American consumers might not realize how fortunate they are: Online stores offer a cornucopia of products at low prices, often with free shipping and two-day delivery.
That abundance is increasingly desired by foreign consumers, many of whom have an Internet connection. And American Worldwide Agencies has stepped in to help some of those overseas shoppers participate in the American consumer culture.
The Long Beach freight forwarder, which provides supply chain management for small and medium-size businesses, has teamed with Australian e-commerce company Qannu to reduce the barriers for Australian consumers interested in shopping online at U.S. retailers while cutting international shipping costs.
Australian consumers can shop online at any American retailer’s website and have the goods sent to Qannu’s Redondo Beach warehouse. Qannu (pronounced like canoe) bundles a consumer’s orders into a single parcel and hands shipping duties off to AWA, which books space on flights headed to Australia, handles customs and contracts with local delivery services to take packages the last mile. Consumers pay shipping fees to Qannu and can monitor the process on its website – it usually takes five to eight days for packages to reach consumers from Qannu’s warehouse.
By shopping this way, Australian consumers are able to buy from American retailers that don’t ship overseas, such as Amazon.com Inc., while at the same time saving shipping costs by combining orders into larger packages.
“Saving customers 50 to 80 percent on shipping costs makes all the difference when it comes to the affordability of buying from American retailers,” said Bridget Speed, Qannu’s marketing director.
She gave an example: A customer purchased a necklace from Anthropologie Inc., a sweater from Gap Inc. and a pair of Reebok shoes from Eastbay Inc., worth $172 in total. The international shipping services provided individually by the retailers would amount to $108. Qannu’s rate would be $52, or 52 percent less.
Qannu, established more than a year ago in Melbourne, has grown 400 percent over the last 12 months, processing about 500 packages a week for Australians shopping on American websites, Speed said.
That growth has in turn fed AWA’s expansion. The company handles all of Qannu’s shipping, said Andrew Scott, AWA’s chief executive and a minority shareholder in Qannu.
AWA, which was formed to do traditional business-to-business logistics, saw an opportunity to expand by shipping to consumers, according to Scott.
A year ago, business-to-consumer shipping accounted for just 10 percent of AWA’s revenue, said Peter Lamy, AWA’s president. This year it has risen to 25 percent and he believes it will continue to grow.
In response, the company, which also operates a warehouse in Redondo Beach, has been investing in scanners and other equipment to enhance efficiency. It plans to hire six additional people to process packages.
Founded in 2012, AWA employs 35, most of them logistics professionals. As a freight forwarder, it doesn’t take possession of goods or physically move them, but plans and coordinates with warehousing companies, trucking companies and shippers.
Its client businesses largely focus on exporting goods to the South Pacific – Australia, New Zealand and the Pacific Islands. Along with Scott, two other partners in the business are from Australia and have worked in the logistics industry there or New Zealand.
Scott declined to disclose the company’s annual revenues, but said it has more than 3,000 clients and works with about 150 partners and vendors.
Lamy said AWA has been talking to other e-commerce processors in Australia, London and Amsterdam in an effort to ink deals similar to the one it has with Qannu. He expects some new contracts to be signed in October.
“We are seeing many companies around the world play a kind of consumer goods arbitrage, in which they are leveraging their own strong currencies against the relatively weak dollar to provide products to local customers at very competitive prices,” said consumer trends expert Daniel Levine, director of New York trend and marketing consultancy Avant-Guide Institute.
Small markets
Another cause of this kind of arbitrage, he added, is that some markets are too small for producers and distributors to enter.
Australia seems to be an ideal market for these middlemen – the Australian dollar has been strong against the U.S. dollar in the last few years, but its population of 22.7 million makes it too small for many American retailers to pursue.
AWA and Qannu are not the only two companies pursuing this growth opportunity. Shipito of Torrance started a similar business in 2008. It also provides overseas consumers a U.S. address for receiving packages from American retailers, repackages the goods and sends them overseas.
The difference: Shipito’s scale is global, and it works with a variety of shipping companies, many of them big companies like DHL Express (USA) Inc. and FedEx Corp.
John Vanhara, Shipito’s chief executive, said it relies on big companies to reach most markets and will only consider smaller freight forwarders if their approaches are really competitive.
Vanhara said he has seen competition increase since 2010 as new players have entered the market and domestic retailers have sought to make inroads in overseas markets through e-commerce.
While it’s hard to measure the market size of e-commerce, Cathy Roberson, senior analyst with Transport Intelligence Ltd., a London research firm, said the U.S. freight-forwarding market was $35.1 billion in 2012, 4.2 percent higher than the previous year.
“E-commerce has skyrocketed around the world in recent years,” she said. “More and more freight forwarders and express services are getting into parcel delivery.”
Though she said most e-commerce is still domestic, she was not surprised that there are companies like AWA, grabbing a chance to grow by working with e-commerce companies making international sales.
“There is a big trend toward B2C right now,” she said.
