How localized and cross-border ecommerce fulfillment can help businesses expand into new markets

During times of economic uncertainty or recession, it is important to strategically evaluate your supply chain and see where efficiencies can be implemented. Direct-to-consumer brands can use a strategic combination of localization and south-bound shipping using the Section 321 exemption to create a North American supply chain that creates efficiencies and saves money, without sacrificing the customer experience.

What is localization?

Localization in the context of supply chain fulfillment is the process of placing inventory in warehouses in the same country as your consumers in order to deliver product to them more conveniently, without the hassle of cross-border shipping. For example, U.S. e-commerce companies can place inventory in Canadian warehouses to expedite the fulfillment and delivery of Canadian customer orders. This method reduces transportation costs, provides faster order fulfillment for Canadian customers, and improves the customer experience through faster delivery and no hidden cross-border duty or tariff fees.

An example of this is Metro Supply Chain’s recent partnership with U.S. brand, Dr. Squatch, a leading men’s natural soap and personal care brand. Metro Supply Chain partnered with Dr. Squatch to successfully expand their e-commerce and wholesale business into the Canadian market through localization. With Metro Supply Chain’s effective end-to-end supply chain strategy including localized warehousing, fulfillment, and transportation operations, Metro Supply Chain was able to support Dr. Squatch’s accelerated growth, resulting in reduced delivery times and improved shipping costs for Canadian consumers. 

Cross-Border fulfillment vs. localized fulfillment

Businesses usually follow one of two distribution models when serving international consumers.

1. Cross-border fulfillment

Cross-border fulfillment uses the traditional method of packing and shipping the order from your country to the customer internationally.

Pros:

• Better for small e-commerce companies just starting and lacking capital for expansion
• One central distribution centre for all customers
• Low cost and speed-to-market

Cons:

• Some buyers are still uncomfortable with cross-border purchases, even from neighbouring countries, over a fear of hidden shipping fees or exchange rates
• Taxes, customs, and international shipping rates are often passed on to customers who are unwilling to foot the bill, leading to shopping cart abandonment
• Longer delivery times

2. Localization

Localization uses warehousing in the same country as your customers.

Pros:

• Decreased shipping costs for the consumer
• Quicker order fulfillment for the consumer
• Decreased carbon emissions from transportation due to fulfilling orders locally

Cons:

• It is a significant investment in time and money to move inventory and distribution to another country
• You may need to apply for licenses to conduct business in a new country, adhere to additional product regulations, etc.

If you’re looking to expand into new markets, or create supply chain efficiencies, now is the time to explore localized fulfillment opportunities with an experienced Canadian 3PL like Metro Supply Chain. For more information, request a consultation with our localization and southbound fulfillment experts.