Retailers, direct-to-consumer brands, marketplaces and marketplace sellers must take action now to protect their cross-border e-commerce margins as global postal rates into the U.S. get start to soar by as much as 150% from today - because they will struggle to pass on additional costs to savvy online shoppers, according to SEKO Logistics.
July 1, 2020, heralds the first day of the historic agreement between the Universal Postal Union (UPU) and the United States, which allows the U.S. to set its own postal rates, a move designed to eliminate economic distortions for the international distribution of goods. The change comes as millions more buyers have converted to online shopping during the global COVID-19 lockdown, which has further boosted a cross-border e-commerce market expected to be worth $627 billion by 2022.
The pressure on margins, however, begins from today and will accelerate further at the start of 2021 when the other 191 UPU member countries will be able to set their own rates for foreign parcel services too.
“Cross-border e-commerce is one of the most resilient sources of income for retailers, e-tailers and marketplace sellers, and even more so in recent months with closures of bricks-and-mortar outlets to stem the coronavirus outbreak. But, savvy online shoppers know higher postal rates are coming and will vote with their plastic if sellers simply try to pass on these much higher costs,” says Brian Bourke, SEKO’s Chief Growth Officer.
The alternative, he adds, is for sellers to see this shift as an opportunity to modernize and speed up the delivery experience they offer, and to take advantage of the postal-like service and the postal-like rate alternatives provided by companies like SEKO, which come with those added benefits that customers genuinely value, such as tracking visibility and customer service.
As a leading parcel consolidator, shipping tens of millions of cross-border shipments a year, connecting prime markets in the U.S., U.K. and Europe, China, Australia and New Zealand, SEKO is already experiencing unprecedented growth in demand for its services. In May alone, SEKO shipped more than six million international cross-border packages inbound to the U.S. - a five-fold increase year-on-year.
The one thing sellers should not do, Bourke says, is ignore the changes in the global postal market. “The retailers, e-tailers and marketplace sellers we’re working with see the potential to build customer lifetime value. Evidence shows online shoppers will pay more for faster delivery times, shipment visibility and peace of mind as long as it’s from brands they trust. They also know cross-border e-commerce offers sustainable growth opportunities as consumers look for cheaper prices on their chosen purchases or source products they can’t find in their home markets from overseas. However, sellers that fail to find alternative and more cost-effective ways to ship their goods will see their margins start to dissipate.”
He advises sellers to reconsider what they’re trying to accomplish into the U.S. market and how this will look different in the future. This includes deciding whether to hold inventory in the U.S. to accelerate their delivery timeframes. Companies producing goods in Asia should also review if it’s more economical to drop ship parcels from Asia to the U.S. to avoid higher duty and taxes on B2B shipments into the United States.
“In a new world where supply/demand chain resilience is king, companies must decide what’s most important: continuity of supply; or velocity, convenience, and cost? Or, do they want it all? Whatever they choose, they should be evaluating their carrier mix and profile because if they are reliant on a postal entity of any kind to ship internationally, they will need other options in place before their bottom line is impacted. Selecting a freight-to-post option via multiple gateways in the U.S. to reach customers faster and meet their desired lead times makes a lot of sense. Having the right, scalable ‘tech stack’ solutions to support the quick onboarding of those retailers, e-tailers and marketplace sellers as they surge with growth opportunities will be a critical factor in success,” Bourke added.
