I interviewed Charles Brewer who discussed Cross-Border E-commerce Trends, a Global CEO Perspective.
Charles, can you first provide a brief background of yourself?
Sure, Dustin.And hello, from a very warm Singapore. So my name is Charles Brewer, and as you mentioned, I'm the CEO for DHL E-commerce and I've been with DHL for the last 33 years. I cover all territories with the exception of Europe. So the Americas, the Middle East, and Africa, and Asia Pacific.
What is cross-border, global e-commerce, and what are the key markets and trade lanes for cross-border?
Just to contextualize the question a little bit... I think most of your listeners will be very familiar with the huge growth story that is e-commerce. So very, very exciting.Has been around for the last 10 years, actually. The first e-commerce has been somewhat debated as to whether it originated in the UK or in America. But still very embryonic, still very new, but hitting the headlines both from a retail and online perspective but also from a logistics perspective. So it's very, very exciting and forecasted it to be around $3.4 trillion by 2020. So the value of gross merchandise value, around $3.4 trillion, which is enormous. And with domestic B2C e-commerce growing at around 10% and cross-border, which is what we're going to talk about today, the very exciting cross-border, growing even faster from a slightly smaller base, by 27% through to 2020, and it will have a value of roughly a trillion dollars, about a third, or a little bit over a third of total e-commerce sales.So very, very exciting.
In addition to the growth of these markets, are there any other reasons that this is important?
I think... I mean,it's clearly hugely exciting. E-commerce as a subject is clearly very exciting but also presents a number of challenges, both for the seller or the retailer or the marketplace or the brand, and also for the logistic company, and also for the consumer, which I’ll talk about a little bit separately. Again, just to share some numbers to frame the size of the opportunity and why we think it is so exciting, why DHL does, and why I do. Those numbers I quoted to you just now should be put into the context of the e-commerce or online sales as a percentage of retail sales still represents something like 10 or 11% globally. So about 10 or 11% of what's bought from a shop is boughtonline. So the upside on this particular segment, this sector, is still significant — 10 X upside and represents hundreds of thousands packages globally already.
So from a logistics, the reasons to get into this space are fairly obvious. Big market, big opportunity, still hugely embryonic, still the playbook for how to actually create a sustainable model and last-mile still relatively unwritten. So very exciting in terms of how to crack the code and how to go out both arcross border and domestic B2C.But a huge, huge, huge upside.
Just to share some other numbers with you, around 1.6 billion people today shop online, about a fifth of the world. So again, still lots of people out there who don't shop online, and they will eventually. So again, as I mentioned already, very, very embryonic. Again, as I said earlier on, some of the markets, the biggest markets for e-commerce and for cross-borders, if you look at the top 10, 20 markets, the US and China clearly are the biggest by some stretch. But then you've got lots of really exciting ones coming through underneath that. So you have Japan as the third biggest market. The UK is the fourth biggest market, South Korea the fifth, Germany, France, India, Canada, Australia, right down to Russia and Brazil. So they make up the top 12 countries in terms of e-commerce originating volume or e-commerce spend. But as I said earlier on, there are some really exciting regions that are starting to emerge is also very exciting. So places like Latin America. So outside of Brazil, which represents about 40% of e-commerce sales in Latin America, you've got countries like Chile, Colombia, Mexico, a lot of other countries that are starting to... So Latin America is very, very exciting.
Then if you look at the Middle East and Africa, still fairly embryonic in terms of its percentage of online sales in that region. But recent events including the launch of a brand new marketplace there called noon.com, which a billion-dollar investment aiming to rival the big players that exist globally. They just started and lots being written right now around Latin America and how exciting that is. And then you come across to where I'm recording from today from Southeast Asia, which is really, really exciting. You’ve got 623 million people in Southeast Asia alone. Andthe e-commerce online [inaudible 00:05:32] retail ranges from 0.5 in Indonesia up to 4 or 5% in Singapore, so still right at the early stage of the curve with a really improving internet connectivity, really improving infrastructure. So I think we'll see Southeast Asia equally grow very, very rapidly.
So all in all, huge market, massive opportunity, massive volumes already. Lots of exciting countries and markets and regions starting to come into the fray in creating huge growth stories.
How should it be done effectively?
So as I mentioned at the start, there are a number of challenges for most companies sort of entering into the e-commerce space. And I suppose you know, as a starting point, to understand why do consumers buy online. So why do people go online as opposed to going to the shop in the first place? Or why is this global phenomenon taking place?
Number one, I think product availability. Depending on where you live in the world, you can't always access everything you want to buy very easy from your neighborhood shop. So if you can go online and choose whatever pair of trainers you're looking for in whatever color in whatever size across a marketplace or across a brand retailer, that's one. Availability.
Secondly, obviously, is appealing offers. So I think consumers are getting quite savvy around how to buy products, both domestically and cross-border and do so at the most affordable price. Lots of great offers out there — Black Friday, etc., 11/11 in China with Alibaba. If you look at the sales that occur around the world and what goes on sale, some of the offers are unbeatable. So appealing offers.
Better conditions.So much easier to do it.And trust is really interesting. A few years ago, trust was a big impediment to e-commerce growth, but now we're seeing it the other way around. People are actually saying that it's actually more trustworthy to go online and buy direct from the manufacturer or direct from the brand than, perhaps, from buying from your local stores. A better chance of the goods being the right goods and not counterfeit and so on and so forth. So that's quite an interesting growing way, reason why people buy.
In terms of what sort of categories do people buy... Again, apparel. Globally, apparel is the biggest one. So people love shopping for fashion, love buying t-shirts, dresses, bags, shoes, suits, shirts, and anything else for that matter.So apparel is huge already.
There's some really interesting ones, new categories that are starting to dominate and starting to grow very rapidly in terms of...particularly in cross-border, actually. So beauty products are growing really, really fast. Pet care. You would never have thought that that would be a big category. It's growing super fast. Food and beverage, and I think we're getting more and more familiar and used to having our lunches, dinners, breakfasts delivered at home or delivered to your office or whatever else. So that's growing. And sporting goods. So four new categories starting to take center stage.
As I mentioned, it's not all [inaudible 00:08:47]. There are challenges. So things, these things test DHL on a daily basis. But that's what makes this fun. One is inadequate physical addresses. So I spent a year or so in the Middle East, as I think you know, Dustin. And trying to find delivery addresses in the Middle East can be a problem in itself. But they're not alone. It's not just the United Arab Emirates where address or adequate address is an issue. So even in Southeast Asia, I was up in Indonesia just recently, up in Thailand recently, up in Malaysia recently. They have the same sort of issues. That is true of Africa, and it's true of many of parts of the world. So finding the address to deliver to is obviously an on-going concern.
Payment methods is really interesting. In Europe, cash on delivery or paying for the goods when the courier delivers is below 2 or 3% whereas in emerging markets — and Southeast Asia would be considered that — it can be upwards of 60 or 70%. So people having access to cash, credit card systems to pay banks, whatever it may be, to pay for the goods can be an impediment to growth.
Customs regulations, again, if you're doing cross-border, there are some challenges around making sure you know what the customs regulations are and how to deal with that. So consumers and customers get very, very upset if they receive their goods — they're wonderful t-shirts or whatever it may be that they bought — and then they find that the duty and VAT on delivery is four times the price of the good. So customs regulations and clearance can be a bit of a challenge.
High-speed, secure connectivity, I mentioned, is improving significantly, but there are still places where it's not great. And a number of other ones besides. The simple reality is that something like 94, 95, 96% of all goods delivered around the world are still delivered by a courier and a vehicle to a home address, which I think is going to change significantly over the coming years, but in itself, creates problems because people are not at home. So that causes issues for both logistics company, a second or third attempt,plus for the consumer being dissatisfied that they haven't received their goods. So a very common thread whether you look at Europe or you look at Asia or you look at the Americas, or you look at the Middle East and Africa. A very common thread in terms of consumer satisfaction.
We see the trend, obviously. The consumers are much, much more demanding in terms of how, when, and where they receive their package. And the dissatisfaction level if you don't get that piece right, goes up incrementally. Something like 60 or 70% of consumers globally are generally unhappy with the delivery experience. So from a DHL perspective — and I'm sure the logistics industry in general — we're working very hard and fast to find new, creative ways to get the order delivered and delivered the way that the consumer wants.
And then lastly, in terms of e-commerce companies, brand e-tailers, thinking about going into cross-border, going back to cross-border, which is where we started, things like being very clear about which markets you want to enter into... So if you are in the petcare goods, as an example, in that segment, and you're thinking about entering a particular market globally, what other petcare goods or internet or brands or marketplaces exist there already? Knowing which countries give you the best opportunity to be successful is a good starting point.
The right assortment, really understanding local tastes and rules. This is absolutely true. It was true in B2B, and it's very true in B2C, which is fully recognizing, understanding how to sell your goods in geography A is different to geography B. So how you present your goods on your website through to the incentives you use through to terminology wording, language, all those sort of things are really, really relevant. So making sure you really understand the local tastes and rules.
Go local, think local. So whilst your website... I'm sure you're very proud of the website you have in country X. It may not be the same that you need in country Y. So let the shopping experience feel very local as best you possible can.
Warehousing and fulfillment clearly growing.So the omni-channel delivery experience growing fast into satisfied consumers demand for "I want it today in 10 minutes time, and I want to pick it up from the Starbucks downstairs" requires a set of supply chain, fulfillment, and warehousing processes and approaches that allows you to fulfill that order in the way the customer wants.
So if you're shipping cross-border, and you're going from the US to Australia, that's not going to be delivered same day, same hour. So working out how you can put product closer to your customer so that you can satisfy the on-demand requirement that consumers have these days.
Lastly — and given that I'm from DHL, a very appropriate topic — making sure you choose a great delivery provider. So, again, everything tells us that generally speaking, consumers are super happy, super excited with most of their web experience. They're going online and choosing apparel, beauty products. The websites today, fairly simple to set up, very X and UX, good user experience, good user interface, and where it falls down, for the most part globally, is in last-mile, in logistics. So making sure you partner with the right deliver company to satisfy the structure you've developed.
Thanks, Charles, for sharing today.
You're very welcome, Dustin.
About Charles Brewer
CEO at DHL eCommerce