Today we have the privilege of spotlighting a fantastic partner company of ours called Bongo International. Their service Bongo Checkout is very easy to integrate into the Miva Merchant Platform. You activate it just like any other shipping module that comes installed with the Miva Merchant software. It empowers you to accept and complete International orders from over 200 countries around the world. It's easy from a merchants perspective because they don't have to worry about understanding all the complex intricacies of International selling and shipping. International orders are treated just like domestic orders from the Miva Merchant perspective and Bongo International handles the final details of International Shipping automatically. To tell you more about Bongo checkout I'd like to introduce you to Greg Sack, Cofounder and President of Sales for Bongo International.
Hi, this is Greg. Thanks for everyone taking the time to join us here on the webinar. My goal is to give you information about Bongo, but more specifically help retailers with their own efforts selling Internationally, whether it is through a third party like Bongo or even doing it on your own. From an introductory perspective I'll give you a little background on myself. Primarily I have a logistics background. I worked for UPS, Airborne Express and DHL. I currently lead International Sales Strategy and Product Development, so a lot of that is working with our retailer partners and identifying what are the needs and concerns of U.S. Retailers when trying to sell their products Internationally.
A little bit about Bongo. We've been awarded by Inc 5000 as one of the fastest growing companies two years in a row. We were just listed on number 104 on the Deloitte Technology Fast 500 this past year. So we're pretty proud of the progress we've made at a very fast growing speed.
- Market Opportunity
- What Do Shoppers Buy?
- Is Internatioanl Expansion for me?
- Challenges of Cross Border Sales
- Cross Border enablement providers
- How does it work?
From an Agenda perspective what I want to do first is talk about the Market Opportunity. Which markets are growing? As in overall growth rate in International ecommerce you're seeing a substantial increase around the globe. The U.S. is quite a bit more mature than other areas of the world as far as ecommerce capabilities. We're still growing at a compound and annual growth rate of 11.8% according to Forrester. When you look at this graph and you look over the course of the past few years and the years to come and what they anticipated, you're looking at multiple trillions of dollars on cross border sales. In certain areas of the world they are actually expected to exceed the U.S. capabilities especially when you look at Asia Pacific and part of that actually happened this year. Then you have substantial growth rate for some of the areas in the world that really aren't as advanced as we are right now so it's a little bit easier to get a high growth rate when you're starting off with a much lower number, but it's one of those questions that you have to ask yourself - does it make sense for me to be out there in that stage and be a part of that growth? I think the answer to anyone on this call would be yes. Then the question is, how do I do it?
So first I want to cover some hot categories.
Hot Categories for Cross Border Sales
What's interesting about this graph is that that largest piece of the pie is listed as "Other." A lot of us would think Apparel or Consumer Electronics would be by far the biggest piece of the pie. Those absolutely are big chunks, but there are a substantial amount of products that fall into this category called the "lone sale" where it makes a lot of sense for International consumers who are looking for these types of products on U.S. sites making those purchases. What we've actually seen is when we've gone out and we surveyed our consumer base the number one reason why people are making purchases in the U.S. is because they don't have the same product availability. They can't get the product in their own country and the U.S. is the first place they are looking to to see if they can make that purchase and have it shipped cross border. The second reason that consumers are purchasing from the U.S. is they think the products are going to be a higher quality then what they can get in their own country. We hear that a lot. Whether that's true or not, that remains to be seen. And last but not least would be currency benefits in certain areas of the world taking advantage of the U.S. dollar which can impact sales and how people are buying online.
This graph is showing the retails that we work with. What's interesting about this is that we actually have more Home and Garden and then our second largest category is "Everything Else" in line of what you saw earlier. Those are just the top two categories. You'll notice here that there's not a single category here that represents even over 15% of our customer base and when I say customer base I am referring to the retailers that are selling their products Internationally utilizing our service. There are a lot of interesting categories here. You can go through it and see if your own business is represented on this chart or if you would fall under the "Everything Else" category.
Is International Expansion for Me?
There's a number of questions to ask yourself like does this even make sense? Should I take the time to do this myself? Should I outsource it? What should I be doing? The first question I have to ask myself is:
Am I getting organic traffic?
A lot of folks that we talk to when we first talk about International expansion, they don't even know if they have International traffic. They might think there is. But more often than not when we ask them to go in and look at their analytics they are realizing that "wow, 10%-15% and sometimes even more than that of traffic is coming from outside the US." They never even knew about it because they never focused their efforts on International Sales. Typically they are only accepting the U.S. orders or if they are accepting International Sales, it's usually only from Canada. We see that pretty frequently. The next question is:
Do I get customer service inquiries?
This is one of the key identifiers to folks reaching out to us. They get consumers that say "hey, will you ship this to me" and they more often than not are saying "no we can't." There's usually a reason why it would be a big challenge for them. It might be payment related. It might be shipping related. If you are getting some, these are just the folks that took the time to reach out and there's very likely a lot larger amount of inquiries that you're not hearing from. The next question is:
Can my products be exported out of the U.S.?
These are some of the categories where there can be challenges with shipping products out of the U.S.
- Exotic leathers
- Export/Import Restrictions
One of the other common things that comes across our desk anyhow is Brand Restrictions. A lot of resellers we talk to, they sell a multitude of different brands. Some of those brands have agreements with retailers stating that the retailers only has rights to sell those goods in the U.S. and that they may not have the ability to sell those brands either into a specific area in the world like Europe, or just globally all together. So after asking those questions and seeing if you're still a candidate for selling Internationally, a majority of you will.
So what are the challenges? Everyone on this call certainly knows what the challenges are in their individual businesses so I'm going to keep this at a little bit higher than a category perspective in terms of what people see as a potential challenge.
One of the reasons are people are saying I'm not going to spend the time and effort it would take to go down this path. The first is Localization. There's a lot of different facets to Localization. So, how do I communicate with national consumers? Is it really important to be able to communicate with them in their native language or knowing that the consumer came to a U.S. web site, do I have the capability of communicating with them maybe in their second or third language?
Landed Cost for those of you who don't know is taking the total cost of the transaction after you consider the cost of the goods, the shipping, the duties, the taxes, and then any potential insurance that might be on that order. This is really one of those challenging aspects in selling internationally is that if you don't provide the consumer with a landed cost you're running some risk for yourself. That risk is, you didn't display the cost to your consumer, you didn't calculate it, that consumer makes a purchase, it gets delivered to them in their home country and the carrier says "hey, you owe me an additional $47 in duties and taxes on this order" and the consumer says they weren't expecting that and they don't want to pay $47 and then they refuse the shipment. What that happens you're kind of stuck. Now as a retailer you have a product overseas that you've already paid to ship there, the consumer is dissatisfied because they didn't know what the costs were really going to be, they've refused it and more than likely you're going to end up with a charge back because you didn't disclose this information and you're certainly going to have to deal with some customer service and when that customer calls or sends you an email they don't want to pay the additional $47. So it's really important to be able to do the calculation, know that they are accurate on the front end and then allow the consumer the ability to either prepay the amount or at least know what they are before actually conducting the purchase.
So we're familiar with this is a MasterCard, this is an Amex, or PayPal, all the common payment methods that we see here, but Internationally that's just not the case. One of the examples I like to give all the time is if you had a consumer hitting your web site and they came in from the Netherlands, 55% of online transactions in the Netherlands were purchased with a credit card called the "Ideal Card." Most Americans have never even heard of the Ideal Card before, but obviously the folks in the Netherlands have. It's important for you to be able to provide local payment options to the consumers because it's what they have in their wallets. It's what they are comfortable paying with. They may not carry a Visa, MC, or Amex and they may not have a PayPal account to be able to complete the purchase. When you're trying to focus on conversions, it's important to remember including multiple payment options for the consumers.
How do I manage with all the various regulations around the globe. There's a lot that goes into that. Some products you just know won't be able to be put on an aircraft, but there's a lot of other compliance to be concerned with. The ones who regulate the compliance out of the U.S., they are doing a number of different things. They are looking to make sure that you're within their rules and regulations for classification numbers that basically says you don't have to have a license to export that product. They also manage the denied parties list, which typically is going to be people that have been identified as drug smugglers or terrorists or some other group of individuals that the U.S. Government just doesn't want you conducting business with. So you want to make sure from a client's perspective that you're managing all of that and you're not moving product outside of the U.S. because negligence and claiming negligence is not a reason for the Bureau of Security Department to come after you. They absolutely can but it's pretty rare but it's possible and you don't want to be in that situation.
Operations and Packaging Process
Most folks in the U.S. are comfortable with the way you sell and ship goods ethically. Typically retailers are moving product through UPS Ground service. You're focusing on getting the product out the door as fast as possible so you more than likely have some standard boxes that you use. A lot of times those boxes have empty space on them and you have to realize when you put those boxes on an aircraft, especially Internationally, that it's safe. Otherwise it could end up with some pretty impactful costs to you as the retailer or to the consumer. So it's important to manage that process a little differently than what you're doing today domestically. I'm going to share with you a couple ways to do that and some experiences that we've had.
This is probably the number one reason why retailers that we communicate with don't sell their products Internationally. They're just deathly afraid of having one fraudulent transaction and that really wiped out all their margin for every other order they completed the entire year. It happens very very frequently. So how are you going to manage that internally and are you going to have your own internal processes or do you reach out to a third party to be able to help you ship internationally. There's a number of ways you can do this yourself. There's a number of third party services, fraud guarantees, just for International orders. So you'd have to reach out and see what their services provide and what the costs are billing at, but it's absolutely something that can be done.
Domestic vs. International Shipping
For clients out there that are familiar with dimensional weight, this might get a little repetitive but dimensional weight through various carriers is determined by length x width x height. Domestically it's divided by 166, so in the International scene the divider becomes 139. Basically what that does is it increases the billable weight of each shipment that's going through your facility. It makes it that much more important again to manage the products of shipments going out the door. So you need to modify your packaging practices using your standard boxes that may not be the perfect size to move your products Internationally. If you do this you're going to reduce costs both for yourself and it's going to reduce cost for the consumer in the long run as you get better and better in this process. Lastly, it reduces risks. Mainly that risk being on you as you sell it. A lot of times resellers are moving products through common carriers, UPS, Fedex, a lot of them have a good profit margin in that segment of their business. We typically walk in and challenge them on that and then when we start diving into the invoices and what they are actually being charged and very quickly we find that international is an area of their business where they either lose money or they are just barely breaking even and it's no where near as profitable as they originally thought. Once you tack on the soft costs of managing the International orders, again, it can be one of those scenarios where you realized you're selling Internationally and every time you send a sale you're losing money. That's obviously not a position you want to be in.
Here's a real life example. We received this box here in its original packaging packaging. It was 16.5 x 16.5 x 16. Many of you might say you have boxes this size and it would be perfect for something like this. What you need to realize, if the product is only 11x11 x 14, the actual billable weight internationally for that item is 13 pounds. A substantial difference for what you're seeing in the larger box which the billable rate is 34 pounds. So if you're building boxes around the product or just managing the type of boxes that are being used to ship the product, you realize you can actually get that exact same product out in a box that is the same exact dimensions of the actual package, or at least get very close with it. If you're not able to get down to 13 pounds, maybe that ships out in a 14 or 15 pound box which is still way better than a 34 pound box that it was in before. When you look at that from a cost perspective, what you're seeing here is a screenshot from UPS so on the left you're looking at a World Wide Saver for that 34 pound shipment which is $920 when it's being shipped to South Africa. Moving down to expedited is $727. Moving that product down to 13 pounds almost drops the price down to half and of course this is before discounts. I know everyone has some discounts from their carriers. I'm just driving the point of what the difference is by just managing the packaging can do for not only you in terms of your items and your cost but really for the consumer and trying to drive them back to your site and make a purchase again in the future. So here you can see the difference, $920 versus $442, that's a big difference.
Cross Border Enablement Providers
- US Address
- 3rd Party Checkout
- Calculation Engine
So you're faced with the question, "do I do this myself or do I try and find a third party to help me with this?" There's a number of providers out there. We're obviously one of them. These are the three different models that you'll see. The one is a US Address. So very likely you're already selling Internationally. Whether you know it or not, when selling Internationally to International consumers they've just found a US address provided by one of these third party folks and then they are coming to your web site, completing a transaction, and simply asking you to ship to a US address. You're shipping to that facility, that third party provider is typically providing some value added services to the consumer and they are shipping those goods on your behalf.
The next model is a third party checkout is what we're really going to focus on on this call so you can see how that works as a third party, where the third party actually takes over the shipping experience and provides a lot of value not only to you but to your consumers as well.
The third is the calculation engine. That's going to be done through an api where the third party is going to provide the retailer the ability to identify what is the accurate shipping, duty, taxes and insurance costs, allowing you to complete that transaction and still give you the ability to ship those goods to a domestic address and allowing that third party provider to add all the value and services that they may in their export process.
So how does it work? Here's an example. This is a current Miva customer, Suncoast Parts. We grabbed a pair of struts and added them into the cart, it notifies the consumer that if they are outside of the US that they'll receive a checkout and shipping quote, moving on to the actual checkout experience the key identifier within Miva is going to be based on the country settings, so as soon as they identify themselves as being outside the US, in some cases it's outside the US and Canada, if the retailer is already comfortable with their processes, it will then identify that this will go over to the third party cart. So in our case what happens here is you'll notice in the right hand corner you'll see English, but based on the users browser settings it's going to see what they are typically browsing the internet from the language perspective and they are going to provide them with an appropriate language checkout experience in their local language. You'll also notice that the transaction costs changed. We are now displaying the ability for the consumer to transact in British Pounds. That way they'll know exactly what the costs are and there are so many advantages to doing it this way because typically when an International consumer buys from the US they are going to be paying in US dollars. But if they pay in US dollars there's a big unknown there. What's the credit card going to charge me from an FX perspective and then what kind of fees are they going to charge me because this is a cross border transaction. Right now going down this path they are going to know exactly what their costs are going to be in their local currency so they can make a payment and there's no surprises after the fact. Our checkout process gives you the ability to see both economy and express service and at the checkout page that's where we provide them the duty tax and insurance costs. We give them the ability to remove those costs if they decide to go that path but at least we present the costs to them upfront. They may make the decision that they want to pay that cost upon delivery. On the insurance side they can decide if they want to insure the goods or cross their fingers and send the shipment anyhow. The last page is the Payment page and this is the one where we typically have integrated fifty-nine different payment options around the globe, the most popular payment options that are local to the internet. Also, based on their IP and billing address we're going to que up a number of local payment options for them so they are going to be able to see what's very likely in their wallet and what they're most comfortable paying.
How Does It Work?
Let me walk you through once an order is placed through a third party cart. In this example what an integration provides through Miva is that once an order is completed in Bongo Checkout, we're submitting those orders back through Miva in the Order Management System with a domestic shipping address. So you have access to all the International data, but we're providing it through their system as a domestic order. We have two facilities in the US. One is in California and the other is in Florida. It gives you the ability to ship to which ever facility is closest to your fulfillment centers. You're able to ship those goods with whatever carrier you'd like UPS, Fedex, USPS - whatever it may be. We receive the order, we process it, we become the order of record, so we're making sure that we're not selling a product Internationally that we're not supposed to or that the Government requires some sort of license to be able to do so. Again, we're managing through a bunch of automation, we're managing all the documentation internally with the carriers, with the local customs agent so we can ship globally and directly to your clients door.
Questions to Ask
So, if you want to go down this path, there's a number of questions you should ask a third party provider. This will highlight which is the right service provider for your business and there's a number of them out there to consider.
What's their customer experience?
That is both a front end and a back end question. What I mean by that is, what's the experience on my site and then once the order's completed, what's the experience afterwards? For example, was the pricing guaranteed upfront or is there additional pricing that's going to take place after the fact.
How do they determine landed cost?
There's a number of ways to do this just like a lot of retailers decide domestically to create a shipping profile that's based on the value of the goods. When you're determining landed costs you have shipping but then you have duties and taxes as well. Duties and taxes can get very very detailed. I'll give you an example. If you were a retailer of shoes and sneakers the duty rate associated with various shoes and sneakers itself can range on the commodity itself. So for example, a shoe with leather uppers and rubber soles has different duty rates than say a pair of boots because of a pair of boots have a protected metal toe cap. Where the shoes were made out of suede or some other kind of exotic leather, you never know and every single country the duty rate can change by commodity and it can also change based on the origin of that product. So you want to look for a third party provider that will go through those various details with you and make sure that your entire catalog is set up and ready to be able to display accurate related costs. There's a number of providers out there that will take any kind of insurance models and will determine a duty rate of 15% and any given country and it's an insurance model. They're going to make money on some, but their not going to make money on others. My recommendation is going with someone that will identify within your catalog what exactly are you selling, what is this commodity made of, etc.
This comes down to what am I doing from a language perspective? What am I doing from a currency and payment perspective? Do they even provide multi-currency? If so, what's that experience on the site?
is it only US based payments? Are there International payments and if there are what are they? How many are there? What's their focus? Is there a specific area of the world that they take all their time on and then neglect the rest?
Transit / Service Levels
There's a lot of different ways to move product Internationally. There's obviously Fedex, UPS, DHL and USPS, but there's also Mail Consolidation providers out there where they'll airlift goods in a consolidated manner and then they'll hand off to the local post office like the Australian post or wherever it may be going to. Those services are great if you're not looking for a fast transaction. They can provide a financial cost savings to the consumer and yourself when you're looking to move product internationally.
How Do They Manage Brand Restrictions?
If you have a certain brand that can't be sold does that third party provider have the ability to manage that? When I say manage that, I'm referring to, "can they allow me to sell this brand to other areas of the world and block Europe?" So the consumer from Europe comes in they can't buy the item. But a consumer from Australia comes in and can buy the item. So if you have brand restrictions it's really important that they understand what the third parties capabilities are.
Do I Retain Customer Data?
Another big one, we found that a lot of third party providers out there where the customer data is either very limited in terms of what the retailer gets back or they don't get back almost anything at all. You have to identify if I get the information, what do I get back? What are the piece of information I get?
Do I Pay Commission?
There's a lot of different models out there. It's important for you to understand what the business model is for the third party. Where are they making money? Am I having to pay commission out of the order margin myself or are they making money in other areas? So before you ask that question, understand what their processes are for the third party.
How Easy Is Integration?
This is an area that we have commonly struggled with retailers that we've had conversations with. They get real excited about the service and then it comes down to integration and they realize there's substantial costs or substantial time it's going to take to integrating the service. Now that's really one of the beauties of conducting this webinar and our relationship with Miva. We've taken on all the expense with Miva's help to get this really pre-integrated into Miva so almost all of their retailers can literally just turn it on. There's obviously components that we have to manage in that process of getting it set up and getting it started but the main part of the integration has already been set up by Bongo and Miva.
Q: Are there issues sending food products?
A: Yes, there's two different ways to look at food products. One is perishables and the other is food stock. I say food stock because that's how the carriers look at it, canned food, things of that nature. We get a lot of those requests. Perishables become very very difficult. If all you do is sell perishables, this may not be the best avenue for you in this context. There's other ways to move perishables Internationally, but looking at ours may not be the best fit. With food stock there are a number of restrictions depending on the country, the sale and what the product is. So one of the unique components of our business is we go through your entire catalog with you, we identify which items can or cannot be shipped, and then we manage that by country. So if a consumer from a particular country places and order where that food can't be imported into it, our system will block it where the consumer won't have the ability to make that purchase where as in other areas of the world they can. I will say as a general statement, canned goods are pretty easy to move in to, but that's really about it.
Q: Where is your California location?
A: It's in Carson, California.
Q: Can I sell products utilizing drop shippers?
A: From the perspective of Bongo where we are providing an export hub for all these goods to be shipped to before they actually export out of the US, the answer is absolutely yes! We are a perfect solution for someone who is going to be utilizing drop ship venders. You can have multiple shipments come to our export hub through one order and we'll consolidate those orders into one box. We actually build the box around the product and make sure we remove any wasted space or any voids in those boxes as we receive them. We're a great fit for that as are any other providers in the states.