Crushing cross-border complexity
New models, increased connectivity and integration are helping to ease the friction involved in cross-border e-commerce
When it comes to cross-border e-commerce “It's an exciting time rich with innovation,” in the opinion of Nick Basford, UPS’ Vice President of Global Retail & eCommerce.
The recent shunt of huge quantities of demand into the online sphere, where borders are not important in the mind of the customer, has “Catapulted” many companies and their approach through the first phase of international e-commerce, where they had been sitting for some time. Now Basford thinks we are in “a second phase, which I would describe as perhaps a little more formative.
“Now we understand a lot better how problems are going to be solved, what the consumer really wants, and the path is clear. The only question really comes down to how much of retail sales will e-commerce ultimately be?” Asks Basford. Currently he notes that “25.5% percent of all retail e-commerce sales were actually crossing a border,” within the EU.
In this environment, brands need to be looking closely at how to accommodate that demand and move towards an “optimised stage”. In this phase, Basford sees that shipments start “fully delivering on what the consumer not just expects,” as well as also providing a level of service where, “ultimately, [they] will be delighted.”
The consumer doesn't want to know
Initially “The disruptive phase has been very much about, yeah, everybody wants to satisfy that overseas demand,” says Basford, leading largely to a race to keep up and simply fulfil emerging consumer desires. As time has gone on, however, there has “been a little bit about testing models, about trying things out, [and] bolting on services to be able to serve that that demand.” The next stage is “now transitioning into saying, ‘hold on, wait, we've got learnings from that phase’.”
Now it is about asking “How do we actually build cross border models that are seamless, that really delight those overseas consumers, and where they don't expect too much from them either?”
Although “Crossing borders can be complicated,” as they between different tax and regulatory regimes, Basford admits that “what we're now realising is the consumer doesn't want to know, right? That friction, that complexity needs to be dealt with by the merchants, by the participants in that value chain and supply chain like ourselves. I think we're now on a path, that formative stage to actually really getting that right.”
Diverging models for movement
Currently Basford sees that there are three models for handling cross-border e-commerce trade: “The first one seller-centric, the second one consumer-centric, and the third one channel-enabled or channel-centric.”
- Seller-centric: “Is really where the seller just bolts on an international capability to an existing domestic supply chain, so they onboard an international carrier … or connect to international cross-border payment services.” While “They're pretty straightforward to build,” Basford explains that “they get tricky, particularly in the hard border situations, because they move some of the understanding still to the consumer.” This can be a particular problem when it comes to the highly-complex environment of returns.
- Consumer-centric: Basford sees this as “A really interesting area now,” where many companies are setting up as “International Demand Solutions Providers (IDSPs)”, which “effectively act as an intermediary between the merchants and their cross-border consumer. They take away all of the problems,” but they’re “not necessarily fast to set up, they tend to be in the domain of slightly larger companies, and … they eat into the margin of the transaction.”
- Channel-centric: Basford believes that this is the “The fastest growing,” where platforms allow merchants to have “the entire supply chain, the entire value chain … solved as part of the service that they get from those platforms.” These have “similar pros and cons to the IDSPs,” where you give up a fair amount of margin associated with using one of those models.”
Increasing connections between borders and digitally
The growth in new models and means of overseas e-commerce fulfilment underline the growth in the market and many of the service providers now stepping in are creating “Seamless connectivity between the physical and the technological,” believes Basford.
For their part, UPS is “Making it much, much easier to integrate [and] to connect to us through our API platforms.” Their goal is to take “all the things that we know about the people we deliver to, about the time it's going to take to get there, about the cost it's going to take, about the optionality,” and to “build it all in and create tools for whichever one of these three versions,” he outlines.
He feels that this all-in-one, agnostic approach is needed because “The consumer is going to win. The consumer’s absolutely going to get what they want.” They are not concerned at what goes on behind-the-scenes but they will notice when it isn’t up to scratch for this high e-commerce demand world Therefore when we operate in a world where the customer wants to ignore borders and to get their preferred product, no matter where they are, the systems and approach have to be able to handle diversity and complexity but bring that back together to make the final delivery.
The end goal? In Basford’s opinion it is to create a future fulfilment operation that is “optimised, really, really predictable, and really frictionless and seamless. That's the future pathing. That's where it's going.”