E-commerce's next frontier

Report finds gap between companies selling online and using automated trade tools

By: Eric Johnson
Photo: Maxx-Studio/Shutterstock
   Much of the focus around the rise of e-commerce has focused on its impact on traditional retail channels.
And rightly so.
   Virtually every keynote, panel, and sideline discussion at the Retail Industry Leaders Association Supply Chain Conference in Orlando this week was tinged with the way online shopping is shaping this industry.
   But something that gets far less attention is how effectively most companies can manage cross-border e-commerce shipments. We’re still some way off from the point where global business-to-consumer supply chains are as seamless as business-to-business supply chains. And the hitch predominantly comes from trade compliance.
   A report released this week by the American Association of Exporters and Importers and the global trade management software provider Amber Road found that while 75 percent of respondents currently have an online sales channel:

   • Only 27 percent have automated denied party screening capability
   • 18 percent have tools to determine if shipments qualify for low-value shipment duty exemptions or are able to calculate and support a deliver duty paid shipment model from shopping carts
   • 21 percent have a system for proper classification of goods based on descriptions from product catalogs and the desired country of import

   “The colossal success of e-commerce sales is the catalyst for major changes in how global business is making, selling and moving products to satisfy customer demand,” the report said. “However, most companies don’t have a single technology solution to satisfy the needs of today’s GTM scenario. In our survey, a large number of participants (48%) are managing their e-commerce channel internally, but none have every piece of the total solution.
   These are critical considerations for companies fulfilling e-commerce orders. The implication is that even for companies that have stringent trade compliance policies in place for their “traditional” supply chain, those policies aren’t as clearly defined or automated in an e-commerce setting.
   “Being able to properly classify goods based on descriptions from product catalogs, country of export, and each consumer’s desired country of import is essential,” the report said. “Consumers expect a quick and easy online buying experience, which requires accurate product classification in real time for cross-border orders. All countries require and rely on the International Harmonized System (HS) to properly classify products. As a result, Customs requirements are routinely identified based on the HS code, and are required at the time of order to deliver a positive customer experience.”

Consumers expect a quick and easy online buying experience, which requires accurate product classification in real time for cross-border orders.

   In other words, in an international e-commerce setting it’s critical that a retailer be able to convey an accurate price to an customer instantly. But depending on the origin of the good and the location of the buyer, that price will change based on duties, free trade agreements and other regulatory considerations.
   So the ability for a retailer to instantly know the landed cost of that potential sale and factor than in to the price offered to the online consumer is that much more important.
   “Having a strong database for global trade content is the core of any GTM solution,” the report said. “This is where the most current information can be used in the functional areas of an automated import/export technology platform. Screening tools can be used to determine if a party to the transaction is on a sanctioned party list, or if the goods being shipped are prohibited or restricted in any way. Alerts will notify the user base of any newly added or removed countries, products, or individuals, thus ensuring compliance.
   “Staying up-to-date on all documentation required for a seamless experience can mean the difference between paying penalties and making - or missing - shipping commitments.”
   The report framed its findings amid a world where “global trade regulations are constantly increasing and changing worldwide.” It also noted the reverse logistics issue, with (according to National Retail Federation figures) online sales prompting three times the rate of returns over the holiday period as overall purchases.
   According to the study, conducted in December 2016 through January 2017:

   • Nearly 36 percent of e-commerce retailers experienced shipping/transportation challenges
   • 24 percent are concerned with regulatory penalties leading to delays and fines
   • 24 percent are concerned about brand reputation damages (for example, recalls)

   Looking more broadly at these challenges, 29 percent of survey participants had already experienced delays, fines, and damage to their brand reputation as a result of regulatory penalties. Aside from cyber security risks, which AAEI and Amber Road said they plan to study in greater detail, the the second biggest risk for e-commerce retailers was regulatory risk.
   Respondents said the U.S. agencies that most impact e-commerce shipments were the Consumer Product Safety Commission (CPSC), the Bureau of Industry and Security (BIS), U.S. Customs and Border Protection (CBP), and the Directorate of Defense Trade Controls (DDTC).
   In prescribing a forward course for companies navigating this maze, the report detailed a
the flow of a typical e-commerce transaction from the GTM perspective.
   “When products are selected for selling on the e-commerce platform, the GTM system is used to assign a production classification for the many combinations,” the report said. “At the point of sale, actual landed cost calculations, including taxes and duties are calculated and presented to the shopper, Customs documentation requirements are identified, and sanctions/denied party screening is conducted. Pack and ship alerts are triggered to internal parties and the customer, while shipment information is also communicated.”
   Key takeaways are this: cross-border e-commerce retailers need to be able to arrive at accurate landed costs calculations to ensure correct pricing for customer quotations, generate the relevant export and import documentation, and provide duty paid notification before checkout on the site.