Express couriers offer one of the easiest and the quickest ways to ship parcels across the globe. The global market is dominated by the 3 major integrators namely DHL, FedEx and UPS with the primary differentiator between these express companies and the freight forwarders is that these express companies ship the majority of their volume through their own freight networks instead of the regular cargo or passenger aircrafts.
Cross border e-commerce is a very lucrative business for the express companies. The cross border ecommerce requirements and the shipping solutions offered by the express couriers are in synchronization with each other. Express couriers prefer to ship small parcels (less than 5 kgs) which is almost 90% of the volume of cross border ecommerce and on the other hand ecommerce industry values speed, which is an inherent quality of the express couriers.
In fact, according to IPC & Accenture’s Cross Border Ecommerce Shopper Survey , the meteoric rise of ecommerce over the last 18 months has accelerated the rise of the express courier network. Some key findings that stood out for me from the report include:
- The global e-commerce market is expected to surpass US$6 tn by 2024.
- The cross border e-commerce sector grew by 21% between Q1-Q4 2020.
- In 2020, the number of online shoppers recorded an increase by 145.7 mn compared to 2019 to reach 2.3 bn digital buyers – witnessing 6.9% y-o-y growth.
- Per Worldpay, 55% of online shoppers worldwide completed cross-border purchase in 2020.
Pros & Cons Of The Express Network
Major advantages offered by express couriers include:
- Delivery Speed
- Door to door shipping
- Inhouse customs clearance: CIA or clearance in air (very important factor)
- Possibilities of using DAP & DDP incoterms
- End to end tracking
- A wide global network.
Major factors to consider when considering express courier:
- Shipping premium from quicker delivery times
- limitations on shipping dangerous goods
- Restrictions on packaging size
Ecommerce Clients Who Should Use Express Network
Whilst express courier brings plenty of value adds to help improve your ecommerce brand’s customer satisfaction and retention rate, it also needs to be a financially sustainable choice.
Economically, express courier is best suited for ecommerce categories such as pharmaceutical, high-tech electronics, fashion & apparel and personally healthcare products. The common ground for these product categories is a high cost to weight ratio, practically, this translates to high retail price items that are below the 2kg weight threshold.
From my experience, an industry insider rule of thumb is if the retail price of the product is more than 4x the cost of freight, then it makes sense to use an express courier.
For instance, if an online seller is manufacturing a high end tech gadget in China and its major market is in the US then the product can be easily shipped directly from a fulfilment center in China or Hong Kong to the US within 2-3 working days, without the hassle of formal clearance & duties and taxes (Remember, de-minimis in US is US$800).
Leveraging Express Network To Streamline Your Ecommerce Supply Chain
Using express couriers in cross border e-commerce can improve the operations and logistics behind your ecommerce supply chain, this is infact one of the models that Floship has replicated for our clients with 3 operational goals
- Improving cash flow
- Reducing lead time
- Opening up more markets
Let’s explore each in more detail:
Improving Cash Flow
Historically, to take advantage of lower ocean freight rates and shipping cost per product, ecommerce operations will need to have enough inventory to fill up a 20 to 25 cubic metre container. To do so, this results in larger inventory orders and consequentially, a higher upfront inventory fee. With express courier, the quicker delivery times mean retailers can restock from the manufacturer faster and hence order smaller batches inventory, this will not only help in improving the cash flow with smaller down payments but also mitigate the risk of over stocking.
Reducing Lead Time
Stocking the inventory close to the manufacturing location and moving orders by using the express network also helps in reducing the lead time drastically. Let’s look at one of my Floship ecommerce clients: Tushy as a proof of concept on how this works to both improve the supply chain and keep their end customers happy. Production wise, it takes their Chinese manufacturer 20 days to create a batch of 1000 units, prior to Floship, this quantity was bulk imported via ocean freight into to the US, where 80% of their online revenue is happens. Now, the inventory reaches their US fulfillment centre where the orders are finally delivered to the end user. This end to end supply chain cycle takes anywhere between 40-50 days depending on the shipping mode used for the first mile (bulk inventory) and the last mile (orders to the customer’s door). Did I also mention the current backlog happening on the east and west coast where ocean freight and port clearance delays of up to 2 weeks are a symptom of Covid-19? Feel free to catchup up on my colleague Baljit’s 2 part analysis on this
Now, let’s see what their revamped supply chain looks like now. Rather than directly exporting from their Chinese manufacturer, we moved the products from China to Hong Kong, a process that takes 2-3 days from the supplier to the Hong Kong fulfillment centre, not only did we reduce the first mile time, but as importantly, we also reduced their customs and duties as Hong Kong imposes zero duties and taxes on Chinese imports. From Hong Kong, we leveraged its status as the world’s largest air-freight hub and shipping lanes to deliver the products to their global customers within 3-5 working days. When you factor out the 20 days of manufacturing time, we managed to reduce the end to end fulfillment cycle from 20-30 to 5-10 days.
Operationally, you can imagine the uplift in your purchase conversion rate when you can cut down that delivery time.
Opening Up More Markets
A centralised stock also opens up the possibility of exploring new markets. We have seen this as a regular phenomenon with our top clients, once they see a saturation in their domestic markets, they start exploring new markets and countries like Singapore, Australia, India and many other offers them just the right mix.