Online shopping options are endless today. The internet allows us to buy goods from all over the world. Whether you want to buy a phone from China or a pair of sneakers from the U.K., it’s great to have options.
Shopping online from other countries comes with three annoying caveats: Long delivery times, unreliable international shipping providers, and not knowing what import fees you’ll need to pay until the package has already arrived in your country. That’s enough to keep many buyers from hitting the buy button, leading to shopping cart abandonment.
DDP is a smart way to increase online sales conversions
Delivered duty paid shipping (DDP) is a solution that many e-commerce retailers offer to buyers so that they won’t have to deal with these hassles. What is DDP, you ask? Simple. DDP means that the seller assumes responsibility for the product, delivery, and VAT fees, so the buyer doesn’t have to worry about it.
If the buyer is promised reliable shipping and knows they won’t have to worry about surprise fees upon delivery, they are much more like to complete a sale. For this reason, it’s becoming more common for sellers to offer DDP these days.
Of course, the seller ends up paying more since they must cover taxes, shipping fees, etc. And since the seller is responsible for the package until it arrives safely to the customer, a reliable international shipping provider and carrier tracking information (which both cost more) are a must.
Compared to DDU shipping, DDP offers a better customer experience overall. That’s always good for business.
Is DDP worth it for your online business?
To make up for the lost profit incurred due to these additional business expenses, sellers that offer DDP find ways to make up for it. Typically, sellers increase the product price to cover the extra cost. Buyers are still happy since they know what they are paying upfront with no surprises later. Most buyers are willing to pay a higher single up-front fee to have that peace of mind.
Keep in mind that when you offer DDP shipping, you will pay for:
1. Shipping fees
International shipping by air, sea, and freight can be expensive. It is essential to calculate how much it will cost to ship your products abroad and work the shipping cost into the product price if possible. Check out the international shipping rates here:
2. Replacing damaged or lost shipments
Shipping products properly is a must to avoid damaged shipments. With DDP, any damage incurred is covered by the seller. That means you’ll also have to pay for a replacement item if the shipment is lost or damaged and pay those expensive international shipping costs all over again. Not to mention, customers aren’t thrilled when shipping snafus happen since they don’t like to wait.
3. VAT fees & customs clearance
Who pays VAT fees? The seller is responsible for paying VAT fees when they offer DDP to buyers. Meanwhile, DDU sellers do not pay VAT fees; instead, the buyer pays VAT.
The VAT can be costly to the seller, sometimes around 20 percent of the purchase price, in addition to duties. Then there are sometimes customs clearance fees. Again, customers appreciate not having to worry about VAT fees and customs, so it is still worth it to cover VAT and duties for the buyer as long as you can make up for the additional expense by increasing the product price.
Shipping items with the correct customs forms is also essential for a smooth transaction, ensuring the shipment won’t incur delays or additional fees. This can be confusing for online sellers since each country has its own rules. A 3PL pick and pack service can handle prepping international shipments for customs, so you don’t have to.
4. Shipping insurance
Insurance is not mandatory, but many sellers choose to buy international shipping insurance because the chance of lost or damaged items increases when shipping worldwide. For a small fee, the seller can recoup losses by filing an insurance claim in the event of loss or damage in transit.
Buyers love when sellers offer DDP
DDP makes the buying process easier for international customers, so they are more likely to do business with you now and in the future. Since the seller assumes more risk and expense with DDP, it is in their best interest to make sure the buyer receives the goods swiftly and in good condition, without any customs hold-ups or surprise customs fees.
Some DDP advice…
Stick with reliable carriers, get tracking and add shipping insurance, if you can cover the costs. Protective packaging can help keep the goods from getting damaged in shipment, especially given the longer shipping time and various checkpoints international shipments must go through.
If you are confused about customs forms, international shipping, and how to protect your products from getting damaged in transit, there is no need to worry. A third-party order fulfillment company like Simpl Fulfillment can take care of all that for you with hands-off, professional pick, and pack services.