Borders Matter Less and Less in E-Commerce
FedEx, UPS race to offer services as more Web shoppers buy from abroad
Blogger Shannyn Allan recently saw a $70-plus faux stone necklace in a boutique near her home in Chicago. She snapped a photo, ran it through Google Image and found a website where she could get the same one for $16 with approximately $7 added for shipping. It arrived on her doorstep about three weeks later—three weeks, because it was coming from China.
FedEx Corp. , United Parcel Service Inc. and other global delivery companies are banking on cross-border shoppers like Ms. Allan, who believe geography is no object when it comes to finding what they want.
Late last year, UPS bought i-parcel LLC and FedEx bought Bongo International. Both acquisitions are designed to allow foreign shoppers to easily purchase goods on a retailer’s site, automatically changing options to reflect the country from which a consumer is shopping. The sites adjust the currencies and shipping methods depending on where a shopper is based, and calculate shipping costs, taxes and duties. FedEx said in April it would buy Europe-based TNT Express for nearly $5 billion to expand in Europe, while UPS is doubling investment in Europe to nearly $2 billion over five years.
Cross-border online shopping has taken off as access to the Internet and mobile shopping spread and shipping options get cheaper and faster. Companies like Amazon.com Inc. and Alibaba Group Holding Ltd. have fueled the trend through letting smaller retailers sell their goods internationally via online marketplaces.
Busy trade lanes, which the 2013 PayPal study calls “the modern spice routes,” have been developing between the U.S., the U.K., Australia, Germany, Brazil and China. The primary online shopping destinations are the U.S., China and the U.K., according to a Forrester Consulting study for FedEx released in December. Australian cosmetics brand Mirenesse is shipping big envelopes of lip gloss to U.S. shoppers. Chinese consumers are buying powdered baby formulas online from Germany. Amazon marketplace fulfilled orders to customers in 185 different countries last year from sellers in more than 100 different countries.
“All of a sudden, e-commerce puts the consumer into the driver’s seat,” says Thomas Kipp, CEO of DHL eCommerce, a unit of Deutsche Post AG . “The consumer has the choice of when he buys, where he buys, how he wants to pay.”
The process has become so simple, consumers often don’t know they are ordering from a foreign retailer. When they do, “the No. 1 driver is that they can’t find that item in their country,” says Carl Asmus, FedEx’s vice president of international marketing.
DHL’s Mr. Kipp was charged an extra $33 in duties when a pair of $120 sunglasses were delivered to his home in Germany from Australia last month. He wasn’t surprised but a consumer not in the shipping business might have been.
Claire Bauling, who lives in northern Italy, buys everything from art supplies to greeting cards from her native U.K. Usually it is worth the extra she pays on shipping, she says. But not always. Her “personal low” was an order of tea bags from Amazon. “I won’t tell you how much I spent on shipping,” she says. “It was quite embarrassing.”
Online merchants can find themselves in a logistical quagmire of language barriers, currency differences and return hassles. Returns— now a key part of the online purchase decision—can be unpredictable if not impossible.
FedEx, UPS and DHL are racing to re-engineer their service offerings to make cross-border shopping seamless. As a retailer, “I can try to build all that expertise myself, or I partner with some other organization that makes it easier for me to do that,” said Steve Brill, UPS vice president of global business-to-consumer strategy.