US e-commerce providers set to expand into international markets, says DHL study

Global expansion is in the cards for most e-commerce retailers, according to a DHL Express US survey of online retailers released June 27. In the survey, more than 53% of DHL Express’ more than 1,000 US-based small and medium-sized businesses said they see international growth as the biggest opportunity for e-commerce business. The EU, UK, Mexico and Canada were the most preferred target markets, with China and Southeast Asia each coming in at 14%.

That’s indicative of a shift in U.S. retailers’ attitudes toward feeling more comfortable shipping products overseas, says Greg Hewitt, CEO of DHL Express US. It’s also good news for the delivery company, which tried and failed to create a domestic express delivery market in the U.S. in the late 1990s, thwarted by UPS and FedEx’s business strategy of focusing solely on cross-border deliveries. “The e-commerce boom has dovetailed perfectly with our cost-saving restructuring because we’re well-positioned to help the world sell to American consumers and help American companies enter new markets where they hadn’t sold before,” Hewitt says.

Judging by the survey results, this situation will only improve.

“When we started focusing solely on international shipping, it was less than 10% of the total market, and that was mostly Canada, maybe the U.K. and Australia,” Hewitt explains. “What we’ve seen over the last 10 years—and it’s accelerated during the pandemic—is that companies are thinking differently.”

This is largely due to the more sophisticated approach of online retailers. In the past, a customer in another country was rarely offered conversions to their own currency, or even language translations, and the actual cost of landing was a real sticking point. Not only was it difficult to establish exchange rates, but also any duties or fees charged on items. This made it difficult for the customer to make a real cost comparison with a potential purchase from a local supplier in their own country. Transit times were also unpredictable.

“That created a really bad customer experience,” Hewitt says. “Now, suppliers can show you exactly how much it’s going to cost in the consumer’s currency, and they can also give you an exact delivery time. So a lot of U.S. companies are seeing opportunities outside of the U.K. and Canada,” he added, noting that the interest in shipping more to Mexico seemed like an “interesting” development. “Suddenly, you don’t have to order locally because you can order cheaply and quickly (from overseas), including duties and taxes.”

One potential straw in the ointment is the looming possibility of higher tariffs on foreign-origin goods and a lowering of the “de minimis” threshold at which small packages are subject to duties—both of which seem likely under a Republican-led administration after the November U.S. presidential election. Hewitt says Customs and Border Protection (CBP) is currently more interested in protecting intellectual property rights and stopping outright fraud involving woefully undervalued packages than in catching packages just above the current $800 limit. But he notes that the U.S. has one of the highest de minimis thresholds in the world. “Should we get rid of that and be more like some other countries, including Canada and Mexico? It’s reasonable that it’s a subject of debate,” he says.

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He points to another problem that stems from better, more widely available data available to CBP. In theory, the de minimis limit applies to every recipient in total and per day, not just individual packages. “So if you’re ordering a lot of different things from different websites to different carriers, you could be over the de minimis limit and you should pay duties and taxes,” Hewitt explains. He says CBP is putting pressure on carriers to gather information so they can make sure the importer isn’t evading duties on their paperwork by splitting shipments into packages that are within the limit. That’s a challenge when you have multiple carriers and they’re expected to coordinate. He asks: What happens if an importer is over their de minimis limit for a given day? Which order gets priority?

In any case, Hewitt says, CBP is now much more scrutinizing small international shipments coming into the U.S., particularly because of the crisis surrounding the illegal importation of opioids like fentanyl. But a significant change in customs policy would put an incredible burden on the government, Hewitt warns.

“I worry about these protectionist policies—the idea that it has to be done in America by an American. You can get carried away by, ‘This is good for American business,’ and say, ‘Let’s get rid of the de minimis and go.’ But CBP couldn’t handle the volume, and it would be a disaster for consumers and businesses.” Still, change is a constant in international package delivery, and carriers are more agile in adapting than most importers and exporters, Hewitt says.

“So if you ask me about (reducing) de minimis, we’re all for open trade, but I can adapt as long as I have time to get my act together and understand it,” he says. “If something has to change in trade policy, fine, but let’s make sure we have time to implement it properly. Look at Brexit. People have had a lot of time to get their act together and plan effectively.”