In today's interconnected world, cross-border ecommerce is on the rise, and DTC brands are no exception. In 2022, cross-border ecommerce was estimated to account for 22% of ecommerce shipments, totaling over $3.5 trillion. With the potential for increased sales and customer reach, it's no wonder more DTC brands are exploring international fulfillment.
However, expanding into international markets is not without its challenges. Establishing fulfillment operations in another country means starting from square one, as ecommerce brands have to research new markets, understand local regulations, and manage logistics to minimize costs. But the potential benefits are significant, including new revenue streams, a larger customer base, and a more diverse supply chain.
In this guide, we'll provide an overview of what DTC ecommerce brands should consider when expanding their sales and fulfillment operations outside of the U.S. We’ll also walk you through critical considerations to keep in mind when deciding if international fulfillment is right for your business—and the steps you'll need to take to make it a success.
Expanding sales and fulfillment operations beyond the U.S. is challenging for many ecommerce brands, but the business benefits can be immense. With international fulfillment, companies can reap the benefits of full-throttle expansion in new countries, including accessing new consumer markets, making more sales, and increasing brand recognition.
Of course, these benefits are only achievable if the costs of fulfilling orders to customers in new locations are feasible and profitable. International fulfillment can lower these costs by enabling companies to store and ship products from international fulfillment centers closer to their customers, reducing shipping time and costs.
Another advantage of international fulfillment is access to new consumer markets. While the U.S. is the second-largest ecommerce market in the world, many other countries are rapidly growing their ecommerce sectors. By setting up fulfillment centers in key locations, DTC brands can take advantage of leading ecommerce nations and tap into new customer bases.
Expanding into new markets can provide a significant advantage over local competitors. Businesses can gain a first-mover advantage by being the first to move into new territories, enabling them to establish a brand presence and tailor their products to meet local needs.
International fulfillment can be a powerful tool for DTC ecommerce brands looking to expand their reach and increase sales. Lowering fulfillment costs and enabling access to new consumer markets can help businesses achieve sustainable growth and take advantage of the tremendous opportunities presented by the global ecommerce market.
Tapping into global markets through international fulfillment can be a game-changer for DTC ecommerce brands, but only if your business is ready to take the next step. To successfully branch into international markets, you’ll need a solid operational foundation at home.
Some considerations to weigh regarding international expansion include:
Before taking on additional complexity, you’ll want to decide if you’ve maximized the potential of your domestic logistics. Have you established a strong customer base and optimized your operations to peak efficiency and profitability? If not, it may be worth focusing on your domestic operations before expanding internationally.
If you have reached peak fulfillment efficiency at your current cash flow in your domestic market and are consistently profitable, expanding internationally can provide a new avenue for growth. For example, if you’ve fully capitalized on the projected $213 billion DTC ecommerce market in the U.S., you might consider selling in the UK, where more than 110 million packages are predicted to be delivered through DTC models.
If you're seeing overseas demand but order fulfillment from existing warehouses is cost-prohibitive, international fulfillment can provide a solution that allows you to serve customers in new markets without breaking the bank.
As you start to explore the world of international fulfillment, there are several questions you need to ask yourself to determine where to begin:
This will help you identify the markets that are most likely to be profitable—and where you should focus your expansion efforts. Canada is a common launchpad for U.S.-based brands looking to cross borders due to its proximity and cultural similarities.
For online pet retailer Chewy—which just announced the brand is planning its first expansion outside of the U.S.—this was a major consideration. The brand “took into account the size of TAM [total addressable market], the geographic proximity and consumer behavior similarities to the U.S., among other factors, as we thought about entry markets that possess attractive characteristics for our initial international expansion,” said Chewy’s CEO, Sumit Singh.
Suppose international consumers are experiencing long delivery times or high shipping costs from their current options. In that case, it may be time to consider international expansion as a way to improve the customer experience and, ultimately, capture market share.
If these costs are prohibitive or if delivery times are unacceptably long, it may be difficult to serve international customers profitably. International fulfillment can streamline the process and reduce costs, making it easier to serve customers in new markets.
While expanding into international markets can be a lucrative opportunity, ensuring that your growth will be sustainable over the long term is vital. You need to have a clear plan for how you'll serve these new markets—and how you'll continue to grow over time—to justify long-term investments.
Expanding into international markets can be complex and time-consuming, requiring careful planning and execution. However, by partnering with a global fulfillment provider like Airhouse, DTC ecommerce brands can dramatically reduce the hurdles they face regarding international expansion. This can shorten the timeline to launch international fulfillment from years to months, enabling brands to start serving customers in new markets more quickly and efficiently.
One of the benefits of using a global fulfillment partner is that they have already figured out optimized shipping methods, including speed, cost, taxes, and import and export fees. This can be a huge advantage, as shipping and handling can be one of the biggest obstacles to serving international customers.
Another big selling point of using a global fulfillment partner is that it can minimize the amount of management required and make it easy to scale operations as demand increases. Going abroad is like going back to square one with fulfillment, as brands need to source a warehouse, learn local laws and requirements for shipping, and so on—but in a different country and sometimes even a different language.
Part of your process when choosing an international fulfillment partner should be to consider import and shipping laws. Before working with a supplier or manufacturer, check the legality of importing your products into different regions.
Outsourcing the confusing parts of expanding internationally—such as taxes, documentation, and legal compliance—allows brands to focus on what they do best: creating amazing products and serving their customers.
Pro-Tip: A bonded warehouse is a great option for ecommerce companies looking to enter international markets or scale up international operations. It offers flexibility, security, and convenience when importing goods or materials by providing temporary tax- and duty-free storage.
As with most business decisions, costs can make or break a deal. Global expansion can be expensive upfront, with new expenses like customs fees, tariffs, taxes, and shipping costs to consider. This is on top of order fulfillment costs, which typically account for 10-15% of gross sales, but can reach up to 20%.
But you don’t have to break the bank—and partnering with the right global fulfillment provider can help you keep your costs under control. Working with a fulfillment provider and establishing local warehouses can help DTC ecommerce brands significantly reduce per-order shipping costs, in some cases by up to 85%.
The need to pay import duties depends on two factors: the destination country and the type of products being shipped.
In ecommerce, passing along the cost of import duties to the customer (DDU shipping) rather than covering them as the seller (DDP shipping) can help prevent the fees from cutting into your revenue. This is especially true for countries with high import duties for consumer products, which can sometimes be as much as the product itself.
If you opt for DDU shipping, it’s essential to clearly state that customers are responsible for all duties and import fees—and factor these costs into the shipping estimate provided during online checkout. This will help ensure you're not taking on unnecessary costs that could eat into your profits.
However, you’ll also want to consider that customers are often price-sensitive to shipping costs. While DDP may be cost-prohibitive when shipping from abroad, using a local warehouse for international orders can enable your company to absorb the cost of DDP shipping. In turn, this can boost sales by offering a more attractive and transparent pricing structure for your customers.
It’s also important to be aware of differing taxes across countries. For example, in the EU, taxes levied on goods shipped within a given country are paid to that country (the country of origin). So, if your company is registered in Germany and you ship to a private customer also located in Germany, you would pay the value-added tax, or VAT, to the German tax office.
But if your goods cross international borders within the EU, the situation changes. In this case, you may be required to pay VAT in the recipient's country. This depends on whether your sales to that country exceed the delivery threshold set by the destination country. It is essential for you and your fulfillment partner to be aware of these regulations and factor them into your decision-making process when expanding into new markets.
When it comes to international fulfillment, dependable technology is more critical than ever before. With operations in another country—and possibly on another continent—you need software you can rely on to keep your business running smoothly.
Ideally, you want to manage inventory, orders, and projects from all countries using a single platform. This streamlines information through a single source of truth and makes tracking and managing multiple locations easier. This is a great reason to look for a 3PL provider with operations both domestically and abroad, because it allows you to easily integrate all your operations onto one system, enhancing efficiency and coordination.
You also need to determine whether your third-party logistics provider (3PL) has robust, proprietary software to support all your needs—or if they're using off-the-shelf solutions or spreadsheets that leave too much room for error. Off-the-shelf, licensed software typically sees less investment from the 3PL using it, and they will have far less power and knowledge to fix bugs as they come up because they didn't build the software. Additionally, these one-size-fits-all solutions might not align perfectly with their warehouse operations.
Alternatively, a provider like Airhouse that uses proprietary software will be able to troubleshoot more effectively, have control over the software product roadmap, build features that fit their operations, and stay invested in ensuring the technology remains up-to-date. In the long run, partnering with a 3PL that uses proprietary software can offer greater efficiency and reliability in managing complex international operations.
Not to mention the frustrations that come with non-tech-savvy 3PLs will be exacerbated by time zone or language barriers. This is why it's so important to work with a provider that has reliable software and a team that can help you navigate any technical issues that may arise.
Taking your ecommerce brand abroad can be transformative for your business, offering access to new customer bases and revenue streams. But before embarking on this path, it's crucial to assess your business's readiness—and to ensure you have a solid logistics strategy in place. By partnering with a global fulfillment provider like Airhouse, you can streamline your international operations and successfully deliver your products anywhere in the world.
Ready to take your brand abroad and unlock new revenue streams? Our managed warehouse network spans 40 countries. Talk to a logistics expert today about our fulfillment centers in Canada, the UK, and beyond.