Challenges and Challenges and Solutions of Solutions of InternationalInternational Ecommerce Ecommerce

Product Product Fulfillment Fulfillment 5 October 2011

Kuala Lumpur, Malaysia

Today’s Talk…Today’s Talk…The Challenges and Solutions for small, medium or large global ecommerce business.Avoid mistakes that companies are repeatedly do.Expand internationallySell physical products

QNet BusinessQNet Business5 million plus subscribed members shop online with the opportunity to start their own entrepreneurial business.QNet developed a wide-reaching distribution and logistics systems fully integrated with advanced, proprietary ecommerce infrastructure.

The Global Ecommerce ChallengeThe Global Ecommerce ChallengeRecent survey: 40% of current Internet companies turn away international orders because:

They do not have processes and systems in place to fulfill the ordersThey do not have a solutions for the challenges they are facing

Companies That Accept Companies That Accept International Orders…International Orders…

Face major challenges in delivering products globally.Fulfillment challenges may cause customer dissatisfaction:

Product returnsRefundsCustoms confiscation

Challenges:Challenges:1.1. Global ShippingGlobal Shipping2.2. Duties & TariffsDuties & Tariffs3.3. Product RestrictionsProduct Restrictions4.4. Currency Restrictions Currency Restrictions 5.5. Returns and ChargebacksReturns and Chargebacks6.6. Poor Customer ServicePoor Customer Service7.7. No Product Service at DestinationNo Product Service at Destination

Global Global ShippingShipping

The Global Shipping Challenges The Global Shipping Challenges Global Shipping – a missing opportunity.Lack of supply chain integration.Weak systems and processes. High delivery fees for heavy boxes.Couriers’ weaknesses in some regions.

Duties & TariffsDuties & Tariffs

Duties & Tariffs Challenges Duties & Tariffs Challenges Customers are surprised by high duties, tariffs and other fees.Customers refuse to pay duties & tariffs. Customers reject the products.

Consequences Consequences RefundsCharge backsReturned products – multiple loss:

Revenue lossShipment cost to country of originReputation loss

Product Product Restrictions Restrictions

Product Challenges Product Challenges Asian consumers find sometimes products they order are confiscated by customs.

Different countries – Different health regulations even in the same region.

ExamplesExamplesMelatonin is sold over the counter in Singapore - Not in Malaysia.Xylitol Vs. Stevia

It’s Just a DVD….It’s Just a DVD….

Currency Currency Restrictions Restrictions

Currency Challenges Currency Challenges Countries limit the amount consumers can import products.Limitation on usage of credit cards.Currency Exchange Rate challenges.

Payment Gateway Restricted Payment Gateway Restricted CountriesCountries

Payment gateways do not operate in all countries.Restrictions on currency by Central Banks.High fraud countries.

Refunds and ChargebacksRefunds and Chargebacks

Returns & RefundsReturns & RefundsCooling-Off Period - gives consumers the unconditional rights to cancel contracts in some countries.Products returns.Money back (buy back) guarantee.Consumer protection laws.Payment gateways merchant’s name.

ChargebacksChargebacksA chargeback is the return of funds to a consumer, forcibly initiated by the consumer's issuing bank. It is the reversal of a prior outbound transfer of funds from a consumer's credit card.It happens when consumers do not approach the seller.

RisksRisksThe payment gateway can ban the business if chargebacks exceed specific percentage (usually 2%).What if product had been delivered before chargeback was received?Security - losses due to fraudulent transactions.

Poor Customer ServicePoor Customer Service

Customer Service Customer Service Ecommerce companies tend to invest in the frontend – ecommerce & marketing.Impersonal & uncaring– only online web forms and emails.Slow response.Inability to resolve issues.

No Product No Product Service at Service at

DestinationDestination

ExamplesExamplesThe risk of drop-shipment.Generic products from contract manufacturers.Counterfeit products. The Alibaba Story.

Up and Coming Challenges…Up and Coming Challenges…Income TaxMarketing & Communication – language barriersSecurity – mobile technology

SolutionsSolutions1. Courier Integration2. Delivered Duties Paid (DDP)3. Foreign Legal Entities4. Regional Communities5. Multiple Payment Solutions 6. Ecommerce Integration with ERP7. Ecommerce Integration with CRM

Courier Courier IntegrationIntegration

SolutionsSolutionsShopping cart integrationCountries/Weight matrixCourier Vs. FreightCustomer trackingAWB Vs POD

Digital to PhysicalDigital to Physical

Domestic

Delivery

Local Productio

n

DDP Vs. DDUDDP Vs. DDU

DDP – Delivered Duty Paid DDP – Delivered Duty Paid The online retailer pays duties and taxes.The online retailer sells goods on an all-inclusive price basis.

Hassle-free service Provided by all couriers.

Foreign Legal Foreign Legal Entities Entities

Why Do Internet Companies Why Do Internet Companies Incorporate Foreign Legal Entities?Incorporate Foreign Legal Entities?

Reduce TariffsProduct registrationReduce shipping cost Local serviceLocal marketing

Regional Economic CommunitiesRegional Economic Communities

Regional Economic Regional Economic Communities Provide: Communities Provide:

Duty-free trade when goods are delivered within the community. Form a hub and deliver to the whole region (Regionalization).Deliver bulk freight to the single hub and distribute at domestic cost.

European Union European Union 27 countries Fulfillment Opportunities Regional Duty Free Single Point of Entry

Gulf Cooperation Council (GCC) Gulf Cooperation Council (GCC) Constituting the Arabian Peninsula.Bahrain, Kuwait, Oman, Qatar, Saudi Arabia, and United Arab Emirates.

The South Asian Association for The South Asian Association for Regional Cooperation (SAARC) Regional Cooperation (SAARC) Seven founding members:Bangladesh, Bhutan, India, the Maldives, Nepal, Pakistan, and Sri Lanka.

The East African Community (EAC) The East African Community (EAC) A regional intergovernmental organizationRepublics of Kenya, Uganda, the United Republic of Tanzania, Republic of Rwanda and Republic of Burundi.

Multiple Payment SolutionsMultiple Payment SolutionsHorizontal multiple payment options

Payment GatewaysE-WalletPre-Paid cards

Vertical multiple payment options Variation – local/globalRotate payment solution

Digital Wallet (e-Wallet).Electronic Money (e-Cash).Slow penetration rate.Advantages:

Better cash flowConsumers do not need credit cards

Ecommerce Integration with Ecommerce Integration with ERPERP

The backend (supply-chain) is the engine of the frontend (ecommerce). Backend failure can kill an online business.Supply chain management - procurement and fulfillment - is critical.Integrated WMS is important.

Ecommerce Integration with Ecommerce Integration with CRMCRM

Online buyers expect very fast response to interactions.Integration of channels like ticket systems, emails, online forms, telephone calls and social media.CRM brings it all together and allows managers to follow up and monitor the SLAs.

SummarySummary

Challenges Challenges 1.1. Global ShippingGlobal Shipping2.2. Duties & TariffsDuties & Tariffs3.3. Product RestrictionsProduct Restrictions4.4. Currency Restrictions Currency Restrictions 5.5. Returns and ChargebacksReturns and Chargebacks6.6. Poor Customer ServicePoor Customer Service7.7. No Product Service at DestinationNo Product Service at Destination

SolutionsSolutions1. Courier Integration2. Delivered Duties Paid (DDP)3. Foreign Legal Entities4. Regional Communities5. Multiple Payment Solutions 6. Ecommerce Integration with ERP7. Ecommerce Integration with CRM

Go GlobalFulfill Physical

Products

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