While in Davos, a panel on the future of international e-retailing was convened with representative CEO’s from major international logistics, supply chain and retail providers. The panel opened with the question of why international e-retailing had been so slow to really take off, given clear demand from people in one geography for goods and services that might only be available in another, for instance, people living overseas who might like to enjoy goods from home. The barriers to effective e-retailing, however, continue to be formidable.
The first barrier is the sheer cost of shipping, including the cost of moving materials around, customs duties, re-labelling packages and parcels to account for local regulations and so forth. For instance, the CEO of a major postal services pointed out that for goods to come from his country to another target country, the boxes would have to have their original labels removed and be relabeled for the target country, which is enormously time-consuming and costly. Indeed, one of the biggest problems is verifying what is actually in the boxes – from large shippers, it is not so much of a problem but as smaller retailers come into the supply chain, governments start to worry about the quality of what is in the containers. At some point, even the most homesick among us apparently rebel at prices that simply can’t be justified.
The second barrier discussed at the session was the generally poor experience people have if an item needs to be returned. Just as it is expensive to get the item shipped in the first place, it is a nightmare if it doesn’t fit or if the item wasn’t shipped as expected. Some providers – for instance those with a local business footprint – can overcome this barrier by having customers return items to bricks-and-mortar facilities in their local regions, but this obviously isn’t an option for someone who does business purely via the Internet.
I had an experience like this myself, in fact. I ordered a nice-looking coat for my nephew and was astonished that it appeared to have been shipped directly to my brother’s home in Massachusetts from a plant in China! It was even more dismaying when the package was opened to find that the coat – which had been advertised as a men’s medium – would have perhaps fit a ten year old. Oh well, perils of e-commerce. When, however, I tried to return the package I received an email from the original Chinese vendor, politely asking me whether I would accept a 50% refund for the coat and simply keep it, as it was too expensive for them to take it back. I replied that I really had no use for it, whereupon the original vendor offered an 80% refund and the opportunity to keep the coat. I guess it will be destined for charity, but it clearly was not a very satisfactory transaction. One of the CEO’s in the room said that the reason the vendor was so keen to try to make me happy was that a negative experience like this could redound negatively on the e-tailer (in this case, Amazon.com) resulting in the vendor being dropped entirely and cut off from burgeoning international markets. With much laughter, the CEO’s found that this was a perfect example of how returns can be a major barrier to progress in international e-tailing.
The third major barrier we discussed was the reliability and convenience of receiving deliveries. Obviously, shipping things any distance increases the risk that something goes wrong. But even more of an obstacle is the fact that for many consumers, receiving packages is not at all convenient. Indeed, stories abounded this recent holiday season of thieves following delivery trucks around, making off with the deliveries as soon as the driver turned the corner. Also, for many working people, packages sitting around are a sign that no one is home. Solutions discussed included something Alliance Boots is trying in the UK, what they call “click and collect” in which buyers order goods on line but collect them in the store. Another reality is that some people shortcut home delivery altogether and have packages shipped directly to their offices, with their bosses looking askance at the practice.
So, where did we land on the future of international e-tailing? That it would develop, probably slowly, but that advances in identification and sensor technology might make it possible to solve the barriers. Pricing could come down if resources were shared. Returns could be easier with that model as well. And reliability and convenience might be a simple as hiring out your car boot to help a neighbor bring an electronically labelled package to your doorstep.
This post originally appeared in Business India