Part of that hyper-speed effect is being driven by the nimbleness of both e-commerce sellers and a growing ecosystem of logistics and customs solutions providers empowering them.
This is not just about the so-called Amazon Effect, but about the compounding impact of a swarm of small online sellers trying to fulfill international orders using new e-commerce tools that dovetail with their own approach to technology.
This phenomenon is particularly noteworthy on the cross-border e-commerce front, where small enterprises are particularly unaccustomed to the demands of international shipping (both parcel and freight).
For these retailers, signing on to platforms like Shopify or Magento quickly allows them to tap into demand and to meet the challenge of selling in an e-commerce space defined by Amazon.
But those platforms lack the capability to allow sellers to reflect the actual or estimated duties a buyer might pay for the good. They also don’t provide embedded visibility tools for shipments, whether parcel or freight.
Frustration To Solution. Thus, a handful of web-based tools has emerged in tandem with the rise of e-commerce cross-border sellers to allow for potentially seamless capability with regard to customs calculations and visibility. These are sellers that lack the experience and technology to handle those functions in-house.
One of those solutions providers is Seattle-based FlavorCloud, a startup founded by Rathna Sharad. Sharad started her career in logistics, working on technology development for UPS Supply Chain Solutions, as well as Menlo Worldwide and Emery Worldwide before that.
Sharad’s responsibility at UPS was to help build tech solutions for cross-border commerce—areas like handling customs from a carrier and freight forwarder perspective, or route optimization solutions. Her work was primarily enterprise solutions, though some would show up in customer-facing applications, like track and trace.
“It was a nightmare for customs and shipping and tracking,” she said. “I couldn’t believe what we had solved for on the carrier side didn’t translate on the B2C side. The core problem we were solving is cross-border commerce, making sure we can facilitate anywhere-to-anywhere e-commerce.”
So in 2017, she started FlavorCloud with the idea that she could leverage her experience in customs and supply chain technology development to fill in the capability gaps small and midsized international sellers were facing.
“Three years ago, we started noticing an SME business problem,” she said. “Cross-border e-commerce was growing at such a clip (around one in three transactions, with 40 percent of the growth coming from international orders). These sellers need to be able to do it easily, and it’s not just a SME problem, but a mid- to large-sized retailer problem. Consumers expect an Amazon-type experience. They want it now, fast and cheap.”
Sharad’s target is to enable any retailer worldwide to plug into the FlavorCloud platform. The company launched its suite of application programming interfaces (APIs) in July that allow users to integrate with existing e-commerce, transportation and fulfillment systems. A Shopify app, which allows users of that platform to integrate with FlavorCloud’s customs and visibility tools, launched in late 2017.
The tool taps into more than 100 global parcel couriers, local carriers, and 3PLs worldwide, and also gives buyers beneficial rates using FlavorCloud’s volume discount negotiated directly with its network of carriers. A machine learning algorithm helps to quickly provide users with the best available dynamic rates.
Aside from aiding sellers with the trickier parts of their international sales, pulling duty costs directly into the online transaction platform allows sellers to increase shopping cart sales conversions (that’s the ratio of people who put items in their shopping carts versus those who abandon them).
“The customs engine helps you classify product, calculate the taxes and duties, as well as options for shipping right in the shopping cart,” she said. “It takes into consideration historical performance—like shoes going into China, how they did all the way through customs clearance. It automates all the paperwork, and customs docs.”
Competing Technologies. FlavorCloud competes most directly with Borderfree, a system acquired by Pitney Bowes in 2015 for nearly $400 million that also empowers e-commerce sellers with a range of tools and APIs. The company’s Complete Cross-Border suite allows sellers to have localized websites, calculate landed cost, and manage the logistics of parcel shipments.
Sharad said her company is a bit differentiated in that it requires only a single installation of the tool to reach any buyer in the world, while Pitney Bowes generally requires a merchant to do country-by-country installations.
FedEx, for instance, in 2016 acquired a company called Bongo (rebranded FedEx CrossBorder), which handles regulatory compliance, duty calculations, package tracking, international shipping costs, and multi-currency pricing. Singapore Post and UPS have made similar investments in tools that calculate duties and provide tracking to B2C sellers.
Other solutions include TradeGlobal, which also offers a suite of outbound and return logistics, landed cost and localized currency tools.
All of these approaches are meant to bolster the selling opportunities for merchants, but they inevitably have huge benefits for buyers, providing accurate pricing on goods and a level of visibility that isn’t as granular as on the pure parcel side of things.
Broker Empowerment. Another approach is BorderBuddy, which markets itself as a digital customs broker aiming to automate the processes and paperwork generally undertaken by traditional customs brokers.
Like FlavorCloud, BorderBuddy is integrated with Shopify and also works with Amazon’s Fulfillment program into Canada (something that a select group of customs brokers around the United States do for import sales through the Amazon platform).
As e-commerce volume grows, brokers will look to tap into more of this business and that inevitably means investment in tools that help merchants understand duty costs, which they, in turn, pass onto potential customers.
Broker associations, like the National Customs Brokers and Forwarders Association of America, speak regularly to U.S. Customs and Border Protection and other relevant government agencies about the impact of e-commerce on duty collection and security. That’s especially true with the high volume of low-value shipments being driven by explosive online retail sales from merchants with which CBP has little or no historical data.
There may well be room for all these approaches—API-driven e-commerce platform tools, digital customs brokers, and traditional brokers managing more complex transactions.
The overarching trend is giving merchants of all sizes tools that weren’t necessarily available to them in years past.
“It’s really led us to take what we had built and hone it to be an anywhere-to-anywhere cross-border service,” she said.
Cross-border toolbox. A wave of technology providers, new and established, are seeking to arm smaller retailers with the means to quickly and efficiently classify products, calculate duties, and bring higher levels of visibility. These solutions generally aim to provide:
• Calculation of applicable duties and instantly present them in online shopping carts.
• Total landed cost to merchants.
• Electronic customs documentation generation.
• Preferential shipping rates.
• Returns logistics management.
• In-transit visibility.
• Multi-language and multi-currency options.