Olivier Schott, founder and chief marketing officer, Scalefast.
This is the third in a series of articles on international e-commerce. The first dealt with data and privacy rules and the second with tax and regulatory issues.
Expanding to international customers creates new opportunities for growth, but it also comes with a set of fulfillment challenges that include complex logistics and reverse logistics.
“Emerging markets are going to be essential for e-commerce growth, as retailers in developed markets may soon reach saturation in terms of consumer growth,” Stephanie Pandolph writes at BI Intelligence.
This idea of expanding opportunity is the context this guide keeps in mind. With the right mindset and armed with the right tools, brands can avoid becoming overwhelmed by the challenges of international commerce — and instead take advantage of the opportunity ahead of them.
International Fulfillment 101
International fulfillment is not an easy topic to break down into a crash course guide. That same complexity is why many companies don’t even bother to reach across national borders.
In fact, Payoneer’s Richard Gilbert notes that only 1 percent of U.S.-based e-commerce companies do business internationally. This is a big opportunity for brands in America looking to connect with new markets. So, what does shipping internationally involve?
Essentially, international logistics deals with nearly the exact challenges as domestic fulfillment. As Andrea Olson at Manufacturing Global notes, on-time shipments, return rates and daily processed orders all remain important with international fulfillment. But taking fulfillment internationally adds some extra dimensions to these challenges.
Marisa Sanfilippo digs deeper at Business News Daily, highlighting that there are three important elements to consider with e-commerce fulfillment:
- Choosing the right packaging.It pays to be space-conscious when fulfilling hundreds of orders per day.
- Choosing the right vendor for fulfillment.More on this in the next section.
- Choosing the right technology and analytics approach.Adam Robinson at Cerasis notes that e-commerce fulfillment tools should let companies do everything from track shipments across modes, interface with ERP systems and serve as the starting point for fulfillment information systems.
The right approach with these initial elements should help you address the complexity of international fulfillment down the line.
International Shipping or Forward Stocking
Of course, in order to meet Amazon-level customer expectations in international fulfillment, e-commerce companies must ensure they have the supply chain in place to do so. E-commerce vendors typically have two options.
Option No. 1 is to simply ship orders internationally. For example, if you are a brand based in Canada looking to sell to customers in the EU, you could ship individual orders from your warehouse in Montreal directly to your customers in Amsterdam. This translates into less upfront costs but higher shipping costs per item, notes Krista Fabregas at FitSmallBusiness. It also stretches your supply chain thin and can result in excessive delivery times. Seldom is this the best option.
Option No. 2 is to have local warehouses in the markets they serve. That way, you send your products from one warehouse to another, called a forward stocking location, and pay one upfront fee for moving that stock across national borders.
We will touch on partnering with third-party logistics providers and full-service e-commerce solutions providers in the following sections, but just note for now that these partners would be able to move your products into shared international warehouses for you. You wouldn’t be responsible for actually opening and managing warehouses in those local markets.
Ultimately, this is a business decision about what fulfillment strategy makes the most sense for your company. “The ideal scenario is that the business is able to build some flexibility into the process,” clarify Reinhard Vocke and his associates at Strategy&.
The Challenges of International Fulfillment
One of the major challenges for brands in international logistics is addressing the cost associated with going international.
Sebastian Dubuisson at Borderlinx writes: “Opening your online retail store to international shoppers brings exciting growth opportunities. However, retailers are being held back from reaching their true potential in new markets by the very resources that are helping them get there in the first place.”
In other words, the traditional approach to logistics and reverse logistics may actually end up costing e-commerce companies more than it’s worth. Shipping and warehousing costs go up, reverse logistics (i.e. returns) become much more complicated, and a company’s profit margin on each individual product may drop significantly.
Moreover, as startup Cloud Fulfillment notes, companies are exposed to more customs requirements and further risk of fraud.
The answer here can go one of two ways:
- Find a third-party logistics (3PL) vendor you can trust.That partner can take a significant portion of this cost off of your in-house team. 3PLs can either take the entire fulfillment process off your hands, or address a specific logistics need (such as warehousing or forward stocking). “A partnership with a 3PL can provide tremendous value to a shipper’s supply chain,” writes Inbound Logistics’ Bob Farrell.
- Partner with a full-service e-commerce solutions provider.More on this in a minute.
The other major challenge in international fulfillment is keeping an eye on your supply chain. Brandon Barborka at the Staff Management blog writes, “Inventory visibility is already important for a domestic operation but especially crucial for cross-border e-commerce as stock-keeping units (SKUs) will grow rapidly.” Lori Mitchell-Keller at MultiChannel Merchant agrees, writing that visibility in international fulfillment becomes more difficult due to everything from customer preferences to geographical differences.
Collaboration and integration in the supply chain require information to be visible both to vendors and managers to run smoothly. Figuring out a solution for successfully shared information is a step toward a more successful international fulfillment strategy.
In this regard, Amazon isn’t guaranteed dominance. “Today, all modes as well as freight intermediaries must be poised for growth and flexible enough to keep evolving,” writes Patrick Burnson, executive editor at Logistics Management. In other words, e-commerce companies have the option of working with logistics vendors of all shapes and sizes — as long as they are nimble enough to address international fulfillment needs.
Getting Started With Effective International Fulfillment
Logistics Management writer Michael Levans says that uncertainty is a constant in global logistics. If any of these challenges sound familiar, the good news is they are not insurmountable. But to address the challenges to international fulfillment we’ve discussed here, you will most likely need a shift in the way you approach logistics.
Managing the complex world of international logistics and reverse logistics really comes to one thing: finding trusted partners. Whether you go with a third-party logistics firm or a full-service e-commerce solutions provider (which would already have vetted 3PLs in place), you’ll need an efficient partner to address the complexities we’ve covered here.
As Global Trade Magazine points out in its 2018 Global Logistics Planning Guide, “retailers and manufacturers look to the logistics industry to make the seemingly impossible happen every day.” The Inbound Logistics staff note that an enterprise-level logistics solution “should seamlessly launch your business without exposing you to service degradation.”
With the right partners, you can keep up on the trends and new opportunities in your niche while keeping customers as your top priority. As logistics writer Robert Everett writes, “The aim of effective logistics management is to improve the efficiency of the operations, ensuring customer satisfaction, and increase productivity.”
The bottom line is that to deal with the challenges of international fulfillment, e-commerce companies must be informed and flexible. An outside partner in international logistics can help keep your e-commerce company nimble.
The importance of meeting these fulfillment challenges cannot be understated. “The e-tailers that manage to jump the hurdles standing in the way of cross-border retail will definitely have the advantage in the global market,” writes Rahul Chatterjee, senior product manager at ServiceNow.
Creating a Seamless Delivery Experience
As we concluded in Part 2: Taxation and Remittance, your primary concern when sorting logistics issues — and any other business issues, really — should be the customer experience.
When supply chains stretch across borders, delivery times can stretch with them, which makes for frustrated customers. Further, variable shipping costs can affect the prices customers pay. This is especially frustrating when it translates to additional expenses for customers. A surprise fee at the end of the checkout process can make for many abandoned shopping carts.
This brings us back to the point above about full-service e-commerce partners. While it is certainly doable to create an international supply chain piece-by-piece, there’s no need to do so. A good full-service partner will already have the key components in place.
By going DIY with your logistics, you risk exposing your customers to unnecessary difficulties. That will have real bottom-line impacts on your business. Instead, we encourage each of the brands we work with to put their customers first and think about how to create a seamless process from order to delivery.
Check back in for the fourth part of this five-part series on international e-commerce. Next up: emerging legal challenges.
Scalefast provides e-commerce technology and services for global brands.
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