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Logistics and delviery in the USA

The US market presents some very real logistics challenges, largely due to its size and scale:

  A population of 320 million within 134 million households

  A physical geographical area of 3.5 million square miles and line haul distances of up to 3,200 miles

  Four time zones

As a result, B2C home delivery within the US is dominated by companies able to match that scale, most notably:

  The United States Postal Service – USPS

United Parcel Service – UPS

  Federal Express – Fed Ex (now incorporating TNT)

  DHL

There are also regional carriers covering specific cities, states or multi-state areas and companies who create a national coverage network by contracting with these regional carriers. These companies particularly become an option when it is possible to manage inventory and returns ‘in country’.

Non-US retailers seeking entry into the US market for the first time will find that there are effectively five routes to access the US delivery market.

Logistics Choices

Post

Using USPS as the final delivery agent, any retailer’s own domestic postal company can get goods to the USA. As an example, from the UK Royal Mail’s Standard service with tracked and signed for options would be suitable for ecommerce deliveries with a 5-7 working day delivery estimate.

In many markets, other service providers are also able to ‘inject’ parcels into the postal network, providing commercial rates to compete with traditional postal rates, some of which act as the international arm of other national mail service providers. For example, Landmark Global is part of bPost, the national postal provider for Belgium and as such it can leverage its strong links with USPS. See Direct Access.

Domestic carriers

In addition to postal operators, domestic carriers in each country will accept online retail orders and ship them to the US to be handed to local partners for delivery, often global carriers or postal carriers. Service times will vary depending on the line haul arrangements in place and the US service partner chosen but for example, from the UK:

  Hermes can provide delivery within 4 to 7 days

  DPD can provide service options spanning 2 to 7 days

Retailers already having a service contract with a domestic retailer should start by finding out what options they provide and can use this as a benchmark.

Global Carriers

For retailers wishing to keep their orders within a single network throughout, the major global carriers all provide collection and line haul services from most places in the world, to the US. By way of an example, the services available to UK retailers are summarised below:

UPS

  UPS Express Plus – 1-2 business days – delivery by 09:00

  UPS Express – 1-3 business days – delivery typically by 10:30, by 12:00 noon or by end of day

  UPS Express Saver – 1-5 business days – delivery by end of day

  UPS Expedited – 2-5 business days – delivery by end of day

  UPS Standard – day definite by date scheduled – delivery during the day

Fed Ex / TNT

  International First – next morning

  International Priority – next day

  International Economy – 3 days

DHL Express

  Delivery in 2 days with next day delivery to New York

Direct Access

Direct Access describes a solution where parcel volume is consolidated for each destination to achieve better air transport rates. Upon arrival in the destination country, orders are cleared through customs and injected into local networks (postal and carrier) for final delivery. To manage these more virtual networks Direct Access often comes with a managed service that may include:

  Expedited clearance

Multiple points of entry – reducing ‘in country’ line haul costs and lead times

Calculation and payment of duties on behalf of the client

  HTS (Harmonised Tariff Schedule) code classification management

  Tracking events and proof of delivery (where applicable)

Tracked returns – for unwanted and undeliverable orders

There are a number of companies providing such services including Landmark Global, wnDirect and P2P. For example using its postal heritage Landmark Global has 8 of its 22 global operating centres in the US allowing it to provide a 4-7 working day service to the US from the UK.

Landmark Global provides an example of the full range of services available from Direct Access operators, allowing retailers to migrate to in country fulfilment and returns management as their volumes grow. These include:

  Delivery Duty Paid – calculating the cost of duty, taxes and shipping costs in the preferred currency to be added to the cost of the product at check out to give the customer the full price of their order.

  Outsourced fulfilment with full warehouse management, pick and pack and dispatch

  Inventory management worldwide

  Returns management including quality checking, refurbishment, restocking or consolidated return through collection or bulk delivery

For all Direct Access orders, delivery times are particularly dependent on the point at which the goods enter the country relative to the final destination and (where applicable) successful first-time clearance through customs. It is therefore important to consider how orders will be transported from the country of dispatch, how the necessary clearances will be obtained and what support the Direct Access operator provides. Landmark Global has an in-house customs team that uses customs clearance technology to facilitate faster, more efficient customs clearance and processing. It has an international trade team to keep abreast of customs and trade regulations and procedures and manage in-country product registration, from administrative support through to checking local regulatory compliance.

Product prohibitions and weight and dimension restrictions may also apply by service so this needs to be checked in advance.

Parcel brokers

Parcel brokers provide a way of accessing better pre-contract rates through global and domestic carriers and, in the UK for example, companies such as Parcel2Go and Parcel Monkey provide this channel.

Contract rates and terms will be available for the logistics options previously mentioned but retailers with smaller cross-border volumes may initially be restricted to postal or public rate card or parcel broker options because most contracts will require a minimum volume.

Integrators

Retailers with a reasonable volume of orders may wish to consider the additional option of parcel service integrators who can provide immediate integration with a wide range of service providers delivering in the US market. These will include most of the options previously mentioned (excluding parcel brokers).

The retailer will typically need to have a direct contract with the service provider(s). The integrator then provides the ability to: allocate orders to the most appropriate service using agreed business rules, print labels and customs documentation, provide tracking and help to manage returns. For smaller retailers, some integrators also offer a parcel broker option that can help obtain better rates.

Providers of such services include MetaPack, Electio, Hypaship’s Parcelworks and Consignor to name a few.

Customs clearance

For delivery into the US there is a current duty threshold of $800, below which no import duty is due although there are some exceptions to this rule and certain restricted items require an entry to be filed with CBP (US Customs and Border Protection) and duties be paid regardless of value.

Companies like Landmark Global provide for advance notification of shipment details to CBP to expedite clearance. This is necessary to comply with ACE (Automated Commercial Environment) which became mandatory for all electronic release transactions in November 2016.

All carriers (regardless of method of transport) are required to submit electronic advance manifest data to CBP prior to arrival via the ACE system if they are to carry commercial shipments into the US.

If a customs broker is not ACE compliant, they are unable to transact any electronic business with CBP and although current regulations do not prohibit paper transactions, they are frowned upon and are processed with very low priority.

Additionally, any paper transaction requires the payment of duties, taxes and fees prior to being granted any customs release of merchandise.

So efficiently managing customs clearance has never been more important than it is today. With the full implementation of the ACE system as well as the former President’s Single Window directive, US government agencies are paying close attention to the admissibility of products being imported. The customs broker is the single best resource to determine what, if any additional agencies will be involved in the clearance of merchandise as well as providing any special documentation or data requirements.

Delivery in the US

Any retailer entering the US market will naturally be competing with local US retailers so it is important to understand the domestic services provided, especially by the four big players mentioned earlier.

The range of services available to US retailers through these companies are more extensive than those they offer to importing retailers. These are summarised below (correct as of February 2017):

US consumer delivery requirements

As well as local delivery services it is important to consider the needs and wants of US online shoppers and how they are already being met by local retailers.

This starts with what the customer can read about delivery and returns on the website. When asked the key questions, US consumers say:

• Only 62% are satisfied with the ability to see stock availability on the retailer’s web site and 41% have abandoned a basket because items were shown as out of stock
• 45% have abandoned a shopping cart due to perceived high shipping charges
• Only 63% are satisfied with the ability to find the retailers returns policy and only 67% are happy that the policy is clear and easy to understand
   »» Only 65% are happy with the ability to process returns online
   »» Only 63% are happy with the ease of return shipping online

This provides an early opportunity for retailers wishing to enter the US market. There is clearly a gap in what shoppers want to see and what they are being shown so well signposted delivery and returns information (on the home page and each product page as well as at check out) will encourage US shoppers to continue through to purchase.

Of course, the delivery offer must be comparable with that provided locally but the door is open here as well. We have already shown that the US market can be reached, certainly from the UK, in between two and seven days and this seems likely to be acceptable for most US shoppers (subject to timely dispatch).

Although US consumers expect to see faster delivery options, in most cases 6 days is acceptable (7 if free delivery is on offer). The UPS Pulse of the Online Shopper survey provides some useful detail:

So it would seem that most US online shoppers would not reject an international purchase if it was to take between 3 and 7 days. However, 48% did say that an assured delivery date is important and 46% would abandon the basket if the expected delivery window was not shown or was too long. This is supported by the fact that ‘arrival as expected’ is a more important satisfaction driver at 67% than ‘delivery was fast’ (55%) in Royal Mail’s Delivery Matters survey (2015).

Once purchased, 30% confirm that a confirmation of dispatch is important. This seems low compared with the UK for example but it is likely to be particularly important for international orders. The most popular messaging channel remains email but SMS is now preferred by 40% of consumers and male and millennial consumers like to receive such messages via text or mobile apps.

Keeping the customer informed extends right through the delivery process with a high proportion wishing to track their orders.

The UPS study suggests an increasing awareness of the ability to change delivery dates and delivery locations in transit with satisfaction with these options increasing year on year:

These service features are important because many US shoppers recognise the problem of delivery when they are not at home. The 2016 UPS study reports that while home delivery is still preferred for 65% of purchases many deliveries cannot be left when, for example, the customer lives in a condo, an apartment, or an urban setting with no direct access to the residence.

As a result, the preference for alternate delivery locations has increased to 35% of purchases, growing from 26% in 2014. The 35% breaks down as follows:

  Retailers store - 8%

  Friend or family - 6%

  Carrier pick up location - 6%

  Workplace - 5%

Click & collect store - 5%

Click and collect locker - 4%

Click & collect

For non-US retailers, the increasingly popular option of Ship to Store is clearly not an option, but clearly some sort of click & collect solution, providing an alternative to home delivery, is an important service to offer.

While click & collect from retail store networks continues to grow, parcel shops and locker networks are still in their infancy, with the main providers being UPS Access Points and FedEx.

Choosing the right partner for click & collect is important for reasons of trust, particularly important for small-to-medium sized retailers. A commissioned study by Forrester Research on behalf of FedEx as far back as September 2014 reported that a significant proportion of US consumers express a low preference to buy from SME retailers because of:

  Difficult to verify seller reputation – 45%

Lack of [brand] recognition – 35%

 Challenging returns – 44%

Using a locally trusted click & collect brand can help overcome these concerns.

The fact that alternative delivery locations are most popular with millennials and urban consumers suggests that these options will become more important in the future.

Many of these locations can also be used for returns with 55% of those surveyed confirming that they prefer to drop their returns off:

  Carrier’s click & collect store – 36%

Carriers click & collect locker – 10%

Other independent click & collect / pack & ship store – 9%

Returns

Returns provide an opportunity for retailers wishing to enter the US market because satisfaction
levels are relatively low.
As well as clear information, the 40% of US shoppers who prefer to return online, are attracted by:
• Free returns - 60%
• Hassle free policy – 51%
• Easy to print labels – 44%
   »» Interestingly higher than the 40% who like labels in the box
• Timely refunds
Source: UPS Pulse of the Online Shopper – June 2016

Other than the challenge of offering free returns with potentially higher returns logistics costs, none of these elements should pose a barrier to a non-US retailer.

Providing all of these things in a cross-border environment means selecting a shipping partner who can get goods to the US, but also back just as efficiently. As an example, Landmark Global provides a number of return solutions including:

• Quality inspection
• Refurbishment
• Disposal management
   »» Re-stock – if using an in-country fulfilment solution Landmark Global can move returns to that inventory location
   »» Consolidated return to country of origin – delivery or pick up
   »» Gift to charity
   »» Cost-effective destroy
• Export duties originally paid on orders, can be retrieved.

Landmark Global can also "localise" the customer returns process providing a returns portal allowing retailers to offer the most appropriate consumer returns service meeting local market and consumer expectations. Such portals make it easier for the customer to make returns, offering multiple payment options such as customer- or retailer-paid. The customer can print the label, see when a return has been received, and when their refund is due.

Local market returns management with quality inspection, refurbishment and disposal allows a prompt acknowledgement to the customer and possibly a faster refund, but also helps to control costs.

The repatriation of individual returns can be expensive, especially because they often constitute a sale that has not been successfully converted. For example:

Single parcel returns will cost more than those that can be consolidated into bulk shipments

Goods coming back to the country of destination may not be recognised as returns, but rather as imports, which mean that duty already paid is not recovered and new duties are imposed

TAKEAWAY: Provide a duty paid, delivery paid cost at the shopping basket; don’t leave any surprises for the customer.

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