International Fulfilment: How to plan for global ecommerce success.
By Will Treasure, Director of Operations at Javelin Group.
International ecommerce presents a great opportunity for retailers and brands to extend their reach and grow sales without the large capital investment that was once required.
Some UK-based businesses are already seeing more than 50% of their ecommerce sales coming from international markets, giving both greater sales and good resilience to tough trading in a particular market. However, international ecommerce is not easy, and much of its success and profitability lies with the operational decisions, processes, and the technology put in place to enable it.
Choose one central fulfilment centre or multiple local centres
One of the most important operational decisions in establishing an international ecommerce offer is choosing between one central fulfilment centre and multiple regional centres. Shipping products internationally from a single fulfilment centre extends delivery time and means the carriage is more costly than local distribution, and this option needs to be weighed up against the stockholding, operational costs and complexity of establishing regional fulfilment operations. Having multiple fulfilment centres adds significant cost and risk due to investment in local inventory, setup and running costs.
The vast majority of UK and European retailers begin shipping internationally from an existing ecommerce warehouse, and typically this requires changes to pick and pack processes, shipment documentation and the addition of new carriage partners. Fortunately for most warehouse operations, these new requirements are well supported by modern warehouse management systems with minor configuration changes.
As international sales grow, the inventory risk of local fulfilment reduces, but staying competitive with the product offer or service landscape may also drive the decision. Other considerations are the availability of local labour and property, employment and operational costs, carriage options, and the need for merchandising systems to support dual stock holding, split inbound logistics and local markdowns.
Optimise the number of carriers and use of each
Once a decision is taken on fulfilment, a carriage solution needs to be found. If existing carriers can meet the geographical coverage, service option and cost requirements they will provide the simplest and quickest solution to enable international fulfilment. Optimising the number of carriers and use of each (based on speed, service, weight, volume, value) is extremely important. There can be large variations in cost between international carriers, depending on volumes and infrastructure in place to deliver to each country.
Some emerging markets still favour cash on delivery payment, so if this forms part of the customer proposition finding a carrier that can offer a credible solution and identifying any outlying areas which may not be serviceable or incur surcharges become important decision criteria. It is also wise to look for carriers that can deliver to as many of the target international destinations as possible to leverage volumes through the existing contracts, and carrier management software is also recommended to reduce technical integration efforts when using multiple carriers.
Identify a commercially viable returns solution
Lastly a returns solution needs to be identified. Ease, speed and cost of returns is becoming an important criteria for customers when deciding whom to shop with online, particularly in the fashion sector. The key decisions are whether the product can be returned to a local address and whether a customer is required to pay return shipping, however it is also important to address any distance selling legislation or local consumer rights that the operation may be subject to.
Although a local return address offers a better customer experience, it is unlikely to be commercially viable for the retailer at low volumes due to the operational overheads; in this case a pre-paid returns label is recommended. Local return processing can be a stepping stone into local fulfilment, storing returns in-country and then fulfilling local orders when stock is available, however this does introduce additional systems’ complexity.
Only the largest international ecommerce retailers have recently reached the scale or orders where regional/local fulfilment and returns processing have become viable options; they also have the advantage of understanding the customer and order profile along with local market specifics to help mitigate risk. For most retailers and brands, a single fulfilment centre shipping products internationally will be most suitable, but it does depend strongly on the product range, item weights and dimensions, and order volumes.
First published in: Essential Retail
For further information, please contact Will Treasure.
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