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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.
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.”
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