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How A Hybrid Model Can Help Retailers Survive The Online-Shopping Trend

How A Hybrid Model Can Help Retailers Survive The Online-Shopping Trend

With shoppers finding much of what they want online, the future of the brick-and-mortar store can seem bleak.

Such major retailers as J.C. Penney, Lowe’s, Gap and Family Dollar, among many others, have announced plans to close at least some stores across the United States this year.

Is it possible, though, that an answer for what’s troubling retailers these days could be a hybrid model that marries digital with an in-store experience? Already some are trying such an approach, as when Amazon opened a Black Friday pop-up store in Madrid where customers could browse, scan the QR code to learn more about any item that drew their interest, and instantly make a purchase online.

“This no-pressure concept is becoming increasingly popular as today’s customer strongly rejects any hard-sell tactics,” says J.J. Delgado (www.jjdelgado.xyz), a former Amazon marketing manager in Europe who led the largest sales day in the company’s history.

“Instead, they favor an environment that allows them to make their own choices based on all the information that is available to them.”

Retailers have been facing a sea change in their customers’ shopping habits for some time now. A recent Harvard Business Review article pointed out that some stores are handling the problem by cutting the number of employees and reducing the amount of training they give employees. But the three Wharton School of Business professors who wrote the article conclude that approach is counterproductive.

In Delgado’s view, retailers can’t waste time lamenting what was. They need to adapt to what is.

“The future of shopping is not in decline, it is evolving,” he says.

Delgado offers a few suggestions on how a hybrid of digital with brick-and-mortar can work for retailers determined to survive in the digital marketplace:

The customer must experience something they can’t online. Shopping has become a multi-sensorial experience that goes much further than a mere retail transaction, Delgado says. It is about replacing the traditional shopping experience and putting the customer at the center of the whole retail process. “The customer wants authenticity and something of real value, not just monetary value but emotional value,” he says.

Store staff must provide the human connection not available online. “That human connection is the store’s trump card and they must play it right,” Delgado says. “Maximizing that connection and combining it with online connectivity is fundamental to creating the ideal hybrid experience.”

Companies must seek innovative ways to manage their new reality. The changing retail landscape is paving the way for deals between manufacturers, retailers and delivery companies to create ‘mashups’ that allow them to combine their strengths and combat their weaknesses, Delgado says.

“Amazon is the main player in this game, as we have seen with their acquisition of Whole Foods Market,” he says, “but many others are following suit.”

One example is the clothing chain Zara. The chain’s London store features interactive mirrors and high-tech facilities, and combines traditional shopping areas with online areas where customers can scan QR codes and make orders that in many cases are instantly delivered to the store on the same day.

“Some see the digital transformation as the cause for store closures, but it’s very possible that this same digital transformation also could provide the solution to retail woes,” Delgado says. “It is clear that we will soon see more hybrid-retail strategies as retailers seek ways of consolidating their online and offline presence to deliver a seamless customer experience.”


About J.J. Delgado

J.J. Delgado, co-author of Think Video: Smart Video Marketing & #Influencing (www.jjdelgado.xyz), is a professional speaker and digital-marketing expert. He is a former employee of Amazon who led the largest international-sales day in the company’s history. In addition, he was recognized as one of the Top 15 unofficial LinkedIn influencers of 2018. He has helped drive the growth of many organizations, including Amazon, Burger King, Pepsi, Hertz, Ford, Liberty Mutual and others.












ocean

A Tough Year on the Water Hasn’t Dampened Innovation for these Ocean Carriers

To say that 2019 has been challenging for ocean carriers would be an understatement. The year began with the National Retail Federation forecasting a decline in year-over-year growth, echoing World Bank chatter of a slowing global economy.

And don’t forget the tariff wars between the U.S. and China (heck, the U.S. and just about anyone). Managing capacity on ships has also been an issue, and then there is the potential biggest bogeyman of all: the International Maritime Organization’s low-sulfur fuel mandate taking effect Jan. 1, 2020.

Sure, we could dwell on the gloom and doom, but that would not be very Global Trade magazine of us, now would it? We here in our silky ivory tower like to spotlight the positive, which we reveal with these ocean shippers we love.

MSC

Mediterranean Shipping Co. this year watched the world’s largest container ship, the MSC Gülsün, complete its maiden voyage from northern China to Europe. With a width of 197 feet and a length of 1,312 feet (!), the Gülsün was built by Samsung Heavy Industries at the Geoje shipyard in South Korea. It can carry up to 23,756 TEUs shipping containers on one haul. That capacity can include 2,000 refrigerated containers for shipping food, beverages, pharmaceuticals or any other chilled and frozen cargoes. That’s a lot of snow cones!

MOL

Mitsui O.S.K. Lines sees MSC Gülsün and raises you the MOL Triumph, which achieved a new world load record this year. Departing Singapore for Northern Europe on THE Alliance’s FE2 service with a cargo of 19,190 TEU. That surpassed the previous load record achieved in August 2018, when Mumbai Maersk sailed from Tanjung Pelepas to Rotterdam with 19,038 TEU onboard. Yes, you are correct, that’s a pretty slim margin of victory, and analysts suspect the MOL Triumph record won’t last long given the 23,000 TEU ships being introduced.

HYUNDAI MERCHANT MARINE 

Speaking of THE Alliance, current members Hapag-Lloyd, ONE and Yang Ming will be joined in April 2020 by Hyundai Merchant Marine (HMM). The South Korean carrier recently signed an agreement to join THE Alliance and then passed the pen to the founding members, who extended the duration of their collaboration until 2030. “HMM is a great fit for THE Alliance as it will provide a number of new and modern vessels, which will help us to deliver better quality and be more efficient,” said Rolf Habben Jansen, Hapag-Lloyd’s chief executive. 

HAPAG-LLOYD

Oh, speaking of the fifth-largest container shipping company in the world, Hapag-Lloyd is piloting an online insurance product as part of a digital offering to try to overcome the widespread practice of shippers relying on the limited cover provided under the terms of carriers’ bills of lading. While Hapag-Lloyd says it takes the utmost care in transporting cargo, company officials acknowledge things can and have gone wrong. Thus, the introduction of Quick Cargo Insurance, which is underwritten by industrial insurer Chubb in Germany and is limited to containerized exports from that country, France and the Netherlands. However, the carrier says it plans to expand the offer.  

MAERSK

To navigate new environmental regulations, A.P. Moller-Maersk A/S is considering going old school. We mean really old school by using a modern version of the old-fashioned sail to help power its ships. Currently being tested on one of Maersk’s giant tankers, the sails look less like the flapping silk you know from Johnny Depp movies and Jerry Seinfeld’s puffy shirt and more like huge marble columns. But they are nothing to laugh at as two 10-story-tall cylinders can harness enough wind to replace 20 percent of the ship’s fossil fuels, according to their maker, Norsepower Oy Ltd. 

MOL, THE SEQUEL

While we’re getting all green up in here, it’s worth also pointing out that Mitsui O.S.K. Lines Ltd. This year joined three other Japanese companies— Asahi Tanker Co., Exeno Yamamizu Corp., and Mitsubishi Corp.—in teaming up to build the world’s first zero-emission tanker by mid-2021. Their joint venture e5 Lab Inc. will power the vessel with large-capacity batteries and operate in Tokyo Bay, according to a statement the foursome released on Aug. 6. Thanks to the onslaught of legislation to improve environmental performance, other companies are also looking to battery power. Norway’s Kongsberg Gruppen is developing an electric container vessel, and Rolls-Royce Holdings last year that started offering battery-powered ship engines.

AMAZON

No, this is not a leftover strand from a different story in this magazine about moving packages on the ground. “Quietly and below the radar,” USA Today recently reported, “Amazon has been ramping up its ocean shipping service, sending close to 4.7 million cartons of consumers goods from China to the United States over the past year, records show.” While other ocean carrier leaders prepare for the bald head of Jeff Bezos, his move really should be no surprise given Amazon’s attempt to control as much of its transportation network as possible. (See my September-October issue story “Air War: Fast, Free Shipping has UPS, FedEx and Amazon Scrambling in the Air”). Of Amazon now floating into the sea, Steve Ferreira, CEO of Ocean Audit, a company that utilizes data and machine learning to find ocean freight refunds for the Fortune 500, told USA Today: “This makes them the only e-commerce company that is able to do the whole transaction from end-to-end. Amazon now has a closed ecosystem.” 

China

What Every Business Should Know About Selling in China

Not only is China the most populous country on earth (1.3 billion people), it also has the second-biggest economy in the world by Nominal GDP (14.242 trillion dollars).

As the country has pursued ever more progressive policies to trade (and despite the current trade war between China and the United States) more and more opportunities to sell in the country have arisen to businesses across sectors. If you see China as a potential growth market, here are some of the most important considerations when selling in China.

Seek advice

When looking to enter a foreign market, it is always advisable to seek sage advice, and even look to local businesses who you can partner with. Although you may not wish to go down the partnership route, it is definitely advisable to seek the counsel of businesses who are already operating within the sphere, or groups such as the Global Innovation Forum who often provide free advice regarding penetrating new markets. 

This is a smart strategy because selling in China will be totally unlike selling domestically, or in European markets, for example. Any insights that you can garner will be potentially critical to the success of your sales strategy and approach in China, because as is abundantly clear, you will be operating within a totally different market, both literally and culturally.

“The cultural considerations when accessing new markets should never be overlooked. From the way that you brand and market your products to the way that you negotiate with local businesses and retailers, everything you do will be influenced by different rules: rules to which you are unfamiliar. Get the help you need to pass through this difficult phase,” advises Grant Tarrant, a business writer at Writinity.com and Lastminutewriting.com.

Understand Chinese governmental practices and rules

Although the Chinese Government has grown increasingly receptive to foreign businesses working and partnering in China, rules will still be a little conservative in comparison to the Western approach. Make sure you totally familiarize yourself with what you are expected to adhere too, especially when visiting the country and seeking to operate a sales operation from within China.

For example, you will need to understand the levels of bureaucracy that exist to set up a business entity that operates within China. For example, you may need to set up as a Wholly Foreign-Owned Enterprise (WFOE) to operate, and this can be a costly and timely exercise that may delay you implementing your sales strategy. Forming a business plan which pays close attention to all the requirements (and timeframes) of the Chinese state is essential.

Understand your customer

This piece of advice holds for whoever you are selling too, but obviously your Chinese customer base will be different from your US customer base and will have different expectations. For example, haggling is a standard cultural procedure, and Chinese customers demand to know a product impeccably before they buy, so ensure that your eCommerce operation includes high numbers of images and product reviews: this will be expected.

“If you study Chinese eCommerce sites such as Taobao you will see that it facilitates the Chinese custom of haggling down prices. In the West we are totally unfamiliar with this practice as we are satisfied that the price is the price, Be prepared to change your approach accordingly,” says Rachel Walliston, a marketer at Draftbeyond.com and Researchpapersuk.com

Provide impeccable customer support

Chinese customers have come to expect an extremely high level of customer support from their retailers and will demand this from any new business operating within their sphere. Knowing this, make sure you ramp up support efforts, and that, of course, raises questions regarding how you will do this in a new language and culture. Seeking advice from established entities is again the recommended route, and establishing support centers in the country is also best practice. 

Understand the marketing and communication channels

If you go in with a Facebook-based marketing strategy, be prepared to be disappointed. In China the social media platforms are different, for example, WeChat is one of China’s most popular platforms, but barely exists outside of the country. It has been dubbed a ‘super-app’ because it can be used for a multitude of actions, so utilizing such platforms is an absolute must if you wish to successfully penetrate the Chinese market. 

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Ashley Halsey is a writer, editor and international business expert who can be found at both Luckyassignments.com and Gumessays.com. She has been involved in many projects in Asia, and enjoys traveling, reading and cultural exchanges.

two-day shipping

Two-Day Shipping or One-Day Order Processing: What Wins?

Your average customer doesn’t know much about logistics, so every e-commerce company faces a unique concern for giving customers what they want. Do you offer two-day shipping for when an order is processed, or speed up your processing, all in order to meet their demands for quick products?

From the customer perspective, two-day shipping obviously sounds fantastic. However, it stops being so great when things take far longer than two days. Imagine if your order processing takes a week — how would customers feel?

In the same light, if an order is processed in a few hours, but shipping takes weeks, people might not even click “buy” if you’re upfront about how long it’ll take to get to their door. Google will lead you to many people who are disappointed with shipping times, regardless of the promise they were made.

So, what’s an e-commerce business to do?

Two-Day Shipping Changes

Adding two-day shipping is all about speed in your warehouse. As soon as this team receives an order, they get to work picking, packing, and sending it off to the customer. Buyers have a clear understanding of when things will arrive after the order is shipped and they’ll hold you to it.

To achieve this, you’ll need a streamlined warehouse with quality technology and practices, optimized to move orders as fast as possible. You also need enough people to prevent a backlog. Warehouse management tools are a tremendous help for this labor planning, plus they can ensure you’ve got the inventory of products as well as boxes and packaging materials to keep you ready.

The good news for a business is that you can keep your shipping promises even when inventory runs low because you’re guaranteeing delivery after order processing. 

Making the most out of two-day shipping requires you to be transparent. Customers need to know that the two days are when the product leaves your warehouse and arrives at their door, not when they click “buy.” Companies often address this by providing an estimated arrival date and then following up with an email once the product is shipped.

Thoughts on One-Day Order Processing

Order processing, simply put, is your ability to verify and use a purchase order to create a warehouse shipment order.

Most customers just don’t think about order processing when they’re making a purchase. Some don’t really understand the concept because they’re treating your business like a brick-and-mortar solution where they walk in, ask for what they want, and then you (the business) immediately know and can start on their order.

The behind-the-scenes actions of verifying orders and payment, checking inventory, creating an order for a warehouse, and getting it all in line when your staff is there simply blow by without a thought. You can see this in the wide range of explanations, FAQs, and responses to customer complaints about package deliveries and times. Even Comcast has to explain order processing times on its support pages.

If you’re able to streamline all of those activities, it’s a boost that customers will love, even if they don’t realize it. Processing every part of an order in a single day, or on the same day, allows your team to pick, pack, and send faster. It’ll improve the speed of all orders you receive, not just those that select expedited shipping.

Most of this is done via technology like warehouse management systems, which allow you to better control costs and understand revenue as well as inventory. What you’ll like about using a WMS is that they process orders quickly enough for you to insert them in the workflow where they need. So, if you get two orders — the first at regular shipping and then another an hour later with two-day shipping — the system will automatically move the two-day shipping to the front of the line.

The Customer-Driven Choice

Choosing between these two options requires one more consideration: where are your customers unhappy?

Unhappy customers won’t buy from you again and are likely to leave negative reviews that can impact other sales. When concerns are around your shipping, read them carefully. Ask if you can best respond by processing an order more quickly and reducing long wait times or if they demand immediate satisfaction with the two-day turnaround.

In general, customers are more likely to understand two-day shipping on your website, so if the issue is clarity or complaints around not knowing when goods will arrive, this might be a better course of action. On the other hand, if they don’t like how their order disappears for days or weeks before they get a notice about it being shipped, order processing can be the right solution.

Shoppers on the e-commerce behemoth Amazon will sometimes gripe that their Prime packages still take a week to arrive. Often this is because the seller’s order processing systems and inventory levels have issues. Because customers are paying for two-day shipping, they can feel cheated. It’s a direct sign for where those companies should focus their next warehouse investments.

Both two-day shipping and one-day order processing can improve your operations. When possible do both. When not, pick the one that your customers will understand and appreciate most based on the feedback you already have available.

_________________________________________________________________

Jake Rheude is the Director of Marketing for Red Stag Fulfillment, an ecommerce fulfillment warehouse that was born out of ecommerce. He has years of experience in ecommerce and business development. In his free time, Jake enjoys reading about business and sharing his own experience with others. 

Giving Customers Choice: The Power of Personalized Delivery in the Age of Amazon

The past five years have paved the way for a new age of retail — where stores have become omnichannel-driven showrooms, checkout has become as simple as a flick of the phone, and teeming competition has driven retailers to create curated experiences for their customers. 

Most fingers point at the e-commerce giants, Amazon in particular, for putting pressure on brick-and-mortar stores to compete on convenience and personalization. Particularly around delivery, Amazon changed the game with two-day shipping for Prime members. As retailers have fought back by leveraging their physical footprints to improve fulfillment times with offerings like click and collect, Amazon upped the ante with one-day delivery. 

There’s no doubt about one thing: increasing consumer demand for convenience is as important as it’s ever been. The focus has been on enabling same- and next-day delivery, but that’s also been putting retailers under enormous strain and compressing already thin margins. 

If you’re solely focused on matching Amazon’s one-day shipping promise, you’re missing the bigger picture. Consumers want more than same-day, next-day, or scheduled deliveries – they want the freedom to choose

There’s no one-size-fits-all solution. Capgemini found that 73% of consumers think receiving a delivery in a convenient time slot is more important than receiving it quickly. It ultimately comes down to a question of time vs. money. Sometimes customers are willing to pay for something to be delivered in a few hours, and sometimes they’d rather save money and receive it in a week.

Instead of focusing on keeping up with Amazon’s expedited shipping, retailers need to focus on building better customer experiences. From a delivery standpoint, this means creating a logistics infrastructure that can reliably deliver orders when buyers want them delivered. This is accomplished by leveraging multiple delivery models and creating a reliable set of options that includes urgent, same-day, next-day, and more. 

For retailers determined to stay competitive, partnering with innovative providers for home delivery and last-mile logistics can add optionality while avoiding the challenges of building out owned asset networks or expanding service with traditional parcel networks.  

The bottom line is this: consumers want what they want, when they want it. The maturation of e-commerce has ushered in an era of personalization at scale and growing customer demand for convenient, flexible shopping experiences. Next-day and same-day delivery sit at the center, but customers are ultimately focused on choosing the right fulfillment option for each and every order.

Otherwise, they’ll leave and find the retailer who can. 

Will Walker is the Enterprise Manager at Roadie, the first on-the-way delivery service that connects people and businesses that have items to send with drivers already heading in the right direction. Roadie works with top retailers, airlines, and grocers for a faster, more efficient, and more scalable solution for same-day and last-mile deliveries nationwide. With over 120,000 drivers, the company has delivered to more than 11,000 cities and towns nationwide — a larger footprint than Amazon Prime.

dangerous goods

Compliance Gaps Revealed in Global Dangerous Goods Confidence Outlook

Dangerous Goods industry players reveal surprising outlooks when it comes down to achieving transport compliance, according to statistics reported in the fourth annual 2019 Global Dangerous Goods Confidence Outlook survey. The results were shared this week during the Dangerous Goods Symposium 2019 event in Chicago and prove that although many are actively a part of the dangerous goods sector, not all are convinced their supply chains are enough to maintain a competitive advantage.

“The growth of ecommerce and the evolution of supply chain has made moving dangerous goods in a safe and compliant manner more important than ever,” said Robert Finn, vice president, Labelmaster. “Unfortunately, several key gaps exist within organizations’ processes and infrastructure that make maintaining a compliant and reliable hazmat supply chain challenging.”

Some of the most telling numbers revealed in the survey point to several factors from infrastructure gaps and leadership risk awareness to technology, budget factors, and communications with supply chain partners. Among the responses, a reported 55 percent confirmed a manual process is still in place for dangerous goods shipping, while a whopping 71 percent expressed the desire for partners matching compliance efforts.

“Companies view DG management and compliance differently, which directly impacts their level of investment and, ultimately, their ability to ensure compliance across their entire organization and adapt to changing operational needs,” Finn said. “As a result, many organizations lack the resources needed to meet their current supply chain needs, and few have the budget and infrastructure necessary to support future requirements.”

Another 42 percent of responses turned attention to the problems in business spurred from the “careless” manner in which some carriers handle dangerous goods while 55 percent struggle with obtaining accurate data from supply chain partners.

Additional results reveal that 67 percent agree their reverse logistics are enough to address current needs with only 20 percent expressing confidence in supporting future dangerous goods operations.

“In order to successfully navigate an increasingly complex and dynamic hazmat supply chain landscape, organizations need to think of compliance beyond simply a mandate and the threat of a fine, and recognize how it can be a competitive advantage that drives revenue, improves supply chain performance, reduces risk and enables better customer service,” Finn concluded.

To read the full report sponsored by Labelmaster, International Air Transport Association (IATA) and Hazardous Cargo Bulletin, please visit: labelmaster.com

SMEs

HOW TO EXPORT TO THE UNITED STATES: 6 SIMPLE STEPS FOR SMEs

According to the Organization for Economic Cooperation and Development, International Trade Statistics 1, participation in exports remains largely led by large enterprises (250 or more employees) in industrialized countries. In developing countries, the story is the same, and only a small percentage of small and medium sized businesses export at all. The World Trade Organization (WTO) reports that SMEs in developing countries make up roughly 45%, on average, of a country’s Gross Domestic Product (WTO, 2016), but SMEs’ exports represent on average 7.6 per cent of total manufacturing sales, compared to 14.1 per cent in the case of large manufacturing firms (WTO, 2016).

If you want your small or medium-sized business to get a piece of the export pie, according to the OECD Trade Committee, there are a number of challenges to be overcome. These include everything from limited access to credit, insufficient use of technology, and lack of export experience, to border controls. The most significant challenge posed, remains learning the ins and outs of getting your product from your country to foreign markets in a cost effective manner. These tips can help your small business become better equipped to enter the exciting world of exports.

The first stage in export planning is to investigate the market and identify your reasons for exporting to customers.
First, determine demand. You need to know where in the U.S. your product is needed. If you sell bathing suits, better export to Florida and California than to Nebraska or Alaska.

Second, you’ll need access to buyers. Start with researching buyers on the Internet, use your local U.S. Chamber of Commerce as a first resource, followed by the Economic Officer in the U.S. Embassy or Consulate in your country. Then, watch for upcoming trade shows where your goods could be featured.

Next, either start selling directly on your own ecommerce platform (secure payment and delivery systems should be integrated), or build a relationship with an international trade agent, whom you trust to help you navigate state and city markets, regulations, and opportunities for you to sell your goods in the U.S. , either to wholesale distributors, or directly to retailers. Improved logistics channels, eCommerce, and free trade agreements make that possible.

Third, find out what, if any, tariffs or exemptions exist for your goods. If there are no trade agreements between your country and the U.S., exempting your goods from tariffs, you’ll need the help of a U.S. licensed Customs Broker. A U.S. Customs Broker will be familiar with the Harmonized Tariff Schedule of the United States (“HTSUS”), and help you classify your goods and determine the tariffs you’ll have to pay to the U.S. Customs and Border Patrol, before your goods can enter the United States.

The National Customs Brokers and Freight Forwarders Association of America can easily provide brokers in the state or region you’re targeting.

Fourth, once you’ve got a better understanding of your profit margin to determine how you’ll sell your goods in the export market, you may wish to consider how to potentially mitigate any risks that can occur while your goods are being shipped, or once your goods arrive at their destination and are with the buyer(s). There are payment risks, damage or destruction of goods risks, documentary risks with customs, and many others.

You may have access to a good trade and customs attorney in the originating country, but he or she may not be thoroughly familiar with U.S. trade compliance requirements. In that case, you may benefit from consulting with a U.S. international trade lawyer to learn how they can help you mitigate risks in exporting by intervening with customs on your behalf, managing disputes through a properly drafted contract, and putting you in touch with relevant agents for information on U.S. trade insurance and compliance with government regulations.

In the U.S., generally, a phone or email consultation with a reputable lawyer would be free. If they want you to pay to talk with them for a few minutes about your problem and find out if they can help you, then hang up and call another lawyer.

Fifth, you need to build a relationship with a reputable freight forwarder or consolidator, who will help you decide: whether to ship by air or by sea; what documents are required for the country you are exporting to; how to pack your products for shipment; label them, and insure them. Normally, the freight forwarder will take care of it all, for a premium, but beware of INCOTERMS (regulations that define the responsibilities of buyers and sellers involved in commercial trade).

You must have at least a basic understanding of them to comprehend the shipping documents your freight forwarder will have you sign, and to protect your rights and limit liability.

Sixth, yes exporting is exciting, but it’s also risky doing business across oceans and continents with buyers you don’t know and may never see. To that end, there are many export resources in the originating country that companies, small and large, can benefit from. Usually Chambers of Commerce are a good starting point. There are associations of American Chambers of Commerce in every region of the world; just check the American Chamber of Commerce online directory for the specific one in your region or country.

Your own government’s resources can usually also offer invaluable information and global networks, including relevant contacts in the U.S. This is particularly helpful if you have a problem that can be fixed by your government seeking the intervention of commercial or economic officers at the local U.S. embassy in your country (keep in mind though that the Embassy is meant to assist U.S. citizens and residents, not foreigners).

Further, your local manufacturers association(s) may have members who have exported in the past, and can share their expertise. Lastly, commercial banks and local Export-Import Banks can guide you on how to leverage export financing, and minimize your financial exposure, when transacting business with foreign buyers.

Against this backdrop, you can reduce the external challenges SMEs face in trading, and better manage the uncertainty inherent in doing business internationally, all while making a healthy profit and expanding to new markets.

Magda Theodate is an international trade attorney and Director of Global Executive Trade Consulting Ltd. She works as a senior consultant for international development agencies in lower and middle income countries, resolving project execution challenges affecting trade, procurement and governance. To learn more, please visit: www.globalexecutivetrade.com

BREAKING BAD TRADE: FENTANYL FROM CHINA

The Real Poison Pill in U.S.-China Trade

Following a historic dinner between President Trump and President Xi last December in Argentina on the margins of the G20 Summit, many of us awaited news on tariffs. We were surprised when, as part of a trade announcement, President Trump hailed a commitment from China to step up its regulatory oversight of fentanyl, the opioid that the Centers for Disease Control says has caused a “third wave” of drug-related overdose deaths in the United States.

It seems the seedy underbelly of e-commerce involves a steady stream of online purchases of deadly variants of the drug fentanyl, made in China and shipped to American doorsteps through the U.S. postal service.

Deadly Parcels from China

Fatal drug overdoses have doubled over the last decade, rising from 36,010 in 2007 to 70,237 in 2017. Synthetic opioids other than methadone – mainly fentanyl – now account for 40 percent of all drug overdose deaths and 60 percent of opioid overdose deaths.

China is the primary source of illicit fentanyl, fentanyl analogues, and fentanyl precursor chemicals in the United States. According to U.S. Customs and Border Protection, almost 80 percent of fentanyl seized in 2017 was interdicted at U.S. Postal Service and express consignment carrier facilities, having been shipped in small quantities from China.

Fentanyl precursors are also shipped from China to Mexico, and to a lesser degree Canada, before being synthesized, often mixed with heroin or cocaine, repackaged, and then trafficked over U.S. land borders in the southwest.

Fentanyl third wave of overdoses

STOP

Last March, the White House stepped up its campaign against opioid abuse, seeking to address factors driving both demand and supply. The Initiative to Stop Opioid Abuse (referred to as STOP) includes education programs, measures to curb over-prescription, expanded access to treatment and recovery, and – a focus on cutting off the flow of illicit drugs from China.

According to Homeland Security, more fentanyl in larger volumes is seized at land crossings, but the fentanyl seized from mail and express consignment carrier facilities is far more potent with purities of over 90 percent versus Mexico-sourced fentanyl that is often diluted to less than 10 percent.

The president’s initiative would require the postal service to provide advance electronic data for 90 percent of all international mail shipments within the next two years, offering data that will help law enforcement identify and seize illegal substances shipped through mail. Private shippers such as UPS and FedEx routinely require such electronic data.

The administration is also scaling up the Department of Justice’s “darknet” enforcement efforts. Fentanyl in its various forms is relatively cheap and easy to buy from China online paying with cryptocurrencies, or even credit cards or money transfers.

fentanyl shipments from China

Over One Million Pills a Day – In One Factory in China

China has grown to become the largest mass producer of generic drugs and pharmaceutical ingredients in the world with over 5,000 pharmaceutical manufacturers. Upwards of 90 percent of the active pharmaceutical ingredients used in U.S. production of finished dosage forms of medical pharmaceuticals is imported from just two countries: India and China.

In addition, China has over 160,000 chemical producers and hundreds of thousands of pharmaceutical and chemicals distributors. The explosion in volume and number of producers has far outstripped China’s FDA (CFDA) from adequately regulating and monitoring them.

Faster Than Can Be Regulated

Unlike opioids derived from the poppy plant, fentanyl is a synthetic painkiller produced in a laboratory. It is 50 times more potent than heroine and 50-100 times more potent than morphine. Inhaling just two milligrams of pure fentanyl can be lethal.

In the United States, most fentanyl products are classified either as Schedule I chemicals, those that have no accepted medical use and high potential for abuse, or as Schedule II chemicals, those with medical use but only available through a non-refillable prescription.

Fentanyl’s molecular structure can be easily modified to create new derivatives, putting regulators constantly behind in evaluating and classifying each new variant one-by-one. From furanyl fentanyl, acetyl fentanyl, acryl fentanyl, to carfentanil — to name just a few — fentanyl has hundreds of analogues that differ slightly from the original, enabling criminal producers to operate in a gray territory while regulators struggle to ban the new substances. Legislation passed in 2017 now allows U.S. FDA to schedule fentanyl analogues immediately on a temporary basis while the agency conducts its investigations.

President Trump has urged President Xi to implement a similar approach. China currently controls around 25 types of fentanyl-related products. President Trump wants China to establish fentanyl as its own class of controlled substances, restricting all fentanyl analogues, including future fentanyl-like substances. Doing so would be a start.

Busting Drug Trade

Such a commitment by China is not, however, likely to put a dent in its fentanyl exports to the United States absent real enforcement. In recent years, CFDA has imposed stricter licensing requirements for pharmaceutical and chemical producers, but diversion, adulteration, and clandestine production remain significant problems.

“Chinese chemical manufacturers export a range of fentanyl products to the United States, including raw fentanyl, fentanyl precursors, fentanyl analogues, fentanyl-laced counterfeit prescription drugs like oxycodone, and pill presses and other machinery necessary for fentanyl production.” — U.S China Economic and Security Review Commission Staff Research Report

CFDA has undergone several reorganizations in the last few years. In the most recent, some of its regulatory responsibilities have devolved to provinces and counties with little accountability. Pre-marketing approvals will be managed separately from post-market inspections and surveillance. With just a little over 2,000 inspectors, authorities have little hope of effectively overseeing legal compliance, let alone spotting even a fraction of criminal activity.

The central government has assisted U.S. drug and law enforcement agencies, sharing information and intelligence that helps U.S. agencies target Chinese nationals trafficking illicit drugs in the United States. To alleviate the free flow of fentanyl from China, the Chinese government should also prosecute transnational criminals operating in China in high-profile cases with severe penalties.

Soybeans, Tech Transfer, and Fentanyl

Trade talks over soybeans and intellectual property protections for American technologies seem an unlikely setting for addressing illicit trade in deadly fentanyl.

There are some in the United States who are frustrated with this administration’s willingness to toss out the traditional trade policy playbook, but this is one case where it can welcomed by everyone.

 

 

Interested to read about fentanyl trade in more detail?

See two key reports produced by U.S.-China Economic and Security Review Commission analyst Sean O’Connor: Fentanyl: China’s Deadly Export to the United States, February 2017 and Fentanyl Flows from China: An Update, November 2018

Andrea Durkin is the Editor-in-Chief of TradeVistas and Founder of Sparkplug, LLC. Ms. Durkin previously served as a U.S. Government trade negotiator and has proudly taught international trade policy and negotiations for the last fourteen years as an Adjunct Professor at Georgetown University’s Master of Science in Foreign Service program.

This article originally appeared on TradeVistas.org. Republished with permission.

UPS & CVS Pharmacy Collaborate for Customer Convenience

CVS customers now have the added convenience of utilizing recently expanded in-store UPS package pick-up and delivery options. UPS confirmed earlier this week that more than 6,000 CVS Pharmacy stores around the country will offer the service which was confirmed to roll out immediately.

“This deal offers additional convenience to consumers in the e-commerce era,” said Kevin Warren, UPS’s chief marketing officer. “Working with CVS Pharmacy demonstrates our commitment to increased customer choice and control with our global UPS My Choice® network.”

The collaboration directly impacts both companies, as it not only brings added traffic to nationwide CVS Pharmacy locations, but also provide the added option of trip consolidation for UPS customers seeking an all-in-one shopping experience.

“We will continue to bring our customers new omni channel services and experiences that redefine convenience and make it easier to meet the demands of their increasingly busy lives,” said Kevin Hourican, Executive Vice President, CVS Health and President, CVS Pharmacy. “Adding UPS Access Point locations at CVS Pharmacy locations offers added convenience in local communities throughout the country for shipping and safely receiving packages.”

By adding more locations for customers seeking convenient shipping options, UPS also adds to the UPS Access Point locations, which currently boasts more than 40,000 and 38,000 drop-boxes globally. Additionally, the collaboration impacts over 60 million UPS My Choice Program members currently customizing shipping needs. These members have direct access to the extended UPS network to for estimated arrival and progress alerts, sign for a package in advance, set vacation holds, and more.

“Until now, the UPS Access Point locations have largely been local businesses and The UPS Store® locations. With this announcement, UPS broadens our services to offer an enviable network of secure choices to busy shoppers,” Warren said. “Consumers now have access to a vast and robust suite of options that include the CVS locations, neighborhood businesses, lockers and The UPS Store centers.”

Asendia to Utilize Tigers Logistics for Oceania Launch

As expansion takes shape for Asendia, Tigers will maintain local logistics for the soon-to-be launched Asendia Oceania subsidiary throughout Australia. The international shipping and distribution company released information this week confirming Tigers is the provider of choice and will utilize its robust warehousing network to support efforts in B2C and omnichannel fulfillment.

“E-commerce fulfillment and international cross-border products continue to be a major focus for Tigers across the Asia-Pacific region, and builds on our cooperation across the USA into Europe, Russia, and Asia,” said Andrew Jillings, Chief Executive Officer, Tigers.

“Partnering with Asendia as it launches Asendia Oceania across Australia and New Zealand is an exciting moment that reflects Tigers’ ongoing global growth, and our support for the logistics and supply chain industry as it evolves through digitization and e-commerce.”

The companies announced the collaborative efforts will ultimately support increasing demand within the B2C cross-border e-commerce market, while focusing on strategies in supply chain optimizations in the near future. The Oceania launch is representative of Asendia’s global expansion plan and how the company will meet demand while offering fresh digital, logistics, and delivery services.

“The launch of Asendia Oceania is an exciting new milestone for Asendia in the Asia-Pacific region,” said Lionel Berthe, Head of Asia-Pacific, Asendia.

“It’s another sign of our commitment to growth in the region, and partnering with a global logistics player with strong capacities and experience in Australia such as Tigers is a key differentiator for cross border end-to-end services.“