Anchors Aweigh

Guide to E-Commerce Technology

For Anthropologie, a multi-channel retailer of women’s apparel fashions and accessories, the prospect of strong overseas sales is hard to ignore. Without even marketing outside the U.S., it receives orders from Europe and other markets, where the currently low value of the U.S. dollar makes its stylish skirts and jewelry bargains. And in Asia, its fashions are so popular local sellers mimic Anthropologie’s branded web presence without permission to re-sell its private label products.

But shipping across international borders has long been too troublesome and costly for Anthropologie to take on in a big way. “We knew there was a surprising number of foreign consumers interested in our retail web site, but we had no good way to get products to them,” says Michael Robinson, managing director of Anthropologie Direct, the retailer’s online and catalog division.

Shipping products overseas, particularly in categories like apparel and consumer electronics where products can contain ingredients from multiple countries, presents a complicated mix of international border restrictions, customs rules, duties and taxes, and many retailers aren’t set up to handle such tasks. “The global economy is problematic because rules and regulations in each country can be radically different,” explains Mitch Scher, president of Vandegrift Forwarding Co. Inc., a freight forwarder for retailers and manufacturers.

Indeed, many online retailers find it impossible to even tell foreign customers the final delivered cost of international orders. “40% of online retailers don’t have their arms around the true landed costs for foreign customers,” says Paula Rosenblum, managing director of research and consulting firm RSR Research LLC.

Relying on web systems

Still, more retailers like Anthro­pologie are looking overseas to expand their sales. And they are relying on help from web-based shipping management systems designed to automatically figure the cost of shipping across borders. Such systems are offered by companies including E4X Inc., eCustoms and Kewill Systems Plc, as well as by carriers UPS and FedEx Corp. Designed to take the pain out of international orders and shipments, the systems also provide online visibility into shipment status and can convert online displays of retail prices into a foreign shopper’s local currency, including a close estimate of all international shipping costs.

These web-based systems address customs duties and tariffs that can differ widely on products depending on a customer’s country of destination as well as on the country or countries from which products were sourced. Before international shipping systems had the web as an operating base, retailers tried to cobble together customs and other shipping information through phone calls and paper documents, experts say. “We were always typing documents and taking them to a shipping pier, so it was much slower getting information to shippers,” Scher says.

And this data often was inaccurate, as retailers and others involved in shipping entered information such as orders, customs fees and shipment status multiple times into multiple versions of documents. What’s more, lack of speed and accuracy made it difficult for shippers to get a handle on overall shipping costs, much less make the same information available to customers.

Web-based systems enable single entry of order, shipment and customs information—whether by workers or automatically transferred from a networked database—which then is immediately available to all participants through a web browser interface. “The immediate visibility and ability to track goods around the world with accurate data on the Internet is key to managing international shipments,” says Andy Ewart, a customs product manager at Kewill.

As retailers import foreign goods into their U.S. warehouses, for example, they may have to figure multiple sets of cross-border fees based on the source countries. And with many individual products including ingredients and processes from multiple countries—a shirt’s cotton from India and its buttons and assembly from China, for instance—the retailer may be responsible for a complex set of customs duties and tariffs on each product.

Import/export

Making things even more complicated is combining the import fees with export fees as retailers ship imported products to foreign customers.

The set of cross-border fees on products sourced from China and sent to a customer in Canada, for example, could be quite different from the cross-border fees on the same products shipped from the U.S. to a customer in Mexico or Europe, experts say. Each country has its own set of rules it applies to duties and tariffs on products sourced from or shipped to other countries, depending on the trade balances and level of competition between countries for particular products.

In some cases, import and export fees may be nearly identical on the same products; in other cases they can differ widely. “For a sweater imported into the U.S., a retailer might pay a 20% duty, depending on the fiber content, but the duty on the same garment could be 75% going from the U.S. to Mexico,” says Scher of Vandegrift, whose clients include apparel retailer J. Crew Inc. and brand manufacturers Puma AG and Wilson Sporting Goods Co.

International rules get even more complicated for retailers and manufacturers who design and source products ahead of time for particular seasons.

“Puma, for example, designs its apparel and footwear several months ahead, and to determine accurate pricing it must have an idea of what the duty rates will be on imported and exported products,” Scher says. The particular set of ingredients it puts into a pair of running shoes can result in widely differing rates. “A duty rate for a certain design might be 6%, but a slight adjustment in materials could bring it up to 48%,” Scher adds.

Retailers also need to be aware of opportunities for drawbacks, which allow them to skip payment of customs duties on exported products if they already paid import duties on the same products, Scher adds.

To manage all these ins and outs of international transactions, retailers must first process the international Harmonization Code that accompanies international shipments. Typically about a 10-digit number, the code relates to a set of data such as an internationally accepted definition of a product category according to a product’s ingredients and country of origin data, plus specific rules and tariffs placed on products by the individual countries involved in an international transaction.

Playing by the rules

Knowing the details of these rules and tariffs from each country is key to figuring the full set of applicable fees for processing a transaction and, therefore, figuring the final costs a retailer pays for imports and the final delivered cost paid by its customers. For a company shipping products in bulk volumes, managing such costs can become somewhat routine, experts say. But the challenge is particularly difficult for direct-to-consumer retailers because they deal with large numbers of individual orders, each of which usually has a different mix of products and related codes and cross-border fees.

“This can be easier if you’re shipping hundreds of thousands of products at a time, but if you’re shipping to individual consumers you have to know the exact code and currency exchange for each product to each country,” Anthropologie’s Robinson says.

Mike Cerny, president of Fit Couture, a web-only retailer of women’s activewear, says complications in managing shipments to foreign markets often result in unexpected fees and delivery delays. “Even when we fill out the shipment paperwork correctly, a shipment can still get hung up in customs—even just going to Canada,” Cerny says. “And it’s not unusual for the shipment to take a lot longer than expected. Sometimes it takes four days to get to a customer in Canada, or it can take three weeks. There’s no way to predict.”

Retailers have several options for managing shipments and addressing the system of codes, customs duties and tariffs, including using internal staff to access code and tariff databases from organizations such as the World Customs Organization and individual country’s trade agencies and working directly with carriers like UPS and FedEx. UPS recently introduced and expanded its international shipping services with programs including TradeAbility, through which shippers can estimate the final landed costs of shipments including customs duties and taxes and verify compliance with international trade regulations. Shippers can access that service on UPS.com or use a web services kit to integrate it directly into their web sites.

Large retailers typically work with freight forwarders supported by web-based shipping management systems. Vandegrift, for instance, uses web-based software from Kewill to integrate with the inventory and order management systems of its shipping clients. From the time retailers process purchase orders for imported goods until they ship those same goods to foreign customers, Vandegrift uses its databases of Harmonized Code information, customs duties, tariffs and other information to automatically apply pertinent rules and tariffs to its clients’ cross-border transactions. Vandegrift’s shipping clients, as well as its clients’ customers, can access the Kewill application via web browsers to check shipment costs and delivery status.

Localized pricing

Anthropologie, a unit of Urban Outfitters Inc., is using web-based software and services from E4X that handle the complexities of shipping to foreign customers. Although Anthropologie relies on its own sourcing personnel and technology to import goods, it began to deploy E4X’s web-based FiftyOne international shipping system last summer to manage cross-border transactions as well as present online retail pricing, including final delivered costs, in a foreign customer’s local currency.

After several months of implementation, the E4X system is handling sales to Canada and will start serving customers this spring in the United Kingdom and continental Europe, Robinson says. The system is designed to recognize the IP address and geographic location of a foreign shopper, then automatically display pricing and shipping costs based on the shopper’s location.

E4X software deployed on the retailer’s web servers displays prices in the foreign shopper’s local currency, but a foreign customer who clicks to make a purchase is automatically switched to web-based software hosted at E4X, which pulls information from its databases for international shipping costs.

“Since 2000, when we began shipping to Canada, the Canadian Post would deliver our orders and tell our customers they owed another $30 or so in taxes and customs duties,” Robinson says. “Now we can charge them the amount right up front so they’re not surprised.”

Anthropologie ships its international orders to an E4X warehouse in New Jersey, where E4X applies shipping labels and sends the orders to foreign customers. The extra warehouse step still results in a smoother international shipment than in the past, Robinson says.

For now, international orders account for about 1% of Anthropologie’s sales, but with its new system Robinson expects that share to grow significantly. “We’re hoping international to be 20% to 30% of our business within the next five to 10 years,” he says.

Fit Couture, which also has deployed E4X’s system, does about $1.2 million a year in sales and expects the international shipping system to boost a modest foreign share to as much as 15% of sales by next year. “We’ll get a return on investment,” Cerny adds, “even with less than a 10% increase in foreign sales.”

paul@verticalwebmedia.com

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