Shipping: The Toughest Nut to Crack in Cross-Border Commerce?

Despite the fact that U.S. consumers have become accustomed to free shipping and returns in recent years – in fact, many have come to expect it – shipping internationally is a complicated business. And business is complicated enough already, so is dealing with it worth the hassle for consumers and merchants alike?

In a recent interview with MPD CEO Karen Webster, PayPal’s director of global merchant and cross- border trade initiatives, Melissa O’Malley, discussed the role shipping and logistics play in the success of cross-border commerce.

When it comes to international commerce, O’Malley said, shipping logistics, along with related issues and regulations such as taxes and customs, is “the toughest nut to crack in cross-border trade.” Shipping internationally is complicated and takes merchants a lot of time to deal with, she said. When it comes to getting over cross-border shipping hurdles, there isn’t a one-size-fits-all solution because each individual country has its own shipping complexities. As a result, O’Malley said, “Getting a landed cost if you’re a smaller merchant and providing that landed cost to an overseas customer takes a lot of time, and most merchants want to focus on their business and not being a shipping and logistics expert.”

And then there are the return shipments – reversing the rigmarole. In research conducted by PayPal and Ipsos on cross-border consumerism last year, 37 percent of 23,000 U.S. online shopper participants said that the difficult process for returning products was a significant barrier for cross-border shopping. The biggest barrier? Forty-seven percent said shipping costs. No doubt, the two can easily be intertwined.

Last fall, in advance of the holiday season, PayPal rolled out its Return Shipping on Us program in the U.S. (its largest market) for a trial period, which was set to wrap up at the end of January. The goal of the service is to boost cross-border commerce opportunities (and presumably to chip away at the perception that returning products is a barrier for cross-border shopping), fueled by PayPal payments. And it’s been successful, said O’Malley – the company just announced that the program, which had previously been rolled out in nearly 40 countries prior to the U.S. (and, according to O’Malley is now available in 46 countries), will be extended through the end of 2016.

PayPal users who activate the free service are eligible for 11 returns this year, with a value of up to $30 in refunded shipping fees per return.

Preferences, complexities, and good goods

Just like every country has its own regulations and complexities when it comes to shipping worldwide, consumers also have their own predisposed online shopping preferences. U.S. consumers, for example, are different from European Union consumers. The European Union, explained O’Malley, is an open market, which makes cross-border sales easier. “The U.S. consumer does not shop cross-border as often,” O’Malley said. “U.S. consumers are not used to having to think about having to pay additional customs and duties and taxes.” And, as the research revealed, she said, almost half of U.S. online shoppers say delivery costs deter them from making international purchases.

It’s a different story with Chinese cross-border consumers. In markets where consumers are hungry for goods they can’t get domestically, there’s more of a willingness to accept shipping costs and lengthy delivery waiting periods.

“The Chinese consumer wants a specific product with a certain quality and authenticity guarantee, and they’re willing to pay for that, even if that means they have to pay for shipping,” O’Malley explained. It has a lot to do with what is driving a particular consumer to buy overseas, she said.

Each country, with its own consumers and merchants, faces and sets regulations that are specific to the individual country. In some countries, consumers are only permitted by law to receive one cross-border package a year, O’Malley explained. Then there’s a country like Argentina, which, O’Malley points out, has extremely high customs and duties. “Even as a merchant, if I could offer refunded returns or free shipping, that’s not going to change through the country regulations on customs and duties and I think that’s a bigger question that’s really outside of the merchant’s control,” O’Malley explained.

Beyond government rules and regulations, there’s the online shopping experience itself. The user experience, O’Malley said, often is not conducive to enabling international sales. Based on research PayPal conducted, O’Malley said, “I think there actually is a fair amount of optimization that merchants can do to help avoid cart abandonment before [a shopper] even gets to the PayPal button to hit ‘buy.’ And some of that is as simple as cookie-based approach where, on the browser, the merchant site realizes that I’m in the U.S. and this merchant is in China, and there’s an automatic pop-up that says, ‘Hey, we ship internationally.’”

This consumer user experience is something, O’Malley said, that PayPal needs to work on with individual merchants and shopping cart providers – “How do you have an optimization to help remove some of those barriers along the shopping process, to make it easier and more enjoyable and, quite frankly, make it a more transparent experience for the customer?”

When it comes to fostering cross-border consumerism, the ease of the online shopping experience is critical, as supported by findings in the PYMNTS.com X-Border Optimization Index, powered by Digital River. And, as O’Malley said, easing the experience is crucial to opening more opportunities for cross- border trade. “You can’t do cross-border trade from a storefront,” she said. “It’s clearly a very important part of our business and it’s really the way that smaller companies are able to compete with larger companies.”

To read the full X-Border Payments Optimization Tracker, click here.