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A few years ago, as violence in U.S.-occupied Iraq was cresting, John Bartholdi and some of his students decided to send a few boxes of Georgia Tech hats, t-shirts, and coffee mugs into the war zone. They chose as their destination Tikrit, the birthplace of Saddam Hussein and the heart of the Sunni insurgency. At 8:30 a.m., they called FedEx, UPS, and DHL and asked to have their packages picked up at noon in Atlanta.
Four days later, the DHL package had arrived, followed less than three hours later by the FedEx delivery. The UPS package was turned back at Dubai, Bartholdi reported, and was returned with the explanation that "this service is not available."
This adventure in shipping and handling was part of a contest run for several years by Bartholdi, a professor of supply chain logistics, called the Great Package Race. The idea is to test the limits of the byzantine global system that has emerged over the past century to move things from one part of the world to another.
The same year the race sent its unwitting contestants to Tikrit, Bartholdi and his students also sent packages to the capital of Zimbabwe during the height of political unrest there and to Yangon, Myanmar (formerly known as Rangoon, Burma), when that country was still in the depths of its isolation from the rest of the world. The other destinations were Apia, the only city on the Samoan island of Upulu, which has no street addresses, and Florianopolis, an island off the coast of southern Brazil near Uruguay.
For every destination, at least one carrier was able to deliver the package.
"They say they can send anywhere," Bartholdi says. "So we call them on it."
The Great Package Race might sound like a nerdy college prank. But it makes a serious point about the future of global consumerism. More than ever, the things shoppers buy come delivered in boxes rather than being lugged home from stores. And thanks to the internet, finding and buying the stuff in those boxes has become as simple as a click of the mouse or a tap of the screen. Bartholdi's contest reminds us that as friction-free as the internet makes global commerce seem, the physical world still intervenes to thwart the instant gratification expectation that digital culture cultivates.
Political borders, cultural differences, and physical distance all stand in the way of the pent-up consumer demand fueled by international online window shopping. Yet massive engines of shopper satiation such as Amazon Prime have only stoked a righteous feeling that merchandise should flow as easily around the world as information. And companies are lining up to help build a seamless global shopping network that enables stuff to zip across international borders as smoothly as data packets hurtling down the information superhighway.
Michael DeSimone is the CEO of Borderfree, an e-commerce outsourcing company that offers a suite of services to U.S. brands that want to sell online outside the country. Borderfree's digital tools will integrate with existing websites to detect the location of an online shopper and convert prices to the appropriate currency, only show items legal to buy in that country and display nation-specific payment options. On the physical side, Borderfree manages issues like international shipping and customs through third-party logistics providers in the U.S., which lets sellers outsource the complexity of selling abroad by sending packages to a domestic address.
"If you have a website and you've got something for sale, everyone in the world can see it," he says. "E-commerce is global by default." But the offline world erects obstacles to the worldwide consumer utopia the internet promises. Political borders, cultural differences and physical distance all stand in the way of the pent-up consumer demand fueled by international online window shopping.
"The companies that focus on taking down those barriers are unleashing something that's already there," DeSimone says.
As consumer demand fosters the incentive for companies like Borderfree to pull down the walls standing between shoppers and the stuff they want, no matter where in the world, sellers are on the other side pushing. Sites such as eBay have allowed U.S. small businesses to set up globally visible digital storefronts since late 20th century. But in many emerging markets, online sellers are just getting started. Worldwide demand could soon get a chance to connect with a much greater worldwide supply.
In India, for example, the $600 billion retail economy still rests overwhelmingly on small shops, says Kunal Bahl, co-founder of Snapdeal, a fast-growing online marketplace based in New Delhi. Because big chain stores such as Walmart aren't widespread in India, the country lacks well-organized centers of gravity to anchor retail supply and distribution. In such an environment, a platform that gets all those small businesses online has the potential to become a powerful engine for what Bahl calls the "democratization of commerce." The inventory of each of those small businesses becomes its own kind of aggregated mega-store, but a store in which everyone shoulders the cost and risk of carrying that inventory together.
"The only way to integrate supply is through a long-tail model where we don't have to own everything we have to sell," Bahl says. On the ground, he says Snapdeal's "supply locally, sell nationally" model has worked out to about half of the $400 million in sales on Snapdeal originating in the country's ten largest cities. The other half is coming from the thousands of other smaller cities and towns across this country of 1.2 billion — places where many small-scale merchants are just beginning to enter the global online marketplace. As they do, they become a potent new online source of merchandise not just for India, but for the whole world.
Snapdeal operates on a business-to-consumer model that has proven wildly successful for other e-commerce companies outside the U.S., such as Tmall in China and Rakuten in Japan (and now the U.S.). Bahl says limiting the pool of sellers to established brands and retailers helps build trust among shoppers more quickly than going straight to the full peer-to-peer model popularized by eBay in the U.S. He says trust builds momentum that generates a network effect for platforms like his.
'You should never show somebody from Japan a riding lawnmower. Nobody in Japan has a lawn besides the Emperor.' At the same time, eBay (reportedly a Snapdeal investor) enjoys immense popularity outside the U.S. More than half the company's revenue last year was generated beyond U.S. borders. In emerging markets, eBay is one of the most recognized online shopping brands, largely thanks to its aggressive push into mobile buying and selling. Wendy Jones, eBay's vice president of geo-expansion and cross-border trade, says the company's strategy for entering new countries is to lead with imports, especially in places that can't take fully stocked store shelves for granted. With its massive inventory, opening itself to markets with a less consistent supply of consumer goods gives eBay a powerful edge for gaining customers.
"Cross-border trade is one of the key ways we activate new users as a company," Jones says, adding that one out of every three new users joins eBay as the result of a transaction that happens across international boundaries.
Since much of that inventory comes from U.S. sellers, eBay is also working to make selling overseas as simple as selling to a customer in another state. The company's vice president of shipping and logistics, Carl Gish, says eBay's so-called global shipping platform is making it possible to show international customers accurate rates and allow them to track deliveries just as a U.S. customer would. The platform is also designed to let U.S. sellers offload the complex work of determining duties and restrictions onto eBay. Ultimately, he says, eBay will support seamless shipping to more than 100 countries. But with more than 400 million product listings, figuring out what can go where for how much isn't simple. "You're talking about a massive data challenge," Gish says.
But the differences among nations hardly end once a package gets across the border. For one, the ways people pay differ widely from country to country. Around the world, paying on delivery is much more common than in the U.S., as is paying in cash. In Germany, one of eBay's top three markets, bank drafts are common, while personal checks are not. In India, Snapdeal offers a service that holds a payment in escrow for seven days while the buyer decides whether to keep a purchase or send it back for a full refund.
Logistics also vary widely. Many countries lack the kind of dense delivery infrastructure UPS, FedEx, and the Postal Service offer in the U.S. Snapdeal has set up a parallel marketplace in which couriers bid for delivery volume, and Snapdeal sellers are required to use only couriers who participate. Without such rules, Kunal Bahl says, "many times in India they will just use a guy on a bicycle." In Russia, Wendy Jones says eBay is averaging one purchase every three seconds, which has lead the company into discussions with the country's leading logistics providers to figure out how to handle the volume.
Perhaps trickier than either payments or logistics are the complexities of culture. Sellers in India, for example, must contend with a wide-ranging variety of religious and regional subcultures that can lead to a spike in demand for gold during one month and appliances in another. To bridge such gaps, companies like Borderfree are working to automate the inventory offered online in different countries in ways that make cultural sense.
"You should never show somebody from Japan a riding lawnmower," DeSimone says. "Nobody in Japan has a lawn besides the Emperor."
Despite the strides made by businesses reaching toward a simplified global marketplace, a more fundamental obstacle remains. As John Bartholdi's global shipping contest shows, the international infrastructure of global commerce can deliver a package just about anywhere in a matter of days. What stands in the way of that package arriving isn't usually logistics. It's politics. And politics is never simple. Take the recent "internet sales tax" passed by the U.S. Senate, which requires online sellers to collect sales tax on behalf of any state where they sell. Jim Fredlund, who heads the tax division at longtime e-commerce outsourcing firm Digital River, says different countries require the same of sellers from abroad, creating a thicket of compliance and enforcement issues.
"How to keep it simple? There is no way," Fredlund says.
One company that appears to be preparing for the political dimension of doing business outside the U.S. is Square, Twitter inventor Jack Dorsey's mobile payments startup. Square recently launched it service in Japan after testing international waters in Canada. It's not stopping there. Square just hired a former Obama administration official who briefly served as the country's top trade negotiator. The company said it was tapping Demetrios Marantis "to lead the company’s international government, regulatory, and policy work." In other words, Square wants to get its card readers and apps into the hands of merchants around the world and knows it needs political muscle to make that happen.
Yet of all the constituencies that carry weight in the 21st century, few can match the power of the global consumer. The collective might of people prepared to spend—or not to spend—can transform nations and topple the most powerful corporations. Against the desire to get what you want, when you want, from wherever in the world you want, how long can artificial boundaries separating shoppers from their stuff truly stand?
"Consumers have aspirations. Cross-border trade provides access to those aspirations," Snapdeal's Bahl says. "This tidal wave is so large that by the time governments figure it out, it's going to be too big to quash."
