As e-commerce business continues to grow, it continues to globalize. Not only do products have to cross the U.S. interstate highway system, many manufacturers have global supply chains. A smartphone might be assembled in China, with components sourced from India, South Korea and Mexico, before it passes through a warehouse in the United States on its way to a customer.
E-commerce sales are increasing the speed and volume of shipping by air, sea and truck. It also means businesses have to incorporate shipping costs at every level of their supply chains.
And while global trade can open doors for small businesses that were locked just a generation ago, it can also be disproportionately expensive for companies without the resources of Amazon or other e-commerce retailers. This is why economists at the global level are talking about the impact of e-commerce.
In December, the World Trade Organization called a panel to discuss e-commerce, a “growing force in global trade.” Officials warned that small- and medium-sized businesses that already struggle to compete for good shipping prices are at an even greater disadvantage in the global e-commerce market, and “reforms to industry practices and government policies are needed” to create opportunities for those businesses.
“There has been a groundswell of interest in e-commerce at the WTO – and in its potential to lift up small businesses around the world,” said WTO Director-General Roberto Azevêdo in a statement after the meeting. “The vibrant debate on these issues has shown the desire of many WTO members to bridge the digital divide, and to gain a deeper understanding of the challenges and opportunities of e-commerce.”
FedEx responded: “this groundbreaking decision reflects the critical role that e-commerce plays in enabling small businesses to reach new markets and expand exports.”
As Customer Expectations Rise, Every Part of the Economy Needs to Keep Up
Preferred Parcel Solutions Executive Vice President Michael J. Ryan made some daunting predictions in early 2017: customers were soon going to expect international deliveries to arrive in four to seven days, and shipping from zone 2 would become the industry’s new standard.
As consumers’ on-time delivery speed expectations keep rising, not only for end-line customers but also for manufacturers and assemblers all along the supply chain. While these aren’t conventional “e-commerce” customers, many buyers of intermediate goods are doing business digitally too.
Further, as supply chains diversify more and more, shipping takes up a larger and larger chunk of manufacturers’ budgets.
It’s one thing for the e-commerce giant, Amazon to keep up with these expectations. They control a vast global network of warehouses and have huge contracts with carriers worldwide.
Plus, they’re soon going to be able to deliver some products themselves.
For smaller businesses to take part in the global retail e-commerce market, they need access to high-quality infrastructure and high-quality services. First, that means well-maintained roads, reliable air and sea traffic, and secure transportation—perks manufacturers and retailers in the developed world may take for granted. Second, it means they need to be able to afford a carrier that offers consistent, wide-reaching international parcel delivery service.
Thinking about the international e-commerce market is an important part in designing your supply chain. Some suppliers may appear more competitive than others, but if their location will impact your ability to meet customers’ demands, they may not be a viable third-party logistics partner.
Continued Supply Chain Transformation
As such, supply chains will continue to evolve in concert with global e-commerce.
That the WTO is paying attention to this topic and recognizing the disparities between developing and developed countries’ access to this market, suggests that officials know how important global supply chains are.
The December meeting established a slate of working groups, who met at Davos in January and will convene again in Geneva this year. They could address customs paperwork and currency exchange costs, which currently hamper e-commerce at border crossings. They may discuss tariffs that have long guided the growth of global trade. They could even design a set of rules for digital trade across borders, which don’t exist yet.
While regulators work, shippers and carriers alike need to evolve internally to stay competitive. Within U.S. borders, carriers generally have most control over last-mile delivery. There are a number of exciting innovations in the last-mile space right now. Any of them could cut the speed of last-mile delivery from a day to a few hours.
But carriers have a lot less control over what happens abroad, such as trade agreements and currency issues. Global e-commerce fluctuates with policy changes even more than domestic trade. Carriers have followed the regulations of the countries they work in and if those regulations change suddenly, their ability to provide the service they promised might change too.
Keeping up with the global e-commerce market can be daunting. Usually, it’s carriers’ responsibility to actually move goods across borders, so they need to be hyper-focused on compliance. But the shippers need to understand how cross-border e-commerce business works and what their contracts say, so they can be ready to maneuver around obstacles or jump at chances to expand.