By: Brian Bourke, Chief Growth Officer at SEKO Logistics
Retailers, direct-to-consumer brands, marketplaces and marketplace sellers riding the lockdown boom in Cross-Border eCommerce sales are going to get a massive ‘wake-up call’ in the mail from July 1 as Global postal rates into the United States start to soar by as much as 150% or more.
The Universal Postal Union’s (UPU) decision to allow the United States to set its own inbound postage rates – and, in doing so, create a more even playing field for international postal rates which have been intrinsically locked in the past – is a turning point in history for a cross border market forecast to rise to $627 billion by 2022, or 20% of eCommerce as a whole.
For the Trump administration, the UPU’s stand-down is nothing short of a triumph, or at least sound economic policy. China’s UPU status as a ‘developing’ country meant it was cheaper for Chinese sellers to ship to the U.S. than for the same products to travel to customers within the U.S. The outcome doesn’t entirely close the gap but, it seems, the USPS will no longer effectively be subsidizing deliveries of goods ‘Made in China’ to homes across all 50 states. It’s what one observer describes as “eliminating economic distortions for the distribution of goods.” You just need to be careful you don’t eliminate your margin along the journey.
The change comes as millions more buyers have been converted to online shopping as brick-and-mortar outlets have literally closed shop to comply with governmental directives to reduce the spread of COVID-19. For a retail sector threatened with a projected global loss of $2.1 trillion in 2020, eCommerce remains one of its saving graces and, in so many cases, their single source of income in an otherwise stagnated sales environment.
As postal rates get set to rocket, retailers, etailers and marketplaces are having to face the reality that despite fuller shopping baskets, the level of competition means consumers will continue to vote with their plastic. Some will undoubtedly pay more for faster delivery times, shipment visibility and peace of mind but, unless sellers find alternative, more cost effective ways to ship their goods, it’s their margins that will start to dissipate – and that’s before the other 191 member countries in the UPU get to set their own rates for foreign parcel services at the start of 2021.
It sounds grim, and it potentially is if you don’t act now. Of course, we’ve been here before when the Trump administration convinced the UPU it would walk away from the Union altogether without a deal. At the 11th hour, the U.S. got its way, and a compromise was found. Savvy retailers who were paying attention then may be suffering from a ‘Y2K moment’ mindset this time around. Rest assured, this is happening and a closer look through your Inbox may already reveal a notification that your postal rates are going up… and soon.
So, if you’re one of these retailers, etailers, marketplaces or marketplace sellers, what’s to be done?
The first thing we know is that the growth of Cross Border eCommerce is not going to slow down, for two simple reasons:
- Buyers who can’t find what they’re looking for in their home market will find a website that ships from somewhere else. You can find everything on the internet, but it’s probably made in another country.
- You find what you want in your home market but with a little bit of Googling and scrolling, you find it cheaper elsewhere. Add to basket!
Never underestimate how savvy online consumers have become. We processed in excess of six million international Cross-Border packages inbound to U.S. in May alone, a five-fold increase year-on-year. Why? Because customers know higher postal rates are heading their way.
So, if you can’t pass your higher costs on, what should you be doing?
As a parcel consolidator shipping tens of millions of cross border shipments a year – connecting prime markets in the U.S., U.K. and Europe, China, Australia and New Zealand – we can reassure you that there are solutions available to you that can still be implemented in time to protect your bottom line as postal rates go into orbit over the next 6-12 months and beyond. In fact, if you do your homework, you’ll find options that not only offer a postal-like service and a postal-like rate, they’ll come with added benefits your customers are going to love, like tracking visibility and customer service; things that are non-existent in the postal world.
Those businesses taking a more holistic approach are already evaluating their Global eCommerce shipping strategy and dealing with questions such as:
- What are they trying to accomplish by selling into the U.S. and does it look different now?
- Do they now want to hold inventory in the U.S. to accelerate their delivery timeframes or, more importantly, those of their customers?
- In a new world order where supply/demand chain resilience is king, what is most important? Continuity of supply or velocity, convenience, and cost? Or, all of the above?
- If you are producing goods in Asia, is it more economical to drop ship parcels from Asia to the U.S., avoiding higher duty and taxes on B2B shipments into the United States (for domestic fulfillment & shipping).
If you haven’t already had these conversations, you probably should, sooner rather than later. I would also encourage you to:
- Evaluate your carrier mix and profile. If you’re using a postal entity of any kind to ship internationally, make sure you have other options before it impacts your bottom line.
- Make sure you’re using the right ‘tech stack’ and ensure your solution is scalable so you have an ecosystem for eCommerce growth to support quick onboarding of new business. Getting integrated with platforms like Shopify and leveraging the likes of EasyShip or ShipStation will give you flexibility to grow quickly, control and peace of mind
- Reconsider your delivery lead time to your U.S. customers and meet the desired lead time by selecting a freight-to-post option via multiple gateways in the U.S. to reach your customers faster. This allows customers to use dynamic routing methods to avoid peak season-related backlogs at airports
If your glass is half empty, changes in global postal prices – so soon after the COVID disruption – present yet another unwanted cost and complication. But, if it’s half full, this is a timely opportunity to modernize and speed up your delivery experience for your clients, and that is the name of the game in eCommerce when it comes to customer lifetime value. As we all know, acquiring customers is relatively easy compared to keeping customers and encouraging them to come back time and time again on a buying trip.
And, never forget those savvy online shoppers. Having made their purchase, the thing they all crave is certainty over when their goods are going to arrive at their doorstep. They’re smart and they’re price sensitive … but offer a compelling value proposition and a better delivery experience and you’ll be well on your way to earning another lifetime customer. And, they’ll pay more, within reason, to remove the vagaries of traditional postal deliveries and because you’ve earned their trust.
Starting July 1, the economics of Cross Border eCommerce are going to be different. Increasing postal rates are going to impact consumers and brands in both American and foreign companies - all sitting within the broader conversation around the future of retail in the ‘new normal’; especially for those retailers that are struggling. But, don’t despair! If the global lockdown has taught us anything about consumer behavior, it’s that more and more savvy shoppers are taking their buying online. Just make sure you’re not the one paying a heavier price for their customs fees.
