Learn from FlavorCloud Founder/CEO Rathna Sharad on cross-border commerce’s explosive growth and the challenges of the international shipping experience.
Trends like the “The Amazon Effect”, growth in eCommerce, success of direct-to-consumer brands, and lower barrier of entry in the global supply chain space are all leading the explosive growth of cross-border commerce. Online selling through webstores, social media, and marketplaces are making it easier than ever for brands to reach more customers around the globe. It doesn’t matter where a customer is located, they’re searching and finding the products they want. Merchants should be ready to serve them.
The challenge isn’t necessarily reaching customers online, but rather shipping your products overseas, which often doesn’t always go as smoothly for both parties. Merchants have to prepare customs documentation an fees like duties and taxes, all while maintaining favorable shipping costs to your customers. Just like domestic shipping, you must think about selecting carriers, shipping rates, last mile delivery and returns.
To understand more about the complexities of international shipping, we sat down with our friends over at FlavorCloud, experts in cross-border commerce. Check out this Q&A with their Founder/CEO Rathna Sharad to learn more about what cross-border commerce is and how merchants should approach international shipping to ensure the best possible experience for your customers.
What is cross-border commerce and what market trends are driving its growth?
In its simplest terms, cross-border commerce is the sales of goods where both the buyer and merchant are in different countries. For example, a buyer in the UK purchases a dress from a seller located in the US.
The size of the market for cross-border commerce is exploding. Analysts estimate the market to top $1 trillion in 2020 and head towards $4 trillion over the next few years, truly explosive growth.
Local shoppers are now looking beyond the mall to shop. With the rise of social media, consumers are seeing brands or niche products that may not be available in their home country, but nevertheless want to purchase. This is especially true for the new digital native brands that sell specialized products in apparel, footwear, health and beauty that have seen explosive growth.
Selling on a global scale can seem challenging to merchants. What types of merchants/brands are best suited for cross-border commerce? Why is selling at a global scale a good opportunity for them?
The great thing about the technology and platforms available today is that any merchant can sell internationally. While it may be possible for all, some brands may still be better suited for a global audience.
The current sweet spot seems to be direct-to-consumer (DTC) brands that may be an aspirational, luxury, or lifestyle brand. In other words, a company that offers a unique product or provides products that customers could not imagine living without. The good news is these types of products span many verticals such as consumer goods, beauty, fashion, athletic, leisure wear, baby, personal goods, vitamins and home goods.
These types of brands will generate interest and sales from international customers, who are willing to go the extra mile and seek out the website and purchase products from them.
We believe it is a great opportunity for these merchants for multiple reasons. First, there is likely untapped demand for their product internationally. And, with the technology and services available today, they can just “turn on” international shipping and realize a dramatic boost to their revenue.
Second, the rise of platforms and technology for online retailers has likely brought on more competition and saturation in your home market. With cross-border commerce, you can now market and sell to a new global customer base, adding in the billions of people that can now purchase your product.
International shipping is the toughest challenge of cross-border commerce. What’s the experience usually like today and how is it falling short of consumer expectations?
The experience for consumers today can range from incredibly simple and satisfying to incredibly frustrating. And, most of the experience depends on how the merchant sets up their international shipping.
Like it or not, governments have a role in all cross-border commerce as they place duties and taxes on almost all imported products. If you purchase imported goods through your local retailer, you are paying those fees, but it is usually paid for the by the importer and then added to the final sale price.
When a customer purchases online from a global seller, then the customer is the importer. This means they must pay the duties and taxes, either at the time of purchase or upon delivery.
Some merchants will not present the duties and taxes to the customer at checkout , which then must be paid upon delivery. This sets their customers up for a nasty surprise. As customers do not read the fine print indicating this, they are shocked when they finally receive their package and are asked to pay some exorbitant fees to get that package into their hands.
Savvy merchants are now including the customs and duties fees at checkout. This leads to a smoother experience as the fees are usually lower and can speed up delivery times as local customs offices don’t need to determine the fees.
Because the shipping experience is vital to consumer satisfaction, what elements make up the ideal international shipping experience for consumers? What should merchants be thinking about?
Besides the issue of duties and taxes we just discussed, another critical item for customer satisfaction is returns. While retailers hate returns, they’re a reality of selling and very important to customers in their reviews and overall satisfaction of a brand. Having a clear and efficient return process is critical, especially for international shipping.
Of course, we cannot leave out the most important item and that is shipping costs. Offering low-cost shipping is critical. Our analysis has shown that high shipping costs accounts for 40% of drop offs in the purchase path. Customers are OK paying more for international shipping as long as they don’t feel ripped off. Merchants should be careful that their international shipping provider offers low-cost shipping. They should and focus on increasing their volume of purchases and shipments, and not abandoned carts.
How should merchants prepare their operations for international shipping? What type of partners or software solutions should they consider?
One of the first steps is finding a technology partner that will guide them through the setup and launch process of international shipping, and is a complete solution. There are a lot of moving parts and government regulations to wade through, but a good partner can handle all of it, letting the merchant focus on their product line.
The other step will be talking to their fulfillment provider, usually a 3PL. Most of the best cross-border commerce solutions offer an integration with any 3PL, so you should let them know what your plans are and how you will be launching your international shipping plan.
Tell us a little about FlavorCloud and how you’re approaching cross border commerce differently.
FlavorCloud has a mission to make international shipping and returns easy, affordable and friction free. We believe any brand can become a global brand and we can easily turn any eCommerce seller into an international merchant, with limited integration and no need to understand carriers, customs, compliance and all the issues of global logistics.
We do this with the mission of being completely transparent on our pricing and fees collected, so there are no hidden surprises for the merchant or the customer. Others in the space view shipping fees as a profit center and will mark up shipping costs 50-100% to merchants, where we pass through our volume based discounted costs directly to the customer, leading to low costs for the customer and higher turnover and sales to the merchant.
We want to be a growth driver for merchants, not a cost center, and we work with our partners to increase conversions, grow revenue, and make the customer checkout as smooth as possible
Key Takeaways from FlavorCloud
With the rise of global online shopping, international shipping challenges are sure to follow. Here are some key takeaways when it comes to cross-border commerce.
Global shopping = explosive growth.
With online selling through branded websites, social media, and marketplaces, it’s easier than ever for customers around the global to shop your products. If you’re looking for ways to continue to expand your brand, then international selling could be a strategic move for you. Right now, cross -border commerce seems like the best opportunity for direct-to-consumer, or digitally native brands.
Be transparent about shipping fees – at checkout.
The shipping experience is critical to the customer experience. While customers are willing to pay more for international shipping, they don’t want to be ripped off. They also do NOT want to be surprised at the door with fees. Be sure to be transparent about what the shipping fees are and present them at checkout.
Find a partner for international shipping.
To be successful at international shipping, it’s best to work with a partner like FlavorCloud that can guide you through the setup and launch process. Just like domestic shipping, you’re not in the business of being a logistics expert. Instead, you want to focus on your brand and products.
Don’t forget about returns.
Lastly, getting your product to your customer is just one step in the process. Don’t overlook making sure your international returns process is also as efficient as possible.
About Rathna Sharad and FlavorCloud
Rathna Sharad started her career in the transportation and logistics industry, working with carriers, forwarders and 3PLs to build multi-modal, cross-border solutions. She also worked with customs organizations around the world, defining trade and tariff contracts.
Subsequently she held leadership positions at Microsoft, responsible for marketplace and monetization, driving advertiser platform strategy, and working with the largest retailers and brands around the world. She co-founded Runway2Street, which was her foray into eCommerce, a marketplace that enabled SMB brands scale globally, powered through an in-house logistics cross-border platform. She then launched FlavorCloud in 2018 as a turn-key, “anywhere to anywhere” logistics SaaS platform, when she realized that a seamless DTC cross-border solution was a critical need in the industry for any brand that wants to go global.