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Retailers, direct-to-consumer brands, marketplaces and marketplace sellers riding the lockdown-induced boom in cross-border e-commerce sales are going to get a massive wake-up call Wednesday as global postal rates into the U.S. start to soar as much as 150% or more.
The Universal Postal Union's (UPU) decision to allow the U.S. to set its own inbound postage rates — and, in doing so, create a more even playing field for international postal rates which have been intrinsically locked in the past — is a turning point for a cross-border market forecast to rise to $627 billion by 2022, or 20% of e-commerce as a whole.
For the Trump administration, the UPU's stand-down is a triumph that ends a market distortion. China's UPU status as a "developing" country meant it was cheaper for Chinese sellers to ship to the U.S. than for U.S. companies to ship the same products domestically. The outcome doesn't entirely close the gap, but the U.S. Postal Service will no longer effectively be subsidizing deliveries of goods "Made in China" to homes across America.
The retail sector faces a projected global loss of $2.1 trillion and e-commerce is one of the few remaining sources of income. With brick-and-mortar outlets closed to comply with governmental directives to reduce the spread of COVID-19, millions of people are adopting online shopping. And international e-commerce will continue to grow because buyers who can't find what they want in their home market will find a website in another country to sell what they want.
The U.S. processed in excess of 6 million inbound packages in May alone, a fivefold increase year-on-year, because many customers knew higher postal rates were coming. As postal rates get set to rocket, retailers, e-tailers, and marketplaces will have to face the reality that their margins will start to dissipate — and that's before the other 191 member countries in the UPU get to set their own rates for foreign parcel services at the start of 2021.
So what should e-commerce players do if they can't pass on higher shipping costs?
Parcel consolidators can offer postal-like service and rates, with the added benefit of tracking and customer service that are nonexistent in the postal world.
Many businesses are evaluating their global e-commerce shipping strategy. Decisions to make include whether to hold inventory in the U.S. to accelerate delivery time frames, drop-ship parcels from Asia to the U.S. to avoid higher duties and taxes, and make supply continuity a priority over convenience and cost.
New Game Plan
Shippers should review their carrier mix and profile, especially if a postal entity is involved. Make sure you're using the right "‘tech stack" and that it is scalable so you have an ecosystem for e-commerce growth to support quick onboarding of new business. Getting integrated with platforms like Shopify and leveraging the likes of EasyShip or ShipStation will give you the flexibility to grow quickly.
Also, reconsider your delivery lead time to U.S. customers and meet it by selecting a freight-to-post option via multiple gateways to reach customers faster. This allows customers to use dynamic routing methods to avoid peak season-related backlogs at airports.
The change in global postal prices so soon after all the COVID disruption is another business complication, but it also is an opportunity to modernize and speed up the delivery experience and generate loyalty. Acquiring customers is easy. Keeping them is hard. Online shoppers crave certainty above all else. They're smart and they're price sensitive, but offer a compelling value proposition and a better delivery experience, and you'll be well on your way to earning another lifetime customer. And, they'll pay more over time because you've earned their trust.
Starting Wednesday, the economics of cross-border e-commerce is going to be different. But don't despair. If the global lockdown has taught us anything, it's that more and more savvy shoppers are taking their buying online. Just make sure you're not the one paying a heavier price to make that delivery.
Brian Bourke is the chief growth officer at SEKO Logistics, headquartered outside Chicago.
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