Alex Yancher is Cofounder/CEO of Passport Shipping, an international shipping carrier focused on small parcel shipping for Direct to Consumer ecommerce companies.
Before there were services like Passport Shipping, there was a lack of easy ways for people abroad to buy products from American brands and retailers. Customers from Kuwait to Kazakhstan would, for example, discover Cards Against Humanity and the only place to buy this one-of-a-kind game would be online, from an American merchant.
Eagerly clicking on the ‘buy’ button, international consumers would get to the checkout page, only to discover that their desired addition to game night doesn’t ship to their home country. Even worse, this customer would get to the checkout, actually buy the product and discover two weeks later that the delivery is being held hostage at their local customs office. Customers were so fed up with shopping online that they paid personal shopping services a fee just to shop for them and ship their products “the right way”!
But that was then, today there is a ‘going global’ playbook for brands to invest in the enormous opportunity of having a global addressable market.
You may be surprised to find that:
95% of the world’s population and 85% of the world’s purchasing power is outside the US (source: US Chamber of Commerce)
Cross-border ecommerce is growing at almost twice the rate of domestic ecommerce (27% vs. 15%) (source: Zion Market Research)
At $147, international order values are 17% higher than average domestic ones (source: Statista)
So, how can a brand unlock the potential for international sales? Here are the top two considerations for going global: getting shipping right and localization.
Get the shipping right
One of the biggest factors in having a successful international program is shipping products with 100% of the duties and taxes paid upfront. This is called DDP shipping (Delivery Duty Paid) vs. DDU shipping (Delivery Duty Unpaid), which is when the customer abroad is responsible for the duty and tax payment upon receipt of the item.
Here are the top 3 benefits of using a landed cost (aka DDP) method of shipping:
Better customer experience
If a customer pre-pays for customs and duties at the checkout, the customer will receive the package without any further action required. However, if the product is shipped without having the duties and taxes pre-paid, then the customer will have to go to the post office to claim the package and pay the duties and fees. The costs go up further because the customer would also have to pay a collection fee (e.g., UK £8, Canada $9.95 CAD).
Reduction in customer support issues
Some of the customers who are required to travel to the post office to retrieve their product may actually choose not to. These customers may request a refund or charge-back which may cause them to report a poor experience.
Higher conversion rates
It may seem counterintuitive, but requiring customers to pre-pay customs and duties drives higher conversion rates. There are two reasons for this:
One is that cross-border shoppers are savvy and they know that they will be required to pay customs and duties when the package arrives. They also know that if they’re not being asked to pay their local tax and duties at checkout, this means that the brand is shipping Delivery Duty Unpaid (DDU), which means their package will be held in the post office and that they’ll be asked to pay an additional fee of ~$10. Cross-border shoppers weigh this when deciding to hit the buy button and this can lead to a lower conversion rate.
The second reason is that while at first a customer may convert because duties and taxes are not in the cart, when the product arrives and is held in customs, there is a high probability that this customer will request a refund or charge-back. If adjusted for these ticking time-bomb orders, then the conversion rates of a DDP program are higher.
How to get started
To get started with landed cost shipping you need to be able to collect duties and taxes in your shopping cart, similar to how you would collect state taxes. Passport has an easy-to-use application built for Shopify (and other carts). You will need to ensure that your shipping method is set to DDP. This setting informs your carrier that they should pay the duties and taxes on your behalf and bill you back for them in a future invoice.
The other key question to answer is what speed of service should you offer: Fast, slow, or both?
Brands that have seen the most success offer both methods of service. They will offer a slower 5-10 business day service for free or for a discounted price and offer an express 2-3 day service (via FedEx, UPS, or DHL) for a fee around $20-30.
Remember, your products are unique! This means they have an inelastic demand so people will be willing to wait for them because they literally can’t get them anywhere else. However there are some people who need the products fast—maybe for a birthday and you’re able to capture this demand with an Express (2-3 day delivery option).
People like what’s familiar to them and this familiarity drives higher conversion rates. Imagine if you landed on a website and everything was in Yen. You would have to extend a lot of mental bandwidth to figure out how much this product costs in your local currency. While this isn’t a deal-breaker, this factor can lower conversion rates.
There are several factors to consider when localizing your website in order to maximize conversion rates. In the order of importance, they are:
Localized treatment of duties and taxes
The section above describes the benefits of shipping with landed costs. You want to get credit for this from the customer! One way of doing this is by adding a line in your checkout that says “Duties and taxes included”. But an even more elegant and ‘localized’ way of doing this is to bake-in the duties and taxes into the price of your product.
In fact this is how local brands and retailers do this all over the world. In the UK, for example, all products that you see on any website already includes the UK 20% VAT in their prices. Therefore when a British consumer checks out on their local site there is no additional line items for tax or VAT because the price already includes this amount. As noted before this ‘local’ pricing experience drives higher conversion rates. Conversion rates can rise when local taxes (VAT) and duties are baked into the cost of the product upfront.
Reclaiming duties and taxes on international returns is very complex. In order to give your international customer their full refund on products they decide to return, it’s important to understand your options when it comes to reclaiming customs and import fees.
Localized payment methods and currency
Even in the US, we are starting to see fragmentation around payments with new options like Afterpay, Klarna, Apple Pay, and Shopify’s new payment option. It gets even more complicated around the world. Different countries have various preferred payment methods. For example, about 30% of shoppers in Germany use the continent-wide SEPA direct debit system. About two thirds of shoppers in Holland use a Dutch banking transfer method called IDEAL and about half of Russians use the country’s e-wallets (Qiwi and Yandex).
The good news is that cross-border shoppers are savvy and typically have a Visa or Mastercard issued credit card so that they are able to transact on American websites. However, conversion rates can be boosted by including payment methods that are familiar and more accessible to local shoppers.
Irrespective of the payment processing options used, displaying pricing in the local currency will remove the need for the customer to calculate the price in their local currency. The less they have to think, the more you’ll sell.
Here are two payment aggregators to explore to add multiple options to your cart: Ayden and WorldPay.
Localized language may seem like an important consideration when ‘going global’, but in reality it is a minor one. While there are hundreds of languages around the world, unless the brand is committed to translating their full marketing funnel into something other than English, the website should just be in English. This is because anyone who lands on your website will have discovered it from an English speaking channel—either one of your marketing campaigns on Instagram or celebrity influencer who touted your product in English.
The effort to translate each product and each description into another language is a monumental one. There is software that can get you 80% there (like Google Translate), but there will always be things that are lost in translation and will likely cause more confusion.
Most of the world’s consumers are reaching for modern brands that can easily connect to this global market. But these changes will not happen overnight. Taking steps to become a more global brand requires a methodical approach, tackle each decision one at a time, rather than try to endeavor too much too quickly.
There are many companies like Passport, and like DCL Logistics who can help you get started. Reach out to chat with our industry professionals, or to see how much global traffic you or your competitors are gaining, there are tools like SimilarWeb to gain more insights.