There’s a decades-old market of small courier companies serving the D2C cross-border markets in Latin America and Europe, at a fraction of the rates, at similar service times than the big carriers, and shipping thousands of packages per day to people buying from Amazon and other big retailers.
This market operates in what almost every country calls Courier Regulations.
Courier Regulations were the rules put in place so people can receive goods from overseas without incurring complex customs processes. In many countries, these laws even allow for the importation of consumables in quantities for personal consumption. Hello, supplement companies!
The US Courier Regulation allows for $800 of product value to enter the country without paying any duties.
A 10,000 feet-high explanation of Courier Regulations:
As immigrants, me included, we always remain connected to our families and friends in our home countries.
That implies, from time to time, we need to send money, but sometimes we need to send stuff. Last week I shipped 5lb of magnesium chloride to my father in Venezuela, because it’s a lot cheaper for me to buy and ship than to give him the money to buy locally.
Since immigrants have always needed to ship stuff back home in a cost-effective way, there’s a market of small companies that specialize in it.
So, who did I trust to ship this supplement to my parents in Venezuela? UPS, DHL, and Fedex won’t take a package like that, and if they did, they would charge upwards of $200 for it.
I went to a company that’s 20 years old and ships weekly to Venezuela and other 40 countries. This company has served over 2 million customers during those 20 years.
It cost me $23.50 to ship this 5lb package.
Why is that even possible?
These companies don’t have the complexity of big carriers, and none of their structural costs. It’s that simple.
It all started by shipping boxes from person to person a long time ago. After the Amazon boom, people in those countries began buying from US retailers and using these companies’ warehouses as delivery address, so these companies could forward those packages to them.
The Latin American and European governments started regulating these imports and said that as long as those purchases were for personal consumption, it was ok to bring them into the country. Sometimes they pay taxes, some don’t.
Here are some regulations:
- Chile: 19% Sales Tax + 6% Duties for packages over $30
- Colombia: 19% Sales Tax + 10% Duties for packages over $200
- Brazil: 60% Sales Tax, payable to the postal service for packages over $50
You would think no one in Brazil would buy internationally. Here’s the thing, for them it’s normal, and still cheaper than buying locally, if not all, many items.
Also, never underestimate the power of buying whatever you want directly from the US, instead of getting limited options from the local importer.
How do you start selling internationally?
I won’t dig into building a distribution network. I want to help you go into cross-border D2C in Latin America and Europe.
There are two objections I know you have:
- There’s no market
- Logistics, as you know it, is a nightmare
First, let’s counter the “there’s no market” objection.
Here are two pieces of information from Statista that will change your perspective about these two regions:
- Latin America: cross-border e-shoppers by country 2022 (Chevalier):
As of January 2022, nearly three-quarters of Chilean e-commerce users made cross-border purchases, the highest percentage among the Latin American countries included in the study. Peru ranked second, with 71 percent of online shoppers making cross-border purchases, followed by Mexico and Brazil, with 65 percent and 57 percent, respectively.
- Cross-border B2C e-commerce revenue in EU-16 2019-2022 (Coppola):
In the 16 countries accounting for most of the EU e-commerce market, the value of the B2C cross-border e-commerce market amounted to 146 billion euros, up from the previous year. By 2022, the cross-border market is forecasted to grow further to 220 billion euros.
Where do you think the market is going? The growing trend is here to stay.
Let’s talk about the second objection: extremely poor logistics.
I’ve lived it myself and talked to hundreds of business owners that tried and failed because logistics sucked.
You set up your store, connect to a shipping app, and let it roll.
But in this case, that’s not working. Here’s why:
Working with the big carriers means you are getting DDU service. DDU stands for Delivery Duties Unpaid which in plain English means your customer gets a call about costs they didn’t know they had to pay.
For you, it also means:
- A complex formula for pricing, that for the most part is incomplete if you don’t have ALL the shipping facts
- High rates that make the purchase unreasonable; shipping could probably cost more than the product itself
- Additional charges after shipping that make the buyer drop the product at customs
In sum, a terrible customer experience. So, why even bother?
The Solution to Cross-Border E-commerce
Particularly, Miami, FL, is positioned as the gateway to Latin America and Europe and where you’ll find the best companies for cross-border expansion, in my opinion.
You need to find a DDP (Delivery Duties Paid) service specializing in the countries you want to target. That means that what the customer pays during checkout is all they will pay to get their package delivered to their country. No surprises.
Here’s what you need:
- Simple Freight + Insurance + Taxes (if applicable) tariffs
- A way to present the rates to your customers. If you’re on Shopify there’s an app for that that allows you to include third-party carriers
- A way to ship to the courier’s warehouse (don’t forget to add it to your rates). As a rule of thumb, $1/lb should work
- A way to get the tracking information back to your customers.
A few highlights:
- Marketing cost is 5-10x cheaper in these regions
- People look up to imports as a sign of getting better stuff
- You can take payments with your current processor, if not, use Stripe
Don’t miss this great opportunity. It doesn’t take that much work.