2022.02.15
Delivery Duty Paid (DDP) Will Decrease Cart Abandonment for International E-Commerce
For many organizations, selling internationally is an excellent way to reach more customers and grow e-Commerce business.
With international e-Commerce, new taxation and duties will apply, leading to a key challenge many businesses face with international selling: cart abandonment.
When shoppers add items to their cart and leave without completing the purchase, they have abandoned the cart. The top reasons for cart abandonment are hidden costs, including shipping, taxes, duties, and other fees. Depending on the shipping method leveraged by the e-Commerce brand, the total landed cost (the total cost of the purchased item, including associated taxes and duties) may not appear on-screen for the international buyer. In short, these international customers will not know the total cost of their purchased items. This lack of transparency into total landed cost can trigger cart abandonment.
U.S. e-Commerce brands seeking to sell internationally must solve the issue of cart abandonment and shipment refusals, or risk returns fees and negative brand impacts. Perhaps the best way to address unexpected fees, and reduce cart abandonment for international e-Commerce, is by leveraging the Delivery Duty Paid (DDP) parcel shipment method.
What is Delivery Duty Paid (DDP)?
U.S. brands will encounter varying taxes and duties associated with the import of goods, depending on where they are shipping internationally, the value of the shipment, and the items being shipped. Depending on the shipment method leveraged, associated value-added taxes (VAT) and duties will be paid either the U.S. brand shipping or the international customer receiving their parcel. The two most common shipping Incoterms (International Commercial Terms) leveraged for international e-Commerce parcel shipping are Delivery Duty Unpaid (DDU) and Delivery Duty Paid (DDP).
Delivery Duty Unpaid (DDU) is leveraged when the U.S. e-Commerce brand does not pay the duties or value-added tax (VAT). Instead, the international customer will be contacted when their shipment arrives and will be required to pay these fees to receive their shipment. DDU puts the responsibility for paying taxes and duties onto the customer, which can be frustrating and upsetting for customers. Additionally, DDU does not allow the e-Commerce brand the opportunity to provide total landed cost to the international customer within the online shopping cart. There is little-to-no transparency as to what the customer will ultimately be spending.
In contrast, Delivery Duty Paid (DDP) requires the U.S. e-Commerce brand to pay for all relevant value-added tax (VAT) and associated duties. It also allows the brand to calculate the total landed cost of the item in the international customer’s online shopping cart. Customers are not subject to any hidden costs before receiving their items and can determine the total landed cost upfront. In summary, DDP ensures a transparent process for both the U.S. e-Commerce brand and the international customer.
While DDU can cost less for the e-Commerce merchant than DDP during check-out, it lacks transparency and directly impacts short and long-term customer experience, while burdening e-Commerce brands with ungainly shipping times and messy returns.
How DDP Lowers Cart Abandonment
Delivery Duty Paid is a key strategy for lowering international cart abandonment rates, and it all goes back to total landed cost calculated within the e-Commerce buying experience.
Customers want transparency when making their decisions. They expect to see everything upfront and know exactly how much their order costs. With DDP, there are no surprise fees for the customer, because the e-Commerce merchant can display the total landed cost upfront in the shopping cart, increasing the likelihood of a purchase. DDP also reduces the time parcels will remain in customs, reducing total shipping time. Lastly, the customer is not expected to pay any hidden fees, reducing the friction of an unhappy customer returning their parcel.
With DDP, carrier partners can also provide a more transparent view of the shipping process to the merchant and customer as well. According to PayPal Cross-Border Consumer Research, 24% of consumers avoid purchasing from other countries due to slow delivery times. When the U.S. brand handles the duties and taxes associated with international shipping, items can clear customs faster and arrive to customers in less time.
DDP Is Becoming the Industry Standard
DDP is quickly becoming the industry standard for international e-Commerce retailers because it helps both the business and its customers. Additionally, DDP shipping is the best solution for future regulatory and VAT measures. New VAT measures from the European Union will tax all cross-border purchases without a threshold. This makes it even more vital for companies to show the total costs for their products at checkout.
When brands put the responsibility for duties and taxes on the international customer, the risk for cart abandonment increases. The customer experiences frustration, exacerbated delays, and surprise fees. DDU may appear less expensive upfront for U.S. brands, but it can drive up costly returns and negatively impact customers.
Tips for Successful DDP Shipping
Provide Transparent Policies
Brands should always let international customers know what to expect by clearly detailing how taxes and duties will be handled. Brands can especially emphasize their shipping policy, FAQ page, checkout, and confirmations.
Ensure Effective Tracking
Brands should leverage carrier partners capable of tracking parcels shipped via DDP. Customers, and the brands themselves, can then use their tracking information to monitor shipping and ensure on-time deliveries. Delivering orders on time builds trust, and shipment tracking numbers help to offer reassurance to buyers.
Integrate the e-Commerce Shopping Cart
Brands will need to integrate their total landed cost calculator and parcel tracking at the online shopping cart level. The technology integration supports real-time calculations based on international charges and changing regulations. Additionally, it provides your customers with parcel visibility throughout the entire process. In order to effectively integrate, most e-Commerce brands will need a strong carrier partner capable of integrating technology maturely.
Find a Strong Carrier Partner
Working with a strong carrier partner that can support DDP shipping is crucial for U.S. brands on the rise. The relationship with this carrier partner should be strategic, transparent, and data-driven.
Where GEODIS MyParcel Can Help
GEODIS MyParcel makes it easy for domestic e-Commerce brands to go global. Our small parcel shipping service currently ships to 27 European countries, Great Britain, and Canada with guaranteed delivery in 4-6 days. How do we do this? By leveraging our parcel expertise, e-Commerce experience, deep understanding of global customs clearance processes, and integrated technology.
Now that you understand the advantage of DDP, we can help you strike the balance between speed of delivery and total landed cost. We offer an end-to-end global transportation network and a fully integrated digital platform to make DDP a breeze for you and your customers. You can rely on our many years of e-Commerce experience to implement. Learn more about what GEODIS MyParcel can bring to your e-Commerce business by contacting us today.