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Truck and Track Spring 2019 26
TACHOGRAPH ANALYSIS
Cross-border ecommerce provides
organisations with, theoretically, a
low-cost opportunity to break into new
markets. Yet, from the cost of air freight
to the complexity of international
returns plus consumer expectations
for full disclosure of import tariffs at
checkout, successful global ecommerce
is significantly more complex than it
might first appear. Johannes Panzer, Head
of Industry Strategy for Ecommerce,
Descartes, dives into the complexity
behind making international ecommerce
transparent, efficient and cost-effective.
Delighting customers
Giving customers a positive experience is the number one priority
for any ecommerce business – but adding international sales to
the mix raises an entire new set of challenges that should not be
underestimated.AccordingtoarecentIPCsurvey,93%ofconsumers
won’t make an online purchase without visibility of the full cost of
estimated import duties plus delivery. For any ecommerce retailer
shipping internationally, failure to provide cost transparency –
accurately, at point of purchase – will experience lost sales.
Any check-out process for goods that will be delivered outside their
customs territory should, by default, use the Harmonised Item
Description and Coding System to identify a product’s HS code
and combine that with delivery destination to provide the full cost
information consumers require to make a purchase decision.
Costs can be pre-calculated across a product category or calculated
in real-time, but either way this is where retailers have to make an
informed decision. Do they create a totally accurate figure using the
full Import Tariff Code - quite a task, especially on a broad product
portfolio? Or, do they take the less complex route of using a tariff
code for the category of goods to provide an estimation of the cost
for the consumer, but then accept responsibility for consuming any
variance in the final cost themselves?
Whichever process you choose, providing this information at the
check-out is key to ensuring the customer has the information
required to confidently embark upon the purchase.
In addition, companies looking to embark on an international
retail strategy should be aware of changes in the legal framework
around ecommerce. Increasingly, customs territories are removing
previously allowed relaxations on small, low value parcels – in
attempts to address perceived tax or security risks or to protect
their indigenous retail industry. In some countries this has created
new customs declaration systems or mechanisms specifically for
ecommerce whilst also in cases increasing the need for the supplier
to be registered with the importing authorities and be responsible
directly or indirectly for paying any import taxes.
Managing Complex Intralogistics
That said, with 62% of respondents confirming they had received
free shipping for their most recent cross-border ecommerce
purchase, the pressure is on to ensure global logistics processes are
incredibly efficient. Speed of delivery is also an issue – albeit not for
all products – so what is the best model?
While smaller retailers will have to rely on one-off product
shipment, as volumes rise it is possible to consolidate goods into
one or more pallets, reducing the overall cost. It is important to also
consider the intralogistics processes and potential implications of
adding international to existing domestic shipment. Clearly, given
the cost of international trade, the pick, pack and ship process must
be as accurate and efficient as possible – but look at the warehouse
operations: would prioritising international orders between a
certain time window ensure goods can hit an earlier air freight
opportunity?
The alternative model is to create a local distribution hub within
a strong international market – provided either by a third-party
logistics partner or a fully owned warehouse - a process which
overcomes the need to provide import duty information for each
order and enables rapid in-country fulfilment.
Understanding Returns
If this model is adopted, what is the returns policy? According to
the same IPC Survey, 90% of customers also count on a simple and
reliable returns process.
Instances of US companies setting up a UK hub to fulfil European
orders only to provide a US returns address are known – creating
a massive and untenable overhead for the business. Furthermore,
how does the business plan to address the import costs associated
with returns? In theory, returned goods could benefit from some
formof returned goods relief – but that relies on companies proving
that goods were ‘duty paid’ at the point of export and that they did
not change ownership between being sold and being returned.
Often the process of finding the export details on the import
declaration for one single package is deemed too much admin
to even attempt to claim relief. Companies will simply treat the
returned item as a brand-new import, suffer the tax or claim low
value consignment duty relief – adding another layer of cost to the
cross border trademodel. This is particularly an issue for the fashion
industry, where it is common practice to over-order knowing items
will be returned. Garments are subject to tax between 10% and
12% - adding significant cost to a low margin industry dogged by
high volumes of returns.
Conclusion
All of these issues can be resolved and none should become a barrier
to international ecommerce; however, the devil is very much in the
detail.
For retailers looking to build up new markets, it is essential
to consider upfront, and truly understand, the full financial
implications of a cross-border model, starting small and scaling
as you learn. Technology is also key to ensure the information
visibility and intralogistics processes are in place to continually
and profitably meet customer expectations - from transparency
of checkout, to speed and efficiency of delivery and an effective
returns process that doesn’t adversely impact the bottom line.
Johannes Panzer, Head
of Industry Strategy
for Ecommerce at
Descartes
How to make international ecommerce
transparent, efficient and cost-effective