Is digitisation the key to preventing cross-border landed costs from disrupting international ecommerce?
In a time of continued economic and political uncertainty - where threats against global trade either quickly materialise or fizzle out as part of hardline foreign policy negotiations - companies involved in international trade must now contend with an unprecedented amount of uncertainty and risk as the ‘new normal’. However, Johannes Panzer, Head of Industry Strategy for Ecommerce, Descartes Systems UK, outlines how ecommerce organisations can ride the storm of uncertainty to international retail success.
UK ecommerce businesses currently shipping to the EU (and vice-versa) need to prepare for the forthcoming split from the single market – or so is the latest thinking. As geopolitical factors such as these drive changes within international trade regulations, it has become nearly impossible for organisations to effectively ensure compliance. It has also become more-costly than ever as penalties for denied-party infractions, for example, reach record levels. Not to mention consumer confidence in international ecommerce retailers.
To date international air-to-final-mile has been a winning combination for ecommerce – and across many European countries this includes train/truck/van-to-final-mile. However, as Sweden witnessed in Spring 2018, a new value-added-tax (VAT) on all postal items arriving from non-E.U. countries caused wide-spread disruption and over 400,000 refused packages as consumers were presented with an additional fee on delivery (so called landed costs) that they had no prior visibility of.
Without a trade agreement in place, a similar scenario could easily arise across the EU, in particular as the EU Commission is set to abolish a current exemption on VAT for ecommerce imports valued at less than €22. The impacts are potentially far-reaching. Consumer costs will undoubtedly increase as vendors will be required to pay increased duties and taxes, and without visibility of these costs provided accurately at checkout, it could lead to a mass ‘return to sender’ scenario where packages are rejected at the last mile of delivery. Research shows that 93% of consumers will not make an online purchase without full visibility of estimated import costs, plus delivery: being unprepared and unaware of the duties isn’t an option for organisations who want to continue to sell internationally.
With uncertainty mounting, there is an urgent need for logistics and supply chain professionals to have a more comprehensive understanding of current and potential international trade developments due to the likely impact on global sourcing, infrastructure and operations. The good news is that utilising global trade content — solutions packed with everything from the latest import and export data down to the bill of lading, to databases for international trade regulations, rulings and duties — can help companies gain greater visibility and confidence within their trade operations.
Realising new opportunities
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.
In a sector where customers can come from virtually anywhere in the world, this global trade content helps ecommerce companies remain compliant with international trade agreements and avoid business transactions with restricted parties. To do so, many companies are loading duty and tax data, as well as sanctioned-party lists, directly into the back end of their shopping carts to provide accuracy and transparency around potential landed costs.
Global trade content is also beneficial in helping ecommerce companies better manage against difficult and costly cross-border returns. By disclosing duty and tax rates upfront during checkout, international customers understand the true cost of sale and are less likely to reject a shipment due to unexpected fees.
Giving customers visibility of these otherwise hidden costs is not only key to realising new market opportunities, however. It also provides an opportunity for competitive differentiation, particularly with items that consumers can purchase from multiple ecommerce vendors. Giving a potential customer visibility of the item cost, plus separate shipping costs – even shipping options – can add positively to the overall customer experience by positioning yourself as a trusted and transparent retail partner.
There is no doubt that global trade uncertainty is set to stay – at least for the foreseeable future. However, this is no reason for domestic businesses to shy away from international expansion. Nor is it a reason for ecommerce retailers operating internationally to consider battening down the hatches.
On the contrary, those organisations who are set up properly and are harnessing global trade data within their sales and fulfilment processes, will not only reduce risk; they have the opportunity to positively differentiate themselves and gain international competitive advantage