For some US online retailers, looking overseas for additional sales has proven to be a highly effective strategy, especially considering the financial effects of a stagnant US economy. Overseas markets can contribute sizeable revenue streams for merchants, and with the expansion of the Internet over the years, it’s easier than ever to launch a global marketing campaign. But despite the relative ease of marketing expansion into overseas markets, effectively rolling out a global distribution strategy can be a very daunting challenge. There are three main avenues that businesses take when it comes to global distribution – shipping international orders from the US, opening an international warehouse, and using an international third party fulfillment services company. By investigating the pros and cons of each, merchants can choose the best option that fits the unique needs of their online strategy.
Lost Sales May Result From Continuing to Ship International Orders from the US
The easiest strategy to implement for international order fulfillment is to simply continue along the same path. For many smaller online retailers, this is a viable option because it doesn’t include other costs and it minimizes the risks of either opening up another warehouse or choosing a high quality third party fulfillment firm. After all, shipping product from an international warehouse can add additional costs that some companies just can’t afford – from carrying additional inventory to international freight forwarding costs. But on the other hand, shipping individual orders internationally, with the added shipping and customs costs, may negatively impact the sales volume, as many potential international customers may be hesitant to pay the incremental shipping costs associated.
Opening Up an a Warehouse Allows for Control but Requires Great Risk
Many online merchants decide that the lost sales from high shipping and custom clearance fees is reason enough to expand into an international market and open up a warehouse space. In addition, for some companies that require a high level of control over the shipping process, opening up their own warehouse facility is a great option because it allows them to set up the warehouse and distribution process as they see fit. However, these companies take on considerable risk, as they have to secure a warehouse lease, manage a staff of warehouse workers, and adjust to a new international market.
Hiring an International Fulfillment House Balances the Risks
Perhaps the most balanced approach to take when expanding shipping into international markets is to hire a third party fulfillment house to store and ship product on behalf of the merchant. This strategy balances out the risks outlined above. From the one perspective, it allows the merchant to enter into a market and gain synergy from not having to ship individual order internationally. From another perspective, it minimizes the risks of taking on additional up front investments in warehouse and distribution costs associated with starting up a new facility. However, care must be taken when it comes to finding the right company. As with US fulfillment houses, there are a lot of distribution companies that don’t operate at the highest of levels. But by performing appropriate due diligence in finding an appropriate outsourced fulfillment vendor, this risk can be mitigated significantly.