In its second-largest acquisition, Amazon buys the company for $970 million.
(Page 2 of 3)
"A lot of consumers in Latin America prefer to purchase from U.S. retailers because the prices they offer are often much less than what they can purchase the same item for locally, even after shipping and duty costs are added," Basagoitia says. "One customer saved 50% off the price of a game available locally, even after shipping, by ordering it from the U.S."
Another way retailers can lower their international delivery costs is to work with companies that operate consolidation shops where packages can be delivered; consumers then stop by to pick them up. The service is convenient for customers who are not typically home during the day, as local consolidation centers are often located in businesses that are open in the evening along common commuter routes, such as gas stations and train stations.
Hermes, for example, operates 14,000 Hermes ParcelShops across Germany and 4,000 more in other countries, such as Austria, the United Kingdom and Russia. A European shopper can choose to have her package shipped to one of these facilities to avoid multiple delivery attempts. Consumers can also initiate returns via a Hermes ParcelShop.
"In countries where there can be long lines to pick up a package at the local post office, such as Russia, consolidation centers are a major convenience, because people can wait in line at the post office for as much as two hours on a given day," says Hermes' Bense. "Consumers can contact Hermes and arrange to have the package sent to the consolidation shop of their choice. This is especially advantageous in peak times like Christmas with record sending volumes having to be delivered successfully on time."
Being a true global retailer, however, means shipping to emerging markets where the delivery infrastructure is often underdeveloped. In these instances, access to third-party data can help verify an address and a local courier networks can complete delivery.
"Address verification and geolocation data from reliable third parties are important capabilities to have when shipping to consumers in less-developed economies, because retailers can't always rely on the local postal service to offer address verification applications," Melissa Data's Gaddy says. "Some emerging markets don't even have postal codes."
Melissa Data provides retailers with geocoding tools that assign a latitude and longitude to international addresses to help identify the final destination where the package is being shipped. The information helps determine if the package is being shipped to a rural area where a delivery agent may be needed to complete the final leg of delivery.
Packages sent to an emerging market such as India, for example, may only have the customer's name and the address of the local post office because his residence may not have an actual address. Nevertheless, the customer expects the package to be delivered to her.
"That's where geolocating comes in to play, because it zeros in on the address and helps the retailer determine whether a courier with local knowledge of the residents and where they live is needed," Gaddy says.
Melissa Data's geocoding tools incorporate spatial data from multiple data sources to determine the most accurate delivery point. The interactive service is available via the web for real-time data, or clients can submit data requests in batches. The company's address verification service uses data from international postal services, as well as marketing companies and other third parties. "Delivering into emerging markets is a challenge, and the better the data retailers have when it comes to validating and locating addresses the better they will be able to serve their customers and reduce costly returns and address corrections after a package ships," Gaddy says.
Delivery in Asia
For many retailers looking to sell in Asia, hiring local couriers to complete the final leg of delivery is a necessity. Many Asian consumers living in large cities in Taiwan and China, for example, expect same-day delivery for orders placed by mid-afternoon and, in some cases, as late as 5 p.m. local time.
To help retailers achieve this goal, Hermes stocks and manages local fulfillment warehouses for retailers. The company then contracts with local delivery services to enable same-day delivery.
"Same-day delivery is a must-have in Asian cities with populations of 10 million or more," Bense says. "Retailers focusing on China need to set up a local warehousing system for China separate from the rest of Asia to meet the delivery expectations there."
Local warehouses can also help lower the cost of returns, which can be very expensive for international orders. Returned items can be shipped to the warehouse and stored until another order for the item is placed. The order can then be filled locally, reducing the retailer's shipping costs on that order, Bense says.
Latin American preferences
One region where the risk of returns is lower is Latin America. The reason, according to TransExpress' Basagoitia, is that many consumers in this part of the world are inclined to keep an item that does not fit, such as apparel or shoes, and resell it on their own or give it to a friend or relative who needs it.
"Retailers need to keep in mind that returns for orders from Latin America are much lower than elsewhere because of cultural issues," he says.
Shoppers who want to return an item can ship it back to TransExpress' warehouse, which then forwards it to the retailer.
One aspect of international shipping that retailers often overlook is surcharges for dimensional weight exceeding that of the package's gross weight. Dimensional weight is an unfavorable calculation for retailers that ship lightweight items in large boxes because low-density items take up a lot of space, which makes them less profitable for carriers to ship. Subsequently, the carrier is unable to maximize the payload of its vehicles. Charging by dimensional weight allows carriers to monetize the extra space taken up by large, lightweight boxes.