Removing ‘Sticker Shock’ From Cross-Border Shipping?

Making cross-border business transactions can be an expensive ordeal for both merchants and consumers. Add unexpected customs and tax charges after a purchase on top off that, and both parties are in for a rude awakening.

For many consumers, seeing additional charges tacked onto their bill can often be a good enough reason to walk away from their purchase altogether. An estimated 40 percent of eCommerce customers abandon their shopping carts if the checkout process is too frustrating, according to the most recent PYMNTS Checkout Conversion Index. Adding the surprise of additional fees on goods can only exacerbate those frustrations.

For merchants focused on boosting their cart conversion, addressing these consumer vexations is a priority. But some companies, such as logistics provider Yakit, are offering ways to reduce the friction involved in international shipping by offering solutions that incorporate all shipping, taxes and customs costs into a final bill so that customers are not caught off-guard when they are ready to check out.

PYMNTS recently spoke with Rajiv Ayyangar, VP of product for Yakit, about how logistical shipping solutions are working to eliminate consumer surprises related to international eCommerce purchases.

Taking Surprises Out of International Shipping

Most merchants engaged in cross-border trade strive to deliver products to their customers as efficiently as possible. But one thing merchants don’t want to deliver to their customers is the shock of being charged additional fees after the checkout process has been completed. Customers are likely to walk away from merchants after learning that the calculations of relevant taxes and customs were not included in the final bill.

However, merchants might not be aware of what a certain global region charges for the delivery of certain goods and hence be unable to offer customers an estimate of what additional fees they should expect to pay for their order. Without the ability to offer these estimates, international eCommerce merchants risk losing their customers because of a rocky delivery process.

Ayyangar said Yakit’s services aim to help eCommerce merchants on Shopify by giving them access to a marketplace of cross-border services and tools. These tools allow merchants to pre-calculate duties and taxes into an order’s final price tag to help consumers anticipate all charges involved. The company also allows Shopify’s eCommerce merchants to compare various cross-border service providers, similar to how Kayak.com compares airline routes and prices, so they can choose a provider that meets their specific budget and timeline.

By offering more tools to merchants and consumers, the delivery process becomes more transparent for both parties, said Ayyangar. Keeping online shoppers informed about all of the charges involved in their purchase can help them avoid an unpleasant surprise during checkout. For merchants, customers who are not caught off guard by the cost of their order are less likely to abandon their shopping carts.

“Cart conversion for international customers is typically a lot lower because of the sticker shock of shipping, duties and taxes,” Ayyangar said. “For a lot of shippers who are doing significant international direct to consumer business, this is the number one complaint.”

Take this scenario as an example: a Canadian customer makes an international purchase valued at $100 and pays an additional $15 to $20 for shipping costs. But at their local post office, the customer is informed that an additional $20 must be paid in duties before the item can be released.

Ayyangar said discovering additional costs after a purchase is made only adds another layer of exasperation to international shipping for everyone involved. Consumers are likely to be annoyed by the surprise costs and, in some cases, might abandon their purchases at the post office rather than pay additional, unexpected fees, he said. Meanwhile, merchants that shipped the goods risk losing return customers over an annoying experience.

“The biggest reason why people will switch off a platform when it comes to international B2C is a poor delivery experience, which includes being charged after the fact for duties and taxes which [they] didn’t expect and couldn’t predict,” he said.

Ultimately, Ayyangar said merchants that can provide customers with a better delivery experience (one that avoids surprise charges) can go a long way toward improving retention rates.

Speed vs. Cost of Delivery

In the cross-border world, eliminating friction from checkout experience entails allowing eCommerce merchants to find a logistics provider with a rate that meets their budget and delivery needs. But when customers must choose between the cost and speed of their delivery, Ayyangar sees a familiar pattern.

Consumers are willing to wait longer for a delivery if it can save them money — a fact that has helped Yakit carve out business from competitors such as DHL and FedEx, which deliver a day or two faster but can cost 20 to 70 percent more, Ayyangar pointed out.

“We’ve found that’s a sweet spot for eCommerce,” he said. “We think there is always going to be an advantage to a slightly slower service with a significant cost advantage.”

However, when needed, customers also expect faster deliveries, which has led Yakit to look for alternative options that can help boost the speed in the “last mile” of a delivery. To do that, the Sunnyvale, California–based company is considering partnering with Deliv and Uber to execute the last stretch of a delivery. And as the demand for faster delivery grows, the company will also keep looking into the use of drone deliveries and autonomous vehicles to complete a delivery, Ayyangar said.

A Roadmap for Logistical Planning

Beyond offering customers pre-calculations on related taxes and fees and options for merchants to ship their products using a cheaper (but slower) delivery option, Ayyangar said Yakit’s solutions also work to remove friction from cross-border logistics by gathering data on various deliveries. By collecting and analyzing this data, the company is able to anticipate challenges and avoid surprises when delivering goods to various global regions.

“Every country has its own challenges,” Ayyangar said.

Deliveries can face “unusual” custom clearance challenges, logistical challenges like reaching certain parts of a country and technical challenges, such as whether a carrier’s technical solutions are advanced enough to meet the delivery needs. Ayyangar said Yakit uses API integrations and FTP-type transfers to collect and analyze data and find ways to improve delivery systems.

“We get less and less surprised as we grow the network,” he said.

As Yakit learns more from customer experiences with international shipping, Ayyangar hopes the company can work to reduce some of the barriers encountered when shipping worldwide. Bringing down these barriers to cross-border trade will allow more innovative merchant products to reach the global market, he said.

“Our hope is to see an increasing richness of unique items being shared throughout the world,” he said. “These types of innovations are connecting people in different parts of the world in a way that’s more personal than making one mass-produced product and putting it in every store.”

While Ayyangar anticipates demand for international eCommerce is poised for an “explosion,” he worries that political climates in the U.S. and Europe could create barriers to international trade in the form of unexpected taxes and fees or logistical challenges. Nevertheless, he sees an opportunity for companies to step in and help merchants and consumers sort through whatever challenges may come.

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About the Tracker

The PYMNTS X-Border Payments Optimization Tracker is the framework for evaluating players in the cross-border payments landscape, and the quarterly index tests the readiness of the companies to serve a global audience.