E-retail has become an enormously important part of business but international e-commerce brings issues which do not apply when trading domestically, and it is essential to be prepared when considering the costs and implication of delivering overseas. Mike Josypenko is senior director of Special Projects at the Institute of Export and International Trade (IOE&IT.) “A lot of e-traders put an effort into their general business, designing and building the website, but not on the last leg of it, which is delivery,” he says. “This is especially the case with international delivery which can be much more complex, in that destinations can be further away, items will have to go through multiple handling procedures, and there will be issues including taxation, the timescale of delivery and regulation.”

All of these issues must be addressed in order to keep the customer satisfied and a key to this is transparency on the website, so that all costs are completely clear from the outset and that delivery expectations are met. “Costs will be higher in international transaction and they will vary according to region,” says Josypenko. “It will also take longer to deliver an item if it is going a longer distance and that can impinge on customer expectations. Conversely if an item is promised within 72 hours and it arrives within 48 that can create a positive impression.”

 

Key considerations

 

If merchandise is going beyond the EU, it has to undergo customs clearance and might be subject to customs duties. “Some websites use the word ‘delivery’ but don’t make it clear whether the buyer may have to pay import duties,” says Josypenko. “It should be made clear if these are included in the cost of the goods.”

Differing delivery options should also be considered. For example, Amazon now routinely offers same day delivery, but a UK e-retailer, selling into Germany may struggle to compete with a German company offering same day delivery, and may have to offer other incentives.

E-retailers must also consider that they may get a substantial number of returns, up to 50 per cent for some consumer goods, such as clothing. The expectation these days is that the retailer will meet the cost of the return. “Traders need to plan their strategy for returns and repairs in advance,” says Josypenko. “If you absorb the aftersales costs, make sure you budget for it.”

And paying duties can involve localised problems of their own. “Some countries have ad valorem limits, that is, low value limits for shipments, below which it is not commercially viable to collect import duties,” says Josypenko. “But they vary from country to country. The USA recently raised its limit from $200 to $800 – but next door in Canada the limit is C$20. The e-retailer has to be prepared.”

Five tips:

  • Spell out who is responsible for duties and taxes before the transaction completes on the website
  • Delivery costs are higher for low value goods to try to upsell, for example by creating incentives for multiple purchases
  • Consider how to manage returns
  • Try to exceed client expectations
  • Make sure profit margins cover unexpected costs