So, you’re a shipper who wants to tap into the burgeoning export markets you’ve heard so much about. And, oh yeah, you’re not exactly Apple or Pepsi.
What are your options?
- Sell your stuff to a U.S.-based distributor that aggregates products and sends it to your chosen overseas markets.
- Work with a foreign distributor that does the same but ostensibly has a better handle on the foreign market at which you’re aiming.
- Set up your own sales network in the chosen export market.
- Target consumers directly in foreign markets.
Whichever option you choose, you’ll need to get your product to those markets, i.e. the transportation and logistics component of the sale. An exporter can choose to handle that transportation leg on its own, or work with a freight forwarder to secure the capacity it needs.
But for the sake of this argument, let’s focus on the last option — the direct sale to consumers — because that’s possibly the most interesting. Why, you ask? It’s essentially the model that’s competing directly with Amazon.
There’s a tendency to think of omni-channel retailing (covered in depth on pages 8-16 of this issue) as some sort of evolutionary offshoot of brick-and-mortar retailing. Retailer A sources goods from country B, transports those goods across ocean C, and delivers them to customer D in whatever format customer D wants. That’s omni-channel retailing in an overly simplistic nutshell.
There’s an assumption in this hypothetical, however, that customer D comes from the same place as retailer A. That customer D only shops at stores in the country where retailer A is located.
But global consumption is changing. Consumers worldwide can source the product they want directly from any country transportation providers reach. The Internet has clearly powered this new model — that’s the same Internet which has allowed Amazon to become a retailing powerhouse that competes or partners with virtually every consumer vertical.
The funny thing about the Internet is it’s nearly 20 years since coming into our lives and yet still we have little idea about the power it holds. From a logistics and transportation perspective, it keeps changing the dynamics.
Go back to the omni-channel sale described above, where the consumer is from the same market as the retailer. Amazon isn’t thinking of itself within those narrow confines. Customers in a wide range of countries can purchase goods from Amazon’s global marketplace, and if the products fall within the rules of the program and the total purchase amount is sufficiently large, the shipping is nominal, if not free.
So any new exporter wanting to tap into the direct-to-consumer market has those goalposts at which to aim. Because of Amazon’s size, those goalposts are a fair distance away. And because of Amazon’s persistent innovation, the goalposts are moving.
Clearly, exporters wanting to sell direct need to have a solid logistics plan in place, one based on best-in-class technology and sound expertise (most likely from a service provider of some kind).
Andrew Scott, chief executive officer of the export-focused freight forwarder American Worldwide Agencies (AWA), said such shippers need “slightly more than a logistics provider. They need help with duties and customs and final mile delivery.
“There is going to be much more of a drive to serve the consumer directly,” he said. “I see that more and more companies are going to want to achieve that. Avoid the distribution. Why put it in brick and mortar?”
Scott said he sees a major opportunity for forwarders in the business-to-consumer space.
“As great as the DHLs and FedExes are, they’re great when you fit in their structure,” he said. “Amazon has amazing relationships with integrators domestically, but not to the same degree internationally.”
Scott said the direct-to-consumer market requires forwarders to be “a bit of a hybrid of everything.”
Specifically, they need technology platforms that align with the demands of the emergent business-to-consumer model. In AWA’s case, that doesn’t mean reinventing the IT wheel. The company employs the widely used CargoWise solution for its basic forwarder ERP platform, the “normal ERP freight stuff,” as Scott put it.
AWA spends its investment dollars building technology around that framework.
“In the direct-to-consumer market, you need strong IT to integrate with people’s shopping baskets, and then integrates with their transportation management system, and their warehouse management system,” he said. “In some cases, you need to reach the area of purchase order management.”
In many ways, the forwarder model has to adapt as markedly as retailers have had to adapt to the online channel, and now omni-channel.
“You see some really big forwarders struggle because things are changing,” Scott said. “They made so much money from Asia, but they’re struggling to change their business model.”
And much of that struggle is tied to the systems forwarders have developed to channel goods from exporting to consumer markets — the basic Asia-to-developed markets flow.
Now that that flow is changing, will forwarders be able to adapt? Will their systems be flexible enough to allow their shipper customers to adopt omni-channel strategies? Will they be robust enough to allow mid-market exporters of consumer goods to compete not just with Amazon, but with the global marketplace?
Sometimes it’s as simple as providing a shipper with an integrated logistics services product, one that bundles the more visible legs (like ocean freight) seamlessly with final mile delivery in a strange land. Not every would-be exporter has a huge logistics operations department or the funds to invest in a top-notch in-house visibility tool. It will ultimately be on the shoulders of forwarders to develop the technology that empowers new models of getting export goods to burgeoning markets — to make direct-to-consumer shipments as routine as the Asia-to-North America trade has become.
