Opportunities in Cross-Border eCommerce

Thomas Baldry

Senior Vice President

Global Mail Germany

Opportunities in

Cross-Border eCommerce

14th Königswinter Seminar on Postal Economics

Königswinter, 26th November 2013

Thomas Baldry, Opportunities XB eCommerce | Königswinter | 26th November 2013 2

Mega-Trends impacting postal markets

Parcel Mail

physical

digital

eCommerce

eS

ub

sti

tuti

on

A bright Future?


We are the postal service for Germany and …

Dialogue

Parcel

e-commerce

Diversification

Internationalisation

Physical letter

Any Strategy ?


Which Services?

Mail Parcel

physical

digital

HANDYPORTO

www.dhleasygermany.com FUNCARD

… keep increasing our service range


Any Options?

Postal Operators face multiple challenges

Challenges

How to stay profitable in a declining market with increased

competition and rising labour cost?

Where and how to invest for a sustainable future?

Strategic Options

“Defend”

Protect market position

Focus on physical mail and direct marketing

“Transform”

Develop new services

“Grow”

Enhance product offer

Focus on new customer segments

Enter new markets


International B2C shipments provide tremendous potential

72% Availability: Only

available abroad

Price: At least 10%

cheaper abroad 34% 38%

×47% ×53%

28%

Attractiveness:

Only available abroad

or at least 10%

cheaper abroad

62% 38%

Of 100 typical e-commerce products,

62 are only available or at least 10%

cheaper if bought outside of France

EXAMPLE: France

Drivers for Cross-border eCommerce (I)

Source: DP DHL, B2C Parcel International


Potential is huge but consumers still reluctant to order abroad

Source: Deutsche Post DHL – B2C Parcel International; European Commission; 1) Study compared availability and price for 100 typical e-commerce products, e.g. clothes, shoes and

accessories, electrical household appliances, electronic equipment, household goods, computer hardware and software, books, films and music

Structural shift from offline to online

Supply chain optimizations (e.g. regional/global warehousing)

Better availability of products & cheaper price of products

European Study1) shows that in all but two EU countries,

more than half of products should be purchased from abroad

as products are only available abroad or at least 10% cheaper abroad

Ireland

Belgium

Portugal

Finland

Czech Republic

France

Spain

Hungary

Greece

Italy

Sweden

Poland

Austria

Netherlands

Germany

United Kingdom

Only available abroad

or at least 10%

cheaper abroad

Products available

and cheaper

domestically

0% 50% 100%

Today, only 9% of

online shoppers buy

something abroad

Drivers for Cross-border eCommerce (II)


Driven by technological and marketing developments

E-commerce booming thanks to recent changes at eTailers,

consumers, and logistics providers

Logistics: Better performance

More transparency on shipment status

Faster, more reliable

New delivery options (Packstation, …)

New services: Returns

eRetailers: Improved offers

Ease of use (navigation, presentation, order process)

Professional appearance, online brands

Broader product range and specialization

New services (auctions, customized products, …)

Pricing Methods

Consumers: More confidence

Faster internet

Lower communication costs

Online anyway

Experienced in online shopping

More trust in e-commerce

Word of mouth

BOOM!

Drivers for Cross-border eCommerce (III)


What Does the Consumer Expect?

General expectations

Consumer

I want …

• No shipping costs

• Convenient return possibility

• Faster delivery time

• More transparency and control

• Better ease of use

• Lots of delivery options

“I want the delivery of my

expensive iPad as safe as

possible”

“I want an appropriate return

possibility in case the dress

does not fit”

“The book should be

delivered fast; but

nevertheless, the delivery

should be inexpensive”

“I do not care if I receive the

trousers in two or three

days”

“The costs for the DVD were

only 5 Euro; therefore I want a

cheap shipment of less than

2 Euro”

“Tomorrow is my wedding

anniversary; I need the

present as fast as possible”

Specific requirements

Shipping is increasingly defined by recipients

Time definite

High security

(insurance & POD)

Appropriate delivery time

Basic insurance

(EUR ~500)

Weight based pricing

No insurance

(exceptions possible)

Label to be provided to

consumer; drop-point

Characteristics and services

analog to “deferred” parcel

eTailer

Shipping solutions

eTailers Face High Consumer Expectations (I)


Regulatory & Legal Requirements

Serving in a Complex Market Environment

EU – Greenbook

Security / Cybercrime

Data privacy

Customs / VAT

Operative Requirements

Last mile delivery options

Warehousing and fulfillment

Cross-border shipping

Customs / tax management

Returns solutions

Consumer Requirements

Marketing services

Single sign-on

FLC calculator

Payment services

Insurance and certification

Anonymous shopping

Customer service

eTailers Face High Consumer Expectations (II)


A Competitive Landscape?

eTailers able to pass pressure on to logistics providers due to

increasing competition in parcel delivery

Local players eTailer Consumer

Local Post

B2B & more

Express-Integrators

Consolidators

Marketplaces


Barriers for Cross-border eCommerce

Non-EU

eTailer

Tariffs & taxes 3

Simplify tariffs and taxes to facilitate

imports from non-EU countries 3

Language 4

English and “Google Translate” will

get consumer quite far 4

Payment 5

Plenty of payment options for

payments within the EU available 5

Transportation & Return 6

Competitive pan-European parcel-

and return-network progressing 6

Several barriers hold back the potential of cross-border eCommerce

eTailer Consumer

Order placement 1

Make it mandatory for e-retailers to

accept orders from any EU country 1

Legal framework 2

Push transparency on consumer

rights, liability, return policies, … 2


In terms of product features, seven customer needs have the high priority

B2C parcel customer needs

Competitive Selling Price

Convenient Return Solution

Coherent Track & Trace

Appropriate Transit Times with high Reliability

Easy Shipping Preparation

Helpful and instant Customer Service

Transparent & sufficient insurance / liability 7

1

2

3

4

5

6

Key product features


Alibaba Group launched China Smart Logistics Network (CSN) on May 28

Need for Speed – Example Alibaba Group

• CSN aims to become backbone of country’s USD 190bn

e-commerce market

• Network will be able to deliver shipments to any city in China

within 24 hours

• Backed by about USD 16.3bn in funding and slated for

completion in 8 to 10 years

• CSN will provide third-party couriers, warehouses, shipping and

other services, as well as analytics to help vendors improve

shipment speed and reduce costs

Big players in eCommerce do not wait for logistics/postal companies to provide solutions.

They create their own solutions.


All benefit from growing parcel business and rapid growth in eCommerce.

But are networks ready?

So ?

Cross-border eCommerce will multiply

Parcel delivery increasingly determined by Consumers

eTailers demanding more service, but do not want to pay more

Consumers will not always realise that they buy abroad

Innovative solutions key differentiator for delivery competition

! Significant Investments

Hardware

Software

Marketing

and People

THANK YOU !

Opportunities in Cross-Border eCommerce

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