services Ltd., a Vancouver, Canada-based global payment processing firm. And in some markets, consumer honesty makes fraud a non-issue altogether: Frappier says that in Germany, mail order merchants typically send goods first and then invoice customers — who actually pay the bill. “You’d go broke doing that in the United States,” she says.
Setting up local currency payment systems is not especially expensive, according to Frappier. Once the bank accounts are opened, accepting payment in local currency ends up costing about 2% in commissions in most places. One of the few countries that her company can’t reach yet is China, she says, and that’s largely because of the banking structure and the lack of an open currency market for China’s currency, the renminbi: “We’re starting to tackle it now, but it’s not easy.”
Finally, dealing with tariffs may soon get easier. In the past few years, technologists and customs brokers have quietly developed software intended to help shippers cope better with the many complexities of taxes, tariffs, and regulations.
One of the reasons many dot-coms have failed internationally is that foreign shoppers typically have no way of knowing the actual cost of a product before it arrives, according to John Flick, a spokesman for UPS International in Atlanta. But retailers have had no easy way to give customers an estimate of the inclusive price, the so-called landed cost.
To come up with cost estimates, you would first need to match the product’s SKU number against the World Trade Organization’s Harmonized Tariff System number, which classifies almost everything people send between countries and includes more than 5,000 categories of goods, each identified with a six-digit code.
Just for good measure, the U.S. actually requires four extra numbers on top of that, to enable the Census Bureau to grind export statistics that are exceedingly fine: 2009.70.00.10, for instance, is the number for frozen apple juice — 20 for vegetables or fruit, 09 for a preparation thereof, .70 for apples, and 00.10 for frozen, according to a Department of Commerce report.
Next, you would take that Harmonized System number, look up how the country to which you’re sending the package classifies that good, what the applicable tariff and taxes might be, and what the regulations are regarding its shipment, and then fill out the paperwork that needed to accompany the order.
If these tables and tariff handbooks were fixed, the job might not have been so time-consuming. Unfortunately, the regulations change all the time. “Each country has its own schedule for updates,” says Debby Mayberry-Jensen, vice president for global trade and compliance at Open Harbor, a trade compliance software firm based in San Francisco. “Some countries are great because they only update quarterly; other countries will update randomly, and there are those that update every day.”
Today, automated trade compliance is a growing industry. The two market leaders, Vastera and NextLinx, each employ more than 500 people. And while the initial efforts of the technologists seem to have focused on the needs of big shippers, they now seem to be on the verge of serving consumer needs as well. One, DoUWantIt.com, appears to have been designed specifically to meet the price-quote needs of foreign consumers (see box at left).
Maynard of NextLinx says that he doesn’t understand why American retailers, who are so good at sourcing from abroad, are reluctant to sell there too. “We live in such a global economy, and yet the retailers in the U.S. act like it’s still very domestic,” he says. “It amazes me.” As a result, stores focus most of their energies beating each other up for a fixed market share, instead of competing in overseas markets “where they have inefficient, fat, dumb, and happy retailers,” he says.
The truth, Maynard notes, is that you may already be in the export business — as a supplier. The US is such a price-competitive market that many smaller foreign retailers may be buying from you here and then selling back home. “You’re doing international,” he says. “You just don’t know it.”
Zisman of DoUWantIt.com believes that a number of customers using his international online shipping service actually buy for resale. You can tell because they buy five digital cameras at a time, he says, or ten books. Some even use company names on the billing address, he adds.
There’s no reason to fear selling abroad, provided you go in with some good local advice, says Richard Miller, executive director of the U.S. International Mailers Action Group, based in North Chatham, MA. “If they can find a market that reflects or mirrors their domestic market, then there’s no reason on earth why they should not do testing on it.”
Such diligence may be particularly important in emerging markets, where understanding the local consumer and coping with economic volatility are both big challenges. “The Indian market has been a Waterloo for a lot of newcomers who have not done their homework well enough,” warns Ramachandran.
But even in India, it’s clearly not impossible to run a viable e-commerce operation. The large online shopping section of one Indian news site, Rediff.com, promises local delivery by courier in three or four days, and seven to 10 days abroad. And if you had ordered by Aug. 17, Rediff marketers promise, it would have even arrived in time for Raksha Bandhan.
Bennett Voyles is a New York-based business writer. He can be contacted at firstname.lastname@example.org.
Global Killer App?
Even as some online retailers reportedly avoid overseas customers, one Hallendale, FL, start-up has developed a tool that may give them more foreign business — whether they want it or not. DoUWantIt.com, a Web-based application, enables foreign consumers to get an accurate price quote, one that includes all transportation, tariffs, and taxes, and then lets them order the product in the same way American shoppers do. The customer just has to surf on a major U.S. e-commerce site and then click on a “DoUWantIt” tab to get a price quote. If the buyer really does want it, she just clicks, and DoUWantIt.com places an order with the e-tailer. The goods arrive at a UPS cross dock in Miami and are shipped as a bulk order to a Mail Boxes Etc. shop in the customer’s home city. The service is now available in Chile, Colombia, the Dominican Republic, and Portugal. CEO Simon Zisman says he anticipates rolling out Italy and Canada next. Plans call for a 26-country rollout soon.