As reported by the Wall Street Journal:
FedEx Corp. will expand its global e-commerce business in an effort to compete for the growing number of packages shipped to consumers from China and Japan, executives said Monday.
The company, which in 2014 acquired Bongo International, a company that helps shoppers purchase goods from foreign retailers by automatically adjusting currencies, and customs and shipping costs, by location, is rebranding the business as FedEx CrossBorder. The company plans to expand its services to merchants in China and Japan by next June, said Chip Hull, vice president of the newly named division. The company already consolidates shipments for global e-commerce retailers in the U.S., Europe and Peru.
Asia “is the second-largest region from an export perspective in the cross-border space, on par with Europe, and [is] growing at a faster rate,” Mr. Hull said. As global e-commerce grows at double-digit rates around the world, “Asia is certainly the 800-pound gorilla in the room.”
FedEx’s international e-commerce efforts have come as other companies are investing in helping retailers with international online-shopping services. United Parcel Service Inc. acquired i-Parcel around the same time that FedEx bought Bongo, and Pitney Bowes Inc. acquired Borderfree Inc. last year. Deutsche Post AG’s DHL also offers international e-commerce services.
The services seek to simplify the international shipping process for merchants who can’t track varying tariffs, shipping times and other factors when sending their products to different countries, a cumbersome and opaque process that experts say can turn shoppers off. Some larger retailers employ dozens or even hundreds of staff to arrange and track packages, while smaller merchants say orders that simply disappear or are indefinitely delayed can lead to unhappy customers demanding refunds.
A customer in Norway “ordered one of my drawings and paid maybe $40, plus shipping. But once it landed in Norway, he was charged the same amount” in import fees, said Kate Zaremba, a U.S.-based illustrator who sells prints of her work on Etsy Inc. “I’ve shipped to Japan before—you look it up, it’s all in yen, and you have no idea what’s going to be charged.”
Payvision BV, an Amsterdam-based company that processes payments across currencies for e-commerce transactions, estimates that one-fifth of all traffic to the average online retailer comes from outside the country of that retailer. Cross-border purchases accounted for around 20% of all global online trade in 2014, according to a survey of nearly 1,200 merchants, merchant service providers and payment services companies conducted last year. Payvision expects those sales to continue growing 27% a year until 2020.
And while cross-border e-commerce is growing, “tangible goods delivery is a barrier that people are trying to overcome,” said Joe Emig, vice president of business development for Payvision. One of the biggest problems that Payvision’s merchant partners face is the time it takes to deliver a product to another country, he said.
FedEx will likely face tough competition in the Chinese market from merchants used to selling their wares on online marketplaces, then shipping them cheaply to the U.S. for final delivery by the U.S. Postal Service.
“Price matters for sure” depending on competition, said Charles Whiteman, senior vice president of client services for MotionPoint, a technology company that helps international retailers sync their e-commerce websites across languages and currencies.
“If you’re serving your product into a really competitive market like China, Japan or Germany—mature markets—and you’ve got a big shipping surcharge, you’re not going to be nearly as successful as if you’re shipping into a market that doesn’t have options,” he said. But international shipping “is truly a logistics challenge,” and retailers have a need for it.
As part of its newly branded cross-border business, FedEx will also be offering the cross-border services to freight-forwarding customers for the first time, said Jack Muhs, president of FedEx Trade Networks. The combination could make it easier for business-to-business customers to calculate international shipping costs for larger shipments, he said.
Ken Wood is the founder of LJM Consultants. LJM helps clients negotiate “Best in Class” UPS/FedEx agreements. LJM was recently named the “best parcel auditing company in America” and was also inducted into Inc. Magazine’s Top 500/5000 fastest growing companies in America for 2013. To learn how LJM Consultants can help your company get the parcel contract you deserve, call 631-844-9500 or email kenwood@myLJM.com.