Reuters Events | Supply Chain & Logistics Business Intelligence

The cost to get cross-border goods to customers and handle their returns are now the top challenges for e-commerce businesses reveals Avalara and Reuters Events, Supply Chain industry survey

Delivery costs and return costs are now the biggest challenges faced by businesses conducting cross-border e-commerce finds a new industry survey, with 55% of respondents worried about the rising cost pressures of deliveries and 48% struggling to process returns.

These are dramatic increases from Avalara and Reuters Events, Supply Chain’s previous report into the topic where a third of respondents faced issues with delivery costs and just 27% said they were challenged by the cost of returns in the 2023 survey.

Other growing challenges include compliance with customs regulations, which rose from 43% to 54%, and added tariffs and duties, which went from 37% to 43% of respondents, further underlining a heightened concern around costs.

The report noted that among businesses that had yet to engage in cross-border e-commerce, they were most likely to say that the inherent complexity and an inability to conduct enough due diligence to comply with trade regulations were holding them back from entering the space.

It doesn’t have to be this hard

Despite the rising concerns surrounding the costs of doing business, the overall burden of conducting cross border e-commerce appears to be falling.

More businesses report that they are finding it easy to conduct cross-border e-commerce, the percentage reporting delays due to misclassifying goods has fallen, and there has been a slight rise in the share being able to calculate and display landed costs to their customers.

The proportion of respondents who find the cross-border e-commerce space easy to operate in rose from 42% in 2023 to 46% in 2024, while the share who found it difficult dropped from 20% of the survey down to 13%.

Driving that trend is a better understanding of trading requirements and being able to calculate duties. The research found that the share reporting frequent delays as a result of filing incorrect Harmonised System (HS) codes reduced by 5% year-on-year, falling from 39% to 34%.

The HS system gives codes to goods so that customs can give assign duties, taxes and tariffs to those imports. However, there are tens of thousands of individual codes that are subject to change over time, creating issues for e-commerce businesses, especially when trying to give an accurate cost to a consumer at the point of purchase.

“The world of classifications is complex,” explains Patrick Frith, Senior Director of Growth Cross-Border EMEA at Avalara. “Every country has its own methods of classifying the same goods. Very often, companies rely on suppliers for classification codes without vetting them, or they use out-of-date databases. In some cases, they may use their own country codes, incorrectly assuming that theirs are the same as others.”

That makes it harder to give a clear picture of the final price of the product to the consumer at the point of sale, a process known as Delivery Duty Paid (DDP), and means the consumer is charged for extra costs at the point of delivery, or Delivered at Place (DAP).

The research notes that DAP is problematic, leading to reduced sales and repeat purchases by customers.

Evan Wright, Senior Director of Growth, Cross-Border at Avalara, emphasised that “setting clear expectations on the total cost of international shipping,” is a key step to success for international e-commerce. “This is especially important for customer service, as HS codes are crucial to enable DDP shipping, saving any hidden costs for the customer.”

This makes it encouraging that there has been a slight rise in the share reporting that they can serve a DDP calculation to customers, going from 61% in 2023 to 63% in 2024.

“The findings underscore the importance of due diligence in international trade,” said Craig Reed, SVP, Global Trade for Avalara, especially as “more accurate Harmonised System (HS) codes are vital for smooth customs clearance and cost management.”

Download the complete, free-to-read report here.