Saturday August 15, 2020
22-06-20

ETOEs can help Posts to profit from cross-border e-commerce

By Jan Kooyman, co-founder of Hurricane Commerce

Jan Kooyman
Jan Kooyman

Jan Kooyman, co-founder of Hurricane Commerce, predicts that cross-border e-commerce will bounce back quickly from the coronavirus pandemic, with ETOEs helping postal operators to grow their business.

 

Over the last few months, Covid-19 lockdown restrictions around the world have had a dramatic impact on e-commerce, including on parcel volumes for postal operators. Pre-corona global e-commerce represented an annual turnover of almost $4.0 trillion, of which 20% was cross border.

On the one hand, the corona crisis resulted in a rapid growth in domestic e-commerce. In Europe and the US some domestic e-commerce categories have shown a growth of up to 40%. Fast growing e-commerce categories have included personal care, apparel, footwear, consumer electronics and home and garden.

In contrast, cross border e-commerce has declined as the result of the lack of (air) transport capacity, the closure of borders and the impact corona has had on consumer trust. But despite this, within Hurricane we believe that global parcel delivery infrastructure will be restored quickly because of the need to make up for the current economic losses.

Cross border will grow even faster by leveraging on the new online demands. Several postal operators have already re-invented Sea Post and integrators have started to augment their airlift capacity.

At the same time, many postal operators are trying to compensate for the decline in traditional mail by leveraging on the expected growth of cross border e-commerce.

One of their strategies in doing so is by setting up or expanding global ETOE networks. An Extra Territorial Offices of Exchange (ETOE) is a mail centre that a designated postal service provider operates in a country abroad. The designated postal operator of country A operates postal export and/or import services under its own brand in country B.

Big regulatory changes ahead

Yet corona is just one of the elements that is currently impacting the growth of cross border e-commerce. 

This year and 2021 will also be characterised by huge changes in the regulatory frameworks that are applicable to the international exchange of low value parcels and packets. Major regulations that will impact the cross border e-commerce industry include:

  1. The US Stop-Act which requires the provision of valid electronic data for custom clearance purposes.
  2. The VAT modernisation in the EU and UK which will lead to the removal of low value thresholds (of € 22 -) and which will put the obligation to declare and pay for VAT on the sending retailers or marketplaces. The EU has set in place a system (International One Stop Shop) with which foreign retailers can declare and pay VAT to the country of destination. Norway, Australia, and New Zealand are also implementing a solution that is comparable with IOSS. Hurricane’s expectation is that several other countries will soon follow this approach as well.
  3. As of March 2021, all posts will have to comply with the requirement to provide an Entry Summary Customs Declaration when importing packet and parcels into the EU.
  4. We anticipate there will be a significant increase in international distribution costs resulting from the new international (UPU) agreements that regulate these costs. Estimates are that Terminal Dues will increase on average between 20% and 30% in 2020. Expectations for 2025 are between 165% and 300% depending on country of origin.

Posts need to re-invent cross-border strategy

These changes will have to be translated by posts into re-defining their global (ETOE) strategy. International postal supply chains will have to adapt to this new reality.

If posts want to maintain their current market share (70%) in the distribution of e-commerce parcels and packets they will need to re-invent their international export and import strategy towards low value parcels and packets.

Not losing their market share in domestic delivery will for posts among others require the offering of:

  1. State of the art services like Delivered Duty Paid or efficient and customer friendly Cash On Delivery (COD) methods.
  2. Highly efficient and cost-effective customs clearance procedures to importing posts, integrators and large foreign retailers and marketplaces. The current administrative fees that posts are charging for custom clearance and the payment of duties and taxes will in view of the removal of low value thresholds most certainly destroy the postal import market for parcels and packets.
  3. Competitive delivery costs by providing other posts access to volume, pre-sortation and/or downstream rebates.
  4. Delivery options (home, post office, parcel locker, etc.).
  5. Efficient return handling that includes an efficient reimbursement of paid duties and taxes.

In our view, a successful postal cross border and ETOE strategy will be characterised by:

  1. A valid and complete pre-alerting (Electronic Advanced Data) of postal consignments supporting access to fast track and efficient custom solutions, which may be postal or commercial. Commercial clearance will be required in case the sending post chooses for a direct insert solution (offering of consignments to the delivering post based on domestic conditions).
  2. Shipping compliant consignments by performing standard prohibited, restricted and denied parties checks. Avoiding customs spot checks, blockages and fines.
  3. Bi- or multi-lateral agreements between posts granting access to cost efficient delivery solutions and state of the art services like PDDP and/or electronic COD.
  4. Access to efficient commercial export and import clearance in case a sending post wants to apply a direct insert or alternative delivery solution for certain destination countries.

The Hurricane Postal Service offering has been specially designed to support posts in the development and implementation of a highly successful international strategy covering the key areas of data enhancement, tax and duty calculations, restricted and prohibited goods and denied parties.

SourceHurricane Commerce
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