Having consulted for some of the largest physical and digital goods merchants in the US as well as cross-border providers like BorderFree, our team recognized a gap between the demand for Western goods and the means to easily purchase them. The issue for global consumers is typically the expense of the product and shipping, the hassle and time to wait for the shipment, and the often hidden fees in foreign transaction processing. Consumers shopping at a localized US retailer will often pay a premium for the goods, extra money in shipping, and an additional 5% in Fx conversion.
Let’s look at a typical transaction from a major retailer of an item costing $100 USD. This item will typically be subject to 9% sales tx ($109), will cost $30 to ship ($139), and the consumer will pay 5% in FX fees ($146). This is nearly a 50% markup, and consumers are paying this because that item is not available in their country OR the markup is more than 50%, and they feel they are getting a better deal.
This same transaction, if purchased directly through a US website and shipped through a repackager would not be subjected to sales tax as most freight forwarders are strategically located in Oregon, a state with no sales tax. The consumer will often qualify for free domestic shipping (a la Amazon Prime) or another promotional offer, and they would simply need to pay the freight forwarding fee which will likely run approximately $20. Smart global consumers, however, and becoming savvier by utilizing the freight forwarder to repackage their goods into one box and save significantly on shipping by combining orders from different retailers. Take the example above and let’s say that consumer buys 5 items. Using a repackager that consumer would likely pay $40 total to ship those 5 items bringing their total to $540. Using a “localized experience” that transaction would be $730, a savings of 35%. Couple this with significant discounts and sales only available in the US, consumers can save well over 50% on the same items.
There are, however, some limitations of using a freight forwarding service such as language, network location, and payment. The first two elements can be overcome using technology like a web browser translation plug-in and a VPN service; the payment instrument is a bit more difficult. This is where Tern focuses all our their energy, to enable those tech and eCommerce savvy consumers around the world access to every US retailer and to fulfill the shipment through one of our certified freight forwarding partners. Through both our consumer facing card US Unlocked as well as through our white label partners, Tern is helping to drive what GRIN Labs (Global Retail Insights Network) calls Suitcase Retail.