How online businesses can adapt their fulfilment & distribution processes for the international market

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Despite stagnating economies across the world and the associated plight of many retail brands, online shopping is continuing to boom. So it's no wonder that e-tailers of all sizes are looking to capitalise on this growth by opening their businesses up to a global audience. A key part of this expansion is ensuring that the delivery process is successfully adapted for cross-border distribution. Here, Paul Galpin, Managing Director, P2P Mailing, examines the chief considerations to be made when it comes to international fulfilment and distribution.

The internet economy continues to grow apace, with analysts predicting that, by 2016 the online market will be worth $4.2 trillion dollars in the G20 economies.^[1] The internet and the growth of ecommerce are giving online retailers a unique opportunity to expand their customer base across the world. The importance of adapting the fulfilment and delivery processes for successful international expansion should not be underestimated. There are a multitude of factors to be contemplated before embarking on such growth, and failure to plan accordingly can have disastrous consequences.

Our research shows that experiencing delays or delivery problems just twice or more would convince 87% of people to switch to another supplier^[2]. If deliveries are mis-handled, your new found customers can find an alternative supplier at the click of a button. And these problems are exacerbated when it comes to distribution across borders, indeed, 61% of consumers surveyed expressed reluctance to buy from overseas online shopping websites^[3]. Clearly, more mistakes are expected when it comes to international deliveries. So how can e-tailers avoid these pitfalls? What are the key steps to success?

Manage your costs

While engaging with overseas customers gives online retailers an opportunity for growth, some tricky decisions will need to be made before the rewards can be reaped. For example, when it comes to the cost of cross-border delivery – what are the related costs? And how can these be minimised? Identifying the most cost effective distributor for each territory can be exasperating, especially when it comes to long distance deliveries where many operators will be involved. For many online businesses, engaging with a third party provider which offers the expertise and the relationships with postal operators, not only in the UK but in the destination territories, will be the most fail-safe and cost-effective way of managing distribution. An expert consultant should not only be able to negotiate competitive prices on your behalf, but will also be able to advise you on how to ensure that your fulfilment and distribution infrastructure can keep pace with the expansion of your business.

Small businesses can also benefit from this kind of approach, and should not assume that outsourced distribution is out of their price range. Indeed, some companies specifically tailor for growing start-ups and can add further value by handling the storage of products, the pick and pack process and even invoicing.

Tracking deliveries

There's also the question of whether to offer trackable delivery. Many consumers like to be able to keep an eye on when their goods are expected, but naturally offering this facility is more expensive. Research of online consumers purchasing from UK sites found that the desirability of track and trace was very much linked to product type and value. For example, 15% of buyers of electrical goods said that they would use track and trace delivery compared to between 1% and 3% for other products^[4]. Bearing in mind that in the UK, 12% of deliveries fail first time costing the online retail industry an estimated £1bn in redeliveries^[5] – and that once delivery to other countries is added into the mix, the potential for mistakes is far greater – you can see why some consumers would like to keep tabs on the progress of their purchase.

For many retailers selling lower value items via a standard delivery service, their trackable options have been limited, with a choice between relying on international packet post with little or no tracking, or premium express parcel services which offer tracking but add significantly to delivery costs. However, this situation is changing and there are now a few solutions that offer trackable, cross-border delivery for smaller parcels at lower rates, enabling online retailers to offer their customers real-time delivery information without the inflated distribution prices.

Facilitate cross border returns

In addition to working out how items will be delivered, it's also vital to consider how you might get them back, should the need arise. Online shopping by its very nature requires a high level of trust between the consumer and the vendor. Money is exchanged before the goods are received and shoppers don't have the opportunity to try on or examine their purchases before the transaction is completed. Vendors need to make their returns policy clear to customers from the outset and carefully ensure that they are compliant with the regulations, which will differ across countries. The Distance Selling Regulations, for example, state that if a customer informs the vendor that they wish to return an item within 7 days of purchase the initial delivery cost has to be refunded as well as the cost of the product^[6], so businesses need to be ready to absorb this cost. These regulations apply across the EU, although countries have implemented them differently so it's important to be familiar with the practices of each.^[7]

Tax & Compliance

As well as ensuring that regulations regarding returns are adhered to, there are a range of other procedures, such as those relating to tax and compliance, to consider. The European Union allows for the free movement of goods so most shipments can be dispatched to other member states of the EU without special customs documentation. However, there are exceptions such as exports to special EU territories (the Channel Islands, for example), and retailers need to be aware not only of the exceptions, but of any future changes to the regulations to ensure they are not caught out.^[8]

When it comes exporting to goods outside of the EU – to third countries, as they are known – businesses need to ensure that they have the appropriate licenses and that they make export declarations through the National Export System (NES). VAT, import taxes and duties in the destination country need to be paid and of course these vary from country to country[9].
For those companies first venturing into selling to customers overseas, seeking the advice of an expert can save both time and money.

Ultimately, the current ecommerce boom that is defying the persistently volatile economic climate gives internet retailers access to a potential customer base of 37 million.^[10] However, international expansion should not be rushed into, and ensuring that the processes are in place to distribute goods promptly and cost effectively across the globe is a key consideration. Customers don't like delayed or unsuccessful deliveries, and will soon defect if they are unimpressed with the service they receive. Similarly, if businesses don't have an early appreciation for the costs of such expansion, they could easily find the expense higher than anticipated. While the opportunity is an exciting one, retailers must ensure they are fully prepared before they attempt to seize it.

^{1) BCG Perspectives by the Boston Consulting Group, The Internet Economy in the G20, 19 March 2012
2) P2P Mailing, Are You Delivering? May 2012
3) Ibid
4) P2P Mailing, Setting the Standard, 2011
5) BBC News Magazine, The parcel conundrum, 6 July 2012
6) BBC News.co.uk, Online retailers told to change websites by OFT, 12 October 2012
7) The Office of Fair Trading, A short guide for business on distance selling, 2008
8) HMRC, Dispatching your goods within the EU, 16 October 2012
9) HMRC, Exporting goods outside the EU, 9 October 2012
10) The Interactive Media in Retail Group (IMRG), July 2011}