January 4, 2006, 12:00 AM

Hands Across the Water

(Page 2 of 3)

Comerxia, which is 30% owned by United Parcel Service and operates four international transport hubs in the U.S., will contract with major international couriers such as FedEx and DHL to get a package into a country and then contract with the local postal service to ensure final delivery at the lowest possible price. In Asia, Comerxia contracts with Singapore Airlines to transport packages into the region, where they are handed off to Singapore Post, the country’s postal service. Singapore Post, which delivers to most of Southeast Asia, charges up to 50% less than that of many of major couriers serving the region with no drop off in service.

“It’s about cost effectively delivering a package for the client without sacrificing quality,” says Rusick. “Other couriers will have local partners that can achieve the same goal.”

Comerxia is planning to add at least one distribution hub in China to serve the Asia-Pacific region, and possibly one more country specific hub, to improve overseas delivery and help lower its client’s shipping costs, adds Rusick without being more specific. It is usually more cost effective to strike a deal with a single courier to deliver items bound for a specific country in bulk, where they can then be redistributed locally, than striking multiple deals to ship a small number of items to individual countries.

Goal: Effortless shopping

Comerxia and Canada Post Borderfree use a similar strategy for shipping into Canada, repacking individual shipments into a larger container to reduce transport costs by lowering the overall price per pound. Like many countries, Canada’s duty fees are the highest on the first pound of the shipment. “Why pay more on the first pound for 20 packages, when you can limit that cost to one package?” Rusick says.

Providing customer convenience is another measure used by retailers in determining relationships with fulfillment vendors. One of the criteria used by Flavia Beverage Systems, a division of Mars Inc. that provides single serve drink stations to consumers and commercial customers, was to fulfill a standing order on the date specified by the customer.

“Making the shopping experience as effortless as possible is a big part of our e-commerce strategy,” says Frank LaRusso, business-to-consumer channel director for Flavia. “Our fulfillment partner has to deliver this level of customer service.”

The company, which began delivering hot beverage service to commercial customers in the U.K. in 1983, partners with PFSWeb Inc. PFSWeb is expected to deliver an order to any home in the U.S., U.K. or Canada within two to five days. Flavia, which also has information-only sites in Germany and France, is preparing to establish a web presence in Japan.

In addition to handling fulfillment, PFSWeb also runs the company’s call center. Keeping caller abandonment rates to a minimum is a Flavia edict. So far, abandonment rates have yet to rise above 2%, according to LaRusso.

Handling returns

Returns are another hands-on service Internet retailers expect near flawless handling of by fulfillment companies. Although consumers outside the U.S. are used to stricter return policies than those offered by most U.S.-based retailers, prompt attention at this end greatly influences customer satisfaction, nevertheless.

One of the considerations the retailer must undertake when establishing a return policy for international sales is the cost of the item being shipped. In some cases, it may be more cost effective to have the customer forgo the return experience in lieu of shipping out a revised order.

“It makes more sense to handle returns on a higher ticket item, like a laptop, than a $20 shirt,” says Steven Graham, executive vice president and chief technology officer for PFSWeb, which delivers to 57 countries and operates an international transport hub in Memphis.

Then again, it does not necessarily make sense for a retailer to market a $20 shirt if the customer can find a like item for a similar price point (see box, p. 44). “Making the customer happy has a lot to do with evaluating the cost of a return,” adds Graham. “The cost of a return starts with whether the retailer provides a unique product.”

Selling a unique product, or the perception of it, is rooted in marketing. While this task has traditionally been the domain of retailers, fulfillment partners are moving into the realm through technology and the availability of quality databases that can aid retailers in their marketing efforts.

Flavia, which aggressively markets its web site offline, relies on PFSWeb to develop source codes that identify the ads to which a consumer responds. Flavia’s ads, which run as part of direct-to-consumer and in-mall campaigns, as well as on television networks QVC and ShopNBC.com, includes a phone number or web address unique to each ad to allow for tracking of customer response rates.

The same strategy is applied to press releases that are picked up and run as a print story featuring company contact information. PFSWeb develops the source code for each point of contact and has a hand in developing search engine marketing strategies. “Our fulfillment partner has been key in helping us develop our marketing strategy,” LaRusso says.

The full breadth

Fulfillment partners can even aid retailers in the development of targeted marketing lists. Canada Post Borderfree has helped Brookstone increase its mailings into Canada fourfold since 2003. The rise is attributable in part to Canada Post Borderfree supplementing Brookstone’s mailings with more than 4 million pieces annually that Canada Post produces featuring Brookstone.com. The retailer is now among the top 15 direct marketers in Canada, according to Brookstone.

For all of the services that cross-border fulfillment companies can provide, retailers still need to perform their due diligence when selecting a partner: that means finding a partner who can deliver on promises for prompt, reliable service, as the failure to do so will damage the retailer’s brand. In most cases a U.S.-based retailer virgin at venturing into foreign markets is likely to have little, if any, brand equity outside its country of origin. Lack of brand equity puts a premium on using fulfillment to help create a pleasant shopping experience.

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