DHL: Teaching 'Naive' Web Companies the Back End Abroad

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REDWOOD CITY, CA - A growing number of American Internet companies are looking to do business overseas "but are quite naive about what it takes to ship internationally," DHL Senior VP Mike Consack believes.


"More and more companies are coming to DHL and saying, 'Just how do we do this, how do we sell internationally,' and we are finding that part of their transition is educational.


"We have to tell them what is different about doing business at home and abroad, about what it takes to ship internationally - customs duties, the value added tax, things like that.


"A lot of companies have been abroad for a long time but they sell through distributors. Large consolidations would be sent to the distributor who would take care of the import paperwork."


Over the last 18 months or so, Consack said, companies like Sintra Technologies have begun to focus on the e-commerce sector and developed Web-based applications that will inform buyer and seller about all the hidden costs.


They will tell the manufacturer everything he needs to know from duties and taxes to transportation and insurance, "so you can tell a customer before he clicks to confirm an order what the total cost will be.


"That's important. If you live in Brazil and buy a music CD and have it shipped from the US, that item is 78 percent dutiable. It doesn't take long with that kind of duty for a $12 item to become a $35 purchase.


"These are some of the things and situations that we are working with our customers to resolve for their customers. The key is breaking down the components and then making customers understand the process.


"If he doesn't, that customer in Brazil will think that he bought the CD for $12 with a couple of bucks for handling charges but when the guy comes around and wants $35 the customer will say forget, I refuse the shipment.


"It is better for a customer to decide not to buy before the item is sent. You don't want to leave the online seller with a huge return problem. So he is much better off staying out of some markets, or, more accurately, not advertising in them.


"We find that a lot of online companies are challenged by the direct-selling model. They have the front end sorted out but the back end - the fulfillment and all the other required operations - have not been thought through very well."


Direct shipments to single end users are a problem for which DHL and other air express carriers have not found a workable solution.


Shipping directly to an end user means assessing the various fees "on every single shipment," so that the amount of work done for a $500 shipment could be similar to that done for a consolidation of those items worth $500,000.


'We're seeing an emerging market not just for transportation but for fulfillment and information systems that will allow you to have a real time view of inventory."


But before that becomes a reality, "all those horror stories ordering online and getting an e-mail three days later saying 'sorry we're out of stock' have got to change to make the online world work more effectively.


"We have a teaching function, a consultative sell with customers so that they will understand their needs and then helping them in developing appropriate solutions."


But Consack is not sure that this is an air express carrier's explicit function. He noted that some logistics companies "can do that stuff. We're seeing some fulfillment companies change their business models.


The key, Consack said, is "getting the delivery density up," and he believes USPS is better equipped to address the problem.


"USPS is suited best because they have their feet on the ground," he said. "They have 125 million addresses, so we could well see more partnerships emerging."


Consack sees the back-end business still in great flux and believes that state will continue for the next 12 to 24 months and "we will see some shakeout in the number of people trying to do international Internet business."
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