DHL unit tests program to manage returns of cross-border e-commerce

The global e-commerce unit of transport and logistics titan Deutsche Post DHL is piloting a program designed to facilitate the returns process for international e-commerce, a segment that is expected to grow as international e-commerce expands.

Charles Brewer, CEO of DHL eCommerce, said today that the program, which began about a month ago, is being tested in both directions on the U.S.-United Kingdom and U.S.-Australia trade lanes. The plan is for the unit to cover all aspects of cross-border returns, including a straight return to the product seller, consolidation of return shipments at the warehouse and distribution center level, disposal of low-value returned items, and the recovery, repair and repurposing of returns deemed to have a shelf life, Brewer said in an interview at DHL eCommerce's offices in Norcross, Ga., an Atlanta suburb.

The program aims to leverage all parts of the DHL enterprise, Brewer said. For example, DHL Supply Chain, one of the world's largest operators of contract warehouse and DC space, will be involved in the consolidation process, according to Brewer. DHL Express, the unit's express operations, will be involved in the transportation. DHL Global Forwarding, the company's freight forwarding, will be brought in to provide forwarding services, if necessary, Brewer said.

It is unclear whether the program will go live in time for the post-holiday returns period, which in many countries typically occurs during the first 10 days of January.

Brewer said that while other providers offer cross-border returns of products from the buyer to the seller, no one to date has come to market with a cross-border returns program to match the scope of development underway in domestic markets. Among the challenges is determining how customs authorities will process e-commerce returns when many countries are already swamped with what World Customs Organization (WCO) Secretary General Kunio Mikuriya earlier this year described as a "tsunami of small packages" that customs administrations, structured to clear business-to-business commerce between established trading partners, were not set up to process.

Brewer said his unit has not experienced problems getting its customers' shipments cleared through Customs in a timely manner. However, he said it is an issue that must be addressed, especially as cross-border e-commerce activity increases.

Brewer said there is merit to the concept of free-trade zones dedicated to e-commerce patterned to some extent after the "Foreign Trade Zone" model long in place for manufacturing. Brewer also endorsed an idea advanced by Jack Ma, co-founder and executive chairman of the Chinese e-marketplace Alibaba Group, of a "World Commerce Organization" that could be structured along the lines of the World Trade Organization (WTO).

Brewer said DHL has an inherent advantage in global e-commerce because it serves 220 countries, is the leading express delivery company in many markets, and has deep relationships with the many different customs authorities. DHL, based in Bonn, is a unit of Deutsche Post, which for decades functioned as the German postal system but which over the last 20 years has aggressively expanded into logistics and transportation. DHL marks its 50thyear in business in 2019.

According to DHL data, the value of all worldwide e-commerce is about US$3.7 trillion. Of that, $2.7 trillion moves entirely within countries, while the rest is cross-border in nature. The cross-border segment grew by 27 percent last year, while the larger "domestic" trades grew by 9 percent, according to the data.

Brewer said that the dominant markets like China, the U.S., France, and Germany will continue to see expanded e-commerce activity but that the pace of growth in those countries will level off due to the law of large numbers. E-commerce accounts for about 13 percent of U.S. retail sales, but when factoring out industries like gasoline where product is not ordered online, e-commerce's percentage is closer to 18 percent, Brewer said. In China, the latter figure is about 24 percent, he added.

Emerging markets offer huge potential, according to DHL. For example, in Indonesia, a nation of more than 276 million, e-commerce accounts for just 0.5 percent of retail sales. In Africa, that figure is about 1 percent, DHL estimates. Brewer reckons that there are only 10 to 12 shopping malls in all of Africa north of Johannesburg. This means millions of Africans will have little, if any, choice but to shop on line; as Internet connectivity improves and disposable income increases, they will, Brewer said.

Ironically, one country that DHL e-Commerce does not serve domestically is China, which is the king of intracountry e-commerce activity. Brewer said the company believes that it would take too much time and cost too much money to serve such a massive country, either through an acquisition or organic growth. DHL provides services supporting the international e-commerce market to and from China.

Brewer said his customers so far have been unperturbed by threats of a U.S-China trade war, which escalated today as each side implemented 25 percent tariffs on $16 billion worth of the other's goods. The National Retail Federation (NRF) has warned that the latest round of tariffs would directly hit U.S. consumers because they would be aimed at everyday consumer goods rather than industrial products and technology, which has mostly been the case up to now. For example, a 25 percent tariff on Chinese furniture imports would cost Americans $4.6 billion more for furniture even if retailers switched their sourcing to other foreign countries, many of whom already charge more than their Chinese counterparts, NRF said.

For DHL, which along with many of its customers has withstood many geopolitical threats through the years, it is business as usual, according to Brewer. "Whatever is going on, most companies tend to find a way to do business," he said.