Most eCommerce businesses target the local market before stepping outside their comfort zone to penetrate the international market. While there’s certainly nothing wrong with validating your business locally, adopting a global mindset might help you scale your eCommerce business more quickly.
Outsourcing order fulfillment operations is becoming increasingly popular for many reasons, but for businesses looking to enter the international marketplace, the answer is simple: risk reduction. According to eMarketer, eCommerce is the only trillion-dollar industry growing at double-digit percentage rates, so why not take advantage of the market if you can reduce your risk?
Merely outsourcing your fulfillment operation is not nearly enough to reduce the risks involved with penetrating an unfamiliar market. Companies should perform the necessary due diligence to properly vet the fulfillment company to ensure they’re suitable for their business’s needs. You want a partner who’s not only able to fulfill your orders, but also store your product while you focus on promoting your business to US consumers. You also want a service that allows you to monitor your orders remotely.
Tip #1: Look for a Fulfillment Center with Similar Clients & Industry Specialization
You’ll want to find a fulfillment company that already works with eCommerce businesses similar to yours. This advice is especially applicable to eCommerce merchants for whom experience and on-time delivery are crucial to the success of the business (e.g. subscription boxes). Just as your online store is different from others, so are order fulfillment companies. For instance, some specialize in certain industries and are more capable of taking care of your specific business needs.
Tip #2: Never Make a Decision Based Solely on Price
One of the most common mistakes in choosing an order fulfillment company, whether domestic or international, is to choose a company solely on price. Even though price does matter significantly, finding a partner you can trust is equally important. Look at what exactly is included in the pick and pack fees, as well as the level of customer service provided. Some fulfillment companies may appear to have lower pricing, but are structured for businesses with higher volume than lower-volume companies trying to sell to US consumers for the first time. Make sure you ask about monthly minimums before you ship your inventory to the fulfillment center and find out if there’s a higher pricing structure for specific businesses such as yours that handle less volume.
Tip 3: Flexibility > Size
No matter how foolproof your strategy for entering the US market, things happen, and you’ll need to rely on your industry partners to adjust and push through obstacles as they arise. That’s why it’s essential to be prepared and stay flexible, especially because your company is entering a new market for the first time. Your fulfillment company needs to understand your situation and be willing to adjust as needed.
Even if you’re a larger company in your respective country, you may not need to hire a large fulfillment company when entering the US. Many times large fulfillment companies are a churn and burn operation and don’t provide the 1-on-1 personal service or flexibility that a smaller fulfillment company would. Lack of adequate customer service is one of the biggest complaints in the supply chain and fulfillment industry. A fulfillment company that provides a dedicated account representative will reduce most issues that arise from a lack of communication and, if anything untoward were to happen, you’ll have a consistent point of contact to reach out to.
Tip #4: SLA Responsibility
Although a handshake and a 5-star reputation are great, an SLA (Service-Level Agreement) is even better. An SLA is a formal agreement that outlines the particular scope and responsibilities of the fulfillment service. This agreement defines items important to your business such as delivery times. An important section that’s often omitted regards accountability of the fulfillment center if they’re at fault and outlines what they’ll do to make good on any mistakes. It’s also prudent that you speak with current customers of that fulfillment center and find out what errors have occurred and, more importantly, how those issues were handled.
Tip #5: Software is King
Pick, pack and ship may seem simple enough, but it’s crucial that you find a fulfillment center that utilizes inventory management and fulfillment software. It’s even more important for foreign companies when it comes to tracking the status of your orders. You also need to be alerted regarding any issues (e.g. products out of stock, low inventory levels, orders with an invalid shipping address, etc.) and that alert must be in real-time to prevent delays. Fulfillment and inventory management software eliminates any errors that occur from manually importing orders and integrates directly into your shopping cart to process orders as quickly as possible. In addition, make sure the fulfillment company allows adequate time for training and offers resources to familiarize you with the software and how it can best be used to streamline your supply chain. It may behoove you to ask how often the software is updated and about update protocols. A fulfillment company that constantly works to optimize its software is one that listens to the needs and desires of their customers.
Myth #1: You Need to Have a US Company to Ship and Sell Your Products in the United States
You may have been advised to incorporate your business as a US company, but it’s not required. You can accept payments through your online platform without an EIN # and use a fulfillment company to store and fill orders for your imported products. Most fulfillment companies will even provide assistance with customs and import documents if you ask.
Myth #2: A Fulfillment Company with Multiple Locations is a Must
Partnering with a fulfillment company with multiple warehouses in strategic locations may not be necessary if you’re just starting out. Virtually all fulfillment companies have partnerships with all the major shipping carriers, so most of the time they can ship from one location just as cost-effectively as shipping from a more strategic location. It also may be a nightmare to manage inventory at each of the locations when you’re learning to penetrate a new market. My advice is to start small and expand. If your business doesn’t require particularly fast shipping, you’ll do fine using a fulfillment center with one or two strategic locations.
Bonus Tip: Shipping Your Products to Your US Fulfillment Center
After choosing a fulfillment company, your first task will be to ship your inventory to them. You need to ensure that you ship with all duties and taxes already paid. Otherwise, you risk having your shipment rejected by the fulfillment center.
If you choose to transport your products via air, you must make sure that your products are shipped as “Delivered Duty Paid” (DDP). Delivered Duty Paid is a transaction in which the seller must pay for all costs related to transportation and is responsible for the products until they’ve been delivered to the buyer. In other words, you must pay for shipping, duties, and other expenses that might occur during the process. Most air carriers like DHL, FedEx, or UPS can take care of this for you.
There are two crucial aspects you need to pay careful attention to when shipping your products to a US fulfillment center: Importer of Record and Ultimate Consignee.
“Importer of Record” refers to the entity that accepts legal responsibility for ensuring your products meet local requirements. Some fulfillment centers don’t accept being named Importer of Record. In that case, name yourself as Importer and use your local address.
“Ultimate Consignee” refers to the fulfillment center where you’re sending your products in the United States. Just enter the fulfillment center’s name and address in that field.
Related article: How To Import Products from China [Complete Guide]