Logistics Manager Magazine

International sales may be seen as a major growth market for many UK retailers but delivering the goods is not always easy.

Marks & Spencer’s latest profit figures may have disappointed the City last month, but, as with many other UK retailers, its international operations proved more successful. Sales in its non- UK operations were up by an average of 6.2 per cent – although that disguised the massive expansion of its Asian operations where sales increased by almost 16 per cent.

Like other retailers, too, much of Marks & Spencer’ss profit came from its multi-channel business with online sales now accounting for 16 per cent of general merchandise operations.

Much of this business is also destined for overseas markets and, with online business often less profitable than store sales, thanks to the cost of delivery, it was perhaps not surprising that the company’s over-all profit figure was disappointing.

International

Next, too, has highlighted international online business as a key growth area.

It recently reported an increase of 86 per cent year-on-year for international sales and expects a further 50 per cent increase to £150 million this year.

Meanwhile, pure-play ASOS – well-known for its focus on international trade – reported in April that at £290 million international sales for the six months to February 2014 accounted for 61 per cent of its turnover and represented a year- on-year growth of 35 per cent.

For these, and many other UK retailers, international operations clearly represent an important growth opportunity, but they are not without difficulty when it comes to delivery – especially in those “emerging markets” which many see as offering the greatest potential for growth.

Goods can be held up at customs, while in some countries desirable items may never actually emerge from the customs shed; elsewhere certain types of goods may be effectively barred by complex regulations.

In China, many “unauthorised items” used to slip through but in the past year China Post has become more vigilant and tightened up the rules and regulations.

South America can also be a problem with low duty thresholds and differently formatted addresses which can totally confuse UK labelling systems – consequently leaving parcels undeliverable.

Russia – problems with the Ukraine notwithstanding – is proving especially difficult.

Not only has the passage through customs long been tortuous, but earlier this year Russia expanded the list of documents required for shipments.

This resulted in January with DHL, DPD, and FedEx suspending deliveries of goods for personal use to Russia because of the increased complications.

Under the new rules Russian customers have to provide additional paperwork, such as scanned copies of their passports, before the goods can be delivered, thus further compounding delays with close monitoring of individual consumer spend and additional duty charges on any citizen exceeding €1,000 or 31kg of western internet shopping in a month.

Reports from other carriers since then suggest that the problems have multiplied with limits on the number of personal internet purchases carriers can deliver each day, rules on using Russian drivers or only drivers that have passed a Russian driving test, and €1,000 levies on trucks carrying internet shipments. Mr Putin, it would seem, is rather concerned that too many roubles are heading to the West, as consumers opt to buy from non- Russian web sites, and he doesn’t want his internal monopolies on trade threatened.

In 2013 Russians spent $14 billion ((510 billion roubles) online while earlier this year Morgan Stanley estimated that Internet sales to Russia could reach $36 billion by 2015 and $72 billion by 2020 – figures which may be concerning Mr Putin.

Interference

For UK retailers and their logistics providers – as well as would-be Russian customers – such interference with free trade is a major irritant.

For wnDirect, which has grown rapidly thanks to its policy of working closely with national carriers, the latest restrictions may instead be proving something of a business opportunity.

“We already had the systems and processes in place to effectively collect proof of ID and handle the other customs regulations already built into our system,” says managing director Stuart Hill.

“So it’s business as usual for us. In co-operation with our in-country partner, SPSR, we are in a unique position to be able to clear goods into Russia.”

Working with Russian delivery companies, such as SPSR, may circumvent some of the restrictions on drivers, but attempts to curtail individual shopping habits and limit internet purchases seem strange ways to try and buck global retail trends.

No doubt the less ethical will be happy to pass those “little brown envelopes” to relevant officials to ensure that their goods get through, but many retailers – and carriers – who had been hoping to cash in on that predicted $72 billion of Russian internet orders, may well have to look elsewhere for growth.

Originally appeared in Supply Chain Standard, June 2014