Shipping costs are known to dramatically impact online shopping, and nowhere is this more true than in cart abandonment. In fact, high shipping costs are one of the top causes of shopping cart abandonment, with a whopping 61% of online shoppers saying it’s made them walk away from a purchase. Transborder shipping increases costs, wait times, taxes, tariffs, and logistics. Furthermore, as international markets grow and become more lucrative, well-funded, local-first competitors, without international shipping burdens, will continue to establish themselves.
Understand local priorities to balance cost and wait times
International shipping presents a paradox. The better the native local experience is, the less likely an international customer expects to pay more or wait longer for an item. However, priorities vary strongly from market to market. It’s not just cost that’s involved; 16% of shoppers report abandoning carts because delivery speeds were too slow. For example, Dutch and Belgian customers want the fastest options. Conversely, customers in developing markets may be more price sensitive and prefer cheaper, slower options. Scandinavians prefer to pick up packages at collection points, whereas the Japanese often choose cash on delivery, so be sure to research the tastes and preferences of each market you’re attempting to enter.
Two potentially “best-of-both-worlds” solutions are leveraging local fulfilment centers and drop shipping. With the combination of increasing production and the rapid growth of e-commerce demand in regions, such as Southeast Asia, shipping directly from your manufacturer to your international customer may save both time and money. While potentially more cost is involved to set up and maintain fulfillment centers, warehousing closer to your customers has obvious cost and speed advantages. Local fulfillment centers also have the advantage of reducing customs-related risks for the buyer (more on this below). However, if local isn’t right for your business, a regional fulfillment center may be the best place to start.
Be upfront with taxes, tariffs, and customs issues
The US International Trade Administration recommends displaying international shipping policies, such as the following, to disavow the vendor from responsibility for customs-related issues:
“Orders that are shipped to countries outside the United States may be subject to import taxes, customs tariffs, and fees levied by the destination country or the shipping company. These charges are the customer’s responsibility and will be billed by the delivery company. We have no control over these charges and are unable to estimate them. Tariffs and taxes are neither collected nor included in your price calculation at the time of your order; for an estimate of these fees, which vary by region, contact the customs office in your area.”
However, calculating many of these costs is possible, and setting accurate expectations with your customer is clearly better. International buyers are keenly aware that importing products can potentially lead to additional fees, wait times, and restrictions from customs authorities. However, shoppers won’t necessarily know how their country’s customs policies apply to your products, and the more you make them guess, the less likely they are to buy.
Sales taxes, value-added taxes, and tariffs vary by product and country. If your product catalog is small and static, collecting and maintaining tax/tariff data may be straightforward. However, as your catalog scales and changes rapidly, the challenge becomes increasingly complex, and you may want to consider integrating with a service provider.
Understanding export regulations and controls is also important. You probably don’t need to worry much about export controls related to arms, munitions, or nuclear non-proliferation, and US trade sanctions generally apply to less lucrative e-commerce markets. However, electronics, computer hardware, and consumer software vendors may be affected by export controls.
Lastly, consider inspection-friendly packaging for international customers. Agents performing customs inspections are often careless in re-packaging boxes they’ve opened, which can lead to product damage and/or a mediocre impression upon arrival.
Ensure shipping promotions are localized
Adding shipping promotions at particular spend levels is a popular way to increase both cart size and conversion rates. For example, while $50 is a common spending target for free shipping in North America, this same target may not work in other regions.
First, understanding the local spending power of your given market is important. If you’re selling into developing markets, for instance, you may need to tweak the ratio of your average purchase-to-shipping target, as well as your total customer wallet.
Second, you’ll need to understand the unique buying patterns of your market. If your most popular products are complementary and/or disposable, free shipping spending targets can help increase overall cart values. However, if your target international markets tend to buy durable and stand-alone products, focusing on lower-cost shipping options is probably more effective than cart value promotions. While in this example, using a personalization system to offer promotions based on the product and locale could be very effective, failing to localize third-party services that insert content is a common UX mistake. For example, offering Indonesian shoppers a shipping promotion in dollars wouldn’t be as effective as one in rupiah and would erode the authenticity of your native Indonesian experience.
Act now to establish beachheads in emerging markets
The pressure to offer shipping discounts, with the reality of increased international shipping costs, can put best practices in direct conflict with profitability. For some, such as global luxury brands, profitability may be the right focus from day one. However, for mainstream products, numerous examples (e.g., Tabao/Ebay, Mercado Livre/Amazon, Ctrip/Expedia, Weibo/Twitter, Didi/Uber, and HelloFresh/Instacart) demonstrate that investing early is far better than allowing local-first competitors to establish themselves. Furthermore, by establishing local brand presence and gaining market share, economies of scale can drive shipping costs down for both buyer and seller. However, the more lucrative international markets become, the more competition they will attract, whether global, regional, or local-first. The time to act is now!