Inventory management and logistics are key factors for retailers and brands looking to enter new global markets. In the latest Internet Retailer/ Global E-Commerce Leaders Forum (GELF) survey, 60% of online retailers said they ship orders to consumers in other countries, primarily from their U.S.-based fulfillment centers (if domestic) or from fulfillment centers located in their home country (if based outside the U.S.) However, 52% of retailers and brands surveyed said they are also selling direct-to-consumer via localized, in-country ecommerce operations. With so much revenue now being generated outside the U.S., retailers are looking for more efficient ways to handle global order fulfillment and delivery.
There are two possible solutions for ecommerce businesses looking to sell cross border: cross docking and direct shipping. Choosing the right option depends on a number of factors. For retailers leveraging drop shipping, the cross docking model may be needed because drop shipping partners and suppliers are usually not equipped to ship internationally. For retailers and brands looking to get their product to customers quickly and at lower cost, direct shipping is the best option. Other factors include cost, the location of your partner’s fulfillment center, and cross border sales predictability and volume, as well as the speed of delivery to global customers. It’s up to each business to decide which works best for them. We at Flow can help brands with either model. To help with the decision, we’ve compiled a quick reference guide giving the pros and cons of each:
Cross docking is a common approach to logistics in which products from a supplier are distributed to a customer or retail chain with marginal to no handling or storage time – no-touch or one-touch processing. The name is derived from the physical act of receiving products through an inbound dock, and then transferring them across the dock to the outbound dock.
In the global ecommerce context, the retailer or brand partners with an international ecommerce provider who sets up the package for international shipping. The package is shipped from the retailer or brand’s warehouse to a domestic hub or a cross dock. The international ecommerce provider estimates duties and tax and prepares the necessary forms for the packages to meet the destination country’s customs and duties requirements before shipping the product to international customers. The key benefit of cross docking is that it enables existing fulfillment centers to ship globally without changing any processes.
However, the cross dock approach does have some downsides worth considering. First and foremost, brands and retailers risk losing control over the delivery chain once the order is sent to a cross dock. This can impact the ability to deliver seamless customer service in the event that there is a problem with delivery or a return. Cross docking can also add more time to the transit window, which translates to a longer wait time for the customer. A 2017 International Post Corporation survey found that in some global markets, the length of time consumers must wait for delivery will influence their decision to buy, and in some regions that that expectation window is tight: a maximum of four to five days.
For retailers and brands who need more control over delivery for international customers, a better solution may be direct shipping, or what we at Flow call hubless shipping. With this model, retailers and brands can fulfill orders from their warehouse directly to international customers, eliminating the need to ship to a cross dock distribution center before moving the order to international shipping. This is enabled by using artificial intelligence to estimate duties and tax and enabling the retailer’s current warehouse to print the necessary forms and commercial invoices for international shipping, along with the shipping label.
The benefits of the direct or hubless shipping model include:
- Reduced transit window to end consumer – faster delivery times
- Reduced (or in some cases, eliminated) domestic line-haul costs
- Reduced vendor data management risk
- Reduced third-party management risk
- A savings of $5 to $8USD per shipment when compared to cross docking
To succeed at cross border ecommerce, brands must maintain control over products, logistics and data and in turn, their international customer experience. Retailers need their systems and processes to be scalable as their business grows internationally. In our experience at Flow, we’ve found hubless (or direct) shipping to offer a more efficient way of maintaining control while getting your product to customers faster. With that said, for those who need cross docking for things like drop ship, Flow offers an option that will still allow retailer and brands to maintain visibility and gain more control over delivery and customer service.
Find out more about Flow’s logistics modules by requesting a demo today: https://www.flow.io/contact-us/.