By Emily Black, Content Executive and Analyst at IMRG
How are retailers set up to ship cross-border? In a survey conducted in April 2022, we aimed to find out how 300 retailers operate cross border, and the associated costs to the customer. Is it worth it, and is this an area retailers are missing out on? Almost 50% of our retailers said they don’t operate cross-border, so this could be an untapped market. To read the full findings of our survey, check out our report here.
The challenges and opportunities in cross-border commerce
Whilst there are many challenges in the cross-border market, with them arise many opportunities. There are opportunities for larger sales and revenue in international markets, due to untapped spaces. Demand can often vary in different regions however, so it’s not always easy to base predictions for one region based on what’s happened in another. Testing and understanding different areas is key for success.
Another benefit is that good products which sell well domestically might have a chance of taking a larger global market share if the right channels and partnerships are utilised. Niche products can sell well too, providing they fill a gap in overseas markets, and sometimes retailers find surprising demand for items they are not necessarily well-known for in their domestic market.
There are additional complications involved in selling overseas, due to the various rules and regulations in place in each market, as well as the cost of international shipping and returns. We’ll delve into some of the exact figures surrounding operational costs later in the blog.
In our first question, we wanted to establish how many of our sample of 300 retailers deliver abroad. Interestingly almost half don’t, whilst just over half do offer international options. So how can we break this data down?
Categories and cross-border
When breaking down the data in the chart below, we can see that home and garden retailers are less likely to deliver abroad, possibly because of shipping expenses and customs costs. Equally, beers wines and spirits (BWS) are also less likely to ship abroad because of the risks involved in shipping liquids in fragile bottles, and regulations on liquids in the post. The majority of retailers who do ship abroad are in clothing, and health and beauty, because of easy transportation.
Splitting the data by destinations, a similar trend emerged, in which we can see (of the 162 retailers who do ship abroad) BWS and home and garden serve the lowest number of destinations. Those with the most destinations were electricals, multi-sector, and clothing, likely because of the smaller nature of some of these items, particularly clothes which can be shipped relatively easy without damage.
The cost of shipping
When it comes down to the shipping costs, it’s interesting to see that Europe and Australia are the cheapest regions to ship to, followed by America. Those which are most expensive, on average, are Spain, UAE, China, India and Brazil. Whilst this might generally follow a pattern of further away being more expensive, this isn’t always the case, as Australia was among the cheapest.
What can we conclude from this? There’s potential for cheaper shipping to Europe and Australia, mainly in the electricals and clothing department. However, retailers might find there’s room for expansion in BWS and home and garden, since not many retailers in these areas ship abroad currently.
We asked our expert members about how retailers can best utilise cross-border commerce…
For Jordan Westley, eCommerce and OMS Expert at Mintsoft, keeping the speed and quality of delivery to the promised level comes with added complications when shipping cross-border, and requires the setting up of ‘smart rules based on product weight, delivery location and order value.’
Mark Elward, chief commercial officer at Huboo points out that ‘access to centrally located, or multiple, distribution centres across Europe’ can provide a further advantage in this respect, as it ‘will enable them to house stock in locations with ready access to the most viable lanes. For example, Germany is a great distribution hub – centrally located, with good links across the continent. A customer’s impression of a business will not only be based on the quality of the product, but also the speed and reliability of delivery, and the condition of products on arrival.’
It is not all explicitly about logistics though; there are the technical and legal requirements that need to be satisfied. Luca Clivati, Senior Consulting Manager at Sovos says that UK retailers ‘should analyse the entry point of their goods into the EU or non-EU countries and consider logistics aspects (incoterms, where clients are located and how to deliver the products to them) and administrative obligations (the need to register for VAT/GST, payment of import VAT, submission of local returns).
Several EU countries (e.g. France, the Netherlands, Belgium) offer solutions to avoid paying import VAT, reducing costs for UK retailers. For local sales, the UK retailer should verify if they need to account for local VAT or if a simplification exists to ease their VAT compliance.’
The quality of the data used across multiple channels is also worthy of consideration. Thomas Kasemir, Chief Product Officer at Productsup cites preparing product data for channels in new markets as ‘one of the biggest challenges retailers face with cross-border commerce. Consider you’re a retailer looking to expand from the UK to Asia. Not only will you have to adjust all of your product data in the existing channels you manage, such as converting sizing charts, changing prices, and translating descriptions, but you’ll also need to add on new channels’.
Barley Laing, UK MD at Melissa indicates that having that focus on data can provide competitive advantage: ‘simply having a web presence is not enough to be successful globally, particularly when there’s so much similarity in the quality and price of products on offer. Retailers need to be delivering a consistent positive customer experience, regardless of market or location. Not doing so can have a negative impact on the user experience and therefore damage the image of the retailer; meaning they could struggle to survive in the long term.’
In the past few years, cross-border trade has become more complex due to the way Brexit has been handled. This popped up a few times in responses for this blog, with Fergal O’Carroll, CRO at Scurri stating that ‘retailers should always expect to encounter some obstacles as they break into new markets, particularly across borders. International shipping is a multifaceted process. In terms of customs harmonisation after Brexit, it can be automated very efficiently with a rules-based approach. To ship across borders and provide a customer experience that works well, you can’t rely on a few carriers, it makes sense to broaden the selection, and have the flexibility to switch between carriers easily.”
This is a sentiment echoed by Bobbie Ttooulis, Group Marketing Director at GFS, who points out that markets outside Europe, such as the US, Australia, New Zealand ‘should be high on the radar of UK eCommerce retailers. But businesses must accept that they often don’t have the bandwidth or expertise to identify the best carriers to give the most efficient services and value for money in these new lanes. To go in with a solid footing, eCommerce businesses need multi-carrier delivery partners with local lane expertise across the various markets, to ensure operational efficiency as well as ensure that delivery is tailored to the local market.’
Mike Hayers, General Manager Europe for ShipStation builds on the potential positives, saying that ‘for most UK retailers, staying ahead of changes brought on by Brexit has facilitated continued healthy growth in EU territories. For instance, offering Delivery Duty Paid (DDP) as a shipping option is becoming a growing expectation for all European sellers post-Brexit.’
It seems that cross-border remains what it always has been – a big opportunity that can yield grest results for some, though many areas of so doing are necessarily more complicated. If you want to benchmark your cross-border offering, download the full findings of our survey in our report here.