Last updated on April 19th, 2022 -
Why it’s better to ship DDP
International shipping with duties and taxes prepaid
Cross-border ecommerce is a highly competitive industry. There are many factors to consider when molding your online business into a well-respected and trusted store, and customer experience is one of the most critical. Some things customers often expect when they visit your site include intuitive navigation, seamless checkout, and quick delivery, no matter where they are located. What you may not realize, though, is that the online retailer’s responsibility for a smooth international customer experience doesn’t end when the consumer checks out on your website. Whether or not you’re responsible for any potential shipping errors or delays, the consumer often naturally associates a negative shipping experience with the online retailer. For international shipments, it can seem difficult to facilitate a seamless shipping process, but it is important for the consumer to be able to trust your business to make this happen.
While you may not have control of what happens to the consumer’s order after you ship it off, there are steps that you can take to make the process as smooth as possible. The most beneficial step is to ship with the prepayment of duties, taxes, and fees (commonly referred to as DDP – Delivery Duties Paid) as often as possible.
What is DDP shipping?
DDP is a carrier billing option and Incoterm. In terms of billing and shipping, DDP means that when you ship a package the duties, taxes, and any applicable clearance fees for the importation of the order into their country are billed back to the shipper. Why would you want to do this? Some online retailers want to cover this for their customers, but for most this would be far too costly. Therefore, the best solution is for the customer to pay for duties, taxes, and fees when they make their purchase; then the online retailer ships DDP. For this to happen, the online retailer must calculate and collect these fees from the consumer at the time of checkout. Otherwise, the consumer will be presented [and likely surprised] with these charges upon delivery by the carrier in the country of importation.
You may be asking yourself, “If they’re being presented with these charges no matter what, why does it matter at what point they pay?” When it comes to customer experience and reviews, shipping DDP makes all the difference.
Why ship DDP?
Consumer convenience and trust
When I first learned about DDP and DDU, I automatically assumed DDU was better because there are no extra charges seemingly associated with the online retailer’s website, and on the surface, it seems like less work for the merchant. However, I wasn’t looking at the bigger picture. To explain why DDP is the most beneficial shipping method, let’s look at a scenario:
You’re an online retailer in the US that sells designer shoes. Someone from the UK stumbles upon your website and decides to buy a pair of $200 stilettos. You charge the consumer the price of the shoes, the US taxes, and shipping at checkout (you know, the usual). The consumer then thinks they’ve paid and can just sit back, relax, and wait for their stilettos to wear to their birthday soiree next month.
*Fast forward 2 weeks*
Their package has arrived in the UK and upon delivery of the stilettos, the carrier bills the consumer for all of the clearance fees (VAT, duties, etc.), and they are completely caught off guard. The cost of the clearance fees cost almost as much, or even more than the shoes themselves. Now, you as the online retailer may face the following consequences:
- The consumer pays the fees but has a negative opinion about your business because they’re associating the whole experience with your company or felt that they should’ve been warned about the additional fees.
- The consumer decides it’s not worth it and wants to return the stilettos at your expense. The return shipping is typically more expensive, and you’re losing money by refunding them for the sale.
- The consumer, again, decides it’s not worth it and simply won’t accept the package. Now, you have to decide if you want to pay for the return shipping fees or leave the package abandoned. (A waste of stilettos, what a crime!)
In some cases, DDU packages are held up at customs and won’t be released until the fees are paid, which would negatively impact the customer experience even more than the current example.
In all of the above scenarios, the consumer may not return to your business. Approximately 59% of consumers will never do business with a company again after a negative experience. Don’t get me wrong; some consumers are fully aware of this process and it won’t be a problem. The reality, though, is that most will be unfamiliar.
From these examples, it becomes clear that had the online retailer billed and collected these clearance fees from the consumer upon checkout, there would not have been any surprises, returns, or abandonments.
Better cash flow for merchants
The previous section highlights how DDP is more convenient for consumers, but the same scenario and its consequences also show how the cash flow process remains unhindered by shipping DDP. Let’s break it down:
- Abandoned packages can result in a loss if…
- You decide to return the package to your location.
- The shipping costs more than the returned item.
- Returned packages mean that you’ve lost the money from those sales, and often the consumer will want you to pay for the shipping since they felt like they were misinformed.
- The negative customer experience as a result of not shipping DDP can result in losing future business with that consumer and anyone they may share their negative opinions of your ecommerce store with.
Bonus: The merchant has an increased cash flow when shipping DDP because those pre-paid funds sit in their account until they are billed by the carrier.
To sum it all up, DDP improves your overall customer experience, which improves your cash flow; the opposite applies to shipping DDU. Keep in mind that being able to ship DDP is based upon the carrier’s available billing options of bill sender and bill third party account number in the country of importation.
How can I set my business up to ship DDP?
Now that you know the benefits of DDP shipping, you’re probably wondering how you can set up your online business to be DDP-friendly. Don’t worry; Zonos can simplify this process for you!
We have plugins, APIs, and tools such as Zonos International Checkout that allow you to show and collect total landed cost at checkout and ship DDP, optimize your website for international shoppers, and stay globally compliant.