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Logistics and Fulfilment

Section Supported by wnDirect

Although domestic retailers in Australia represent the highest proportion of online spend, with 74.6% of the total market value, this still means that just over 25% of the total is being spent with over-seas merchants and cross-border shopping is not at all unusual amongst Australia with over 80% of consumers having made an overseas purchase at some point; this far exceeds the global average of 51.2%. The most popular cross-border targets for Australian shoppers are UK and US retailers, both of course sharing (mostly) a common language.

Rather than ‘where’ a product comes from, Australians are far more interested in how quickly it can reach them and therefore consideration needs to be given to the volume of transactions being imported into Australia and the channels used.

As a non-Australian e-retailer reaches critical mass and transactions increase, the supply chain model used will need to adapt to a physical distribution presence. A typical supplier will start off sending individual products.

Traditionally most individual deliveries into Australia will have been made through the postal routes with Aus Post as the local delivery link providing:

Economy – 3 to 5 day delivery with ‘signature on delivery’ and ‘safe place’ options

Express – next day delivery to about 80% of the country and with the option of additional on line tracking (Premium)

Collection at the Post Office

Or by using services provided by the big global integrators (TNT, UPS, DHL, Fed Ex) mainly providing Express services, some with time slot delivery options.

However neither the slower postal route nor the more expensive ‘courier’ route were ideally suited to the needs of cross-border ecommerce.

Over the past few years we have seen the emergence of direct access solutions where orders from many retailers are consolidated in the country of origin, flown in bulk to the country of destination (customs cleared on the way if necessary) and handed to a local deliver partner for the ‘final leg’. These services are tracked all the way and are faster than post and cheaper that express. In addition, Australian Customs allows for purchasers and importers to ‘self-declare’ cross-border transactions and service providers are increasingly providing services that enable declarations to be made whilst goods are in transit; reducing processing time, paperwork and improving the competitiveness of cross-border merchants.

wnDirect is the forerunner of these services and shipped almost 50,000 individual parcels to Australia in August 2015 alone, on behalf of UK e-retailers. This type of solution provides an ideal bridge to the point where a retailer may eventually move to importing container loads of product with a view to utilising a local 3PL solution, finally setting up their own logistics, warehouse, and distribution solution. A larger importer may take the option of making application for their own licensed depot, warehousing and customs broker facilities located in Australia.

Retailers offering fast and inexpensive shipping can very quickly gain themselves a competitive advantage as Australians are used to ‘waiting’ even for domestic purchases. The promise of delivery within a specified time frame is not enough; online shoppers in Australia also expect an element of choice when it comes to delivery options. In fact research suggests that, despite the delivery distances involved in this huge country, 94% of Australian e-shoppers expect to have various delivery options. Rapidly catching up with the demanding approach seen in other countries, Australian online shoppers no longer simply expect their packages to get to them within a decent period of time, they want more.

Once orders arrive ‘in country’ it is worth considering where the demand is and what mechanisms will be required to service this custom. In 2014, the National Australia Bank reported a detailed breakdown of which regions made up the online shopping population.

ACT, whilst representing one of the smallest users of online shopping, had the highest spend per capita.

The geographical split of delivery locations is also interesting as the size of the landmass provides one of the biggest challenges to efficient fulfilment in Australia. In particular the postal areas, including Northern Territories; Tasmania; Queensland County and Western Australia County represent specific challenges, particularly around geography and population density.

Of the August volume delivered through wnDirect, the majority went to the major metropolis whilst only 8.12% went to rural areas.

This diverse range of destinations with delivery ‘hot spots’ requires multiple points of injection through which an international carrier can interface with local delivery solutions. wnDirect for example, ships in through Sydney, Melbourne, Perth and Brisbane thereby shortening the final ‘leg’ whilst also providing redundancy in the case of natural disasters such as the bush fires of 2014.

In common with other markets, Australian employers are starting to restrict their employees from receiving domestic orders being delivered to their work address; partially because of security risks but also due to the increasing volume overload post rooms and internal services.

Keen to innovate, the national mail carrier, Aus Post now not only provides delivery services for wnDirect and UK e-retailers but provides the facility for Click & Collect, opening the largest network of parcel lockers in Australia offering 24/7 access to 30% of the population in a location less than 10 minutes from home via 200 locations and thereby answering some of these delivery challenges.

This now forms part of wnCollect, the world’s first worldwide international click & collect solution launched earlier this year by wnDirect. It is already gaining traction in Australia with a number of brands adding the service to their delivery portfolio.

Returns

Australian consumers expect to be able to return unwanted goods and receive a replacement or credit with the minimum of fuss or delay.

In response to this customer demand, the retailer ‘City Beach’ changed its returns policy from 14 days to 100 days. Interestingly, increasing the timeframe for returns did not change the volume of returns received. “In fact, increasing the time that returns will be accepted almost seems to lessen the return rate! It gives the customer security,” says Michael Leard, Online Manager for City Beach. (Australia Post Whitepaper: Returns, 2013)

EziBuy, a fashion and homewares brand in Australia, reports a returns rate of 23% and offers a 30 Daymoney back guarantee.

By way of contrast, LatestBuy.com.au offer a 365 day return period and are reported to have a returns rate of 1.5%

These brands have taken their own views as to how the returns process fits with their overall proposition and customer base.

Central to these services, Aus Post, through the postal network, provides the traditional route and most people prefer to return via AUS Post post offices - all demographics show a preference above 40%. Retirees show the strongest preference for postal return, closely followed by Youth category. (Source: RealityCheck Research Feb 2015). Aus Posts new locker solution, with wnDirect, also now gives significant comfort in this area.

Typical issues facing merchants include getting the product back in to inventory so that it can be resold. With the costs and distances involved, many international merchants consider destroying the stock rather than return to their domestic distribution centre. Alternatives include creating a local stock pool so as to services future orders. Aside from the obvious physical issues around product returned by the customer, there are also the financial implications of the transaction itself; in particular customs duties on more expensive items.

As previously advised within the Customs and Clearance overview, Australian Customs take on how cross-border returns are dealt with will impact how returns and refunds operate. Professional advice should be sought as to how a merchant might want to cover this in their terms & conditions but also how they might want to arrange their reverse logistics and refund processes.

 

 

Political and socio-economic environment

Online and mobile usage

Marketing

Payment

Custom clearance policy

Legal framework and regulation

References

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