Global e-commerce is enabling direct-to-consumer (DTC) brands to sell their products in hundreds of countries at a time. Shipping those goods, though, can be problematic with tariffs and duties, various tax rates and currency conversion issues.
Shopify’s Oberlo brand estimates that 2.14 billion people will shop online in 2021 and Statista said that the average order value for an international sale is $147, a 17% premium over the average domestic sale for a U.S.-based seller. It also found that retailers offering international shipping grow 60% faster than those that don’t.
The statistics for selling globally are compelling, but the challenges are daunting.
Global e-commerce shipping and logistics company FlavorCloud was founded on the premise of helping local sellers achieve global success. The 3-year-old company on Tuesday announced a $6.3 million Series A investment round led by Mucker Capital. Mucker partner Omar Hamoui will join the FlavorCloud board.
Additional funding from the deal came from Rise of the Rest and Willow Group. Rise of the Rest is also an investor in FreightWaves, Modern Shipper’s parent company.
“We live in a global marketplace. However, it is consistently hard for DTC e-commerce brands to offer their products to an international audience,” said FlavorCloud founder and CEO Rathna Sharad. “FlavorCloud makes it simple to ship to anyone anywhere in the world, with a seamless consumer experience, which has an incredible impact on enabling these DTC brands to expand globally. We’ve created a platform that is truly a game-changer.”
The DTC e-commerce marketplace is estimated to be $4.5 trillion, but many businesses are unable to tap that global market due to the complexities of moving goods across borders – especially smaller parcels that may represent one-off sales.
“FlavorCloud has tapped into an underserved and massive cross-border enablement market, one that has grown explosively over the past year as the pandemic has accelerated nearly every aspect of e-commerce. They excel at simplifying a complicated yet critical process of international shipping and logistics for DTC brands, end to end, including reverse logistics and supply chain optimization,” said Hamoui. “We believe FlavorCloud is well positioned for rapid growth as the global e-commerce and trade landscape continues to evolve quickly around the world.”
“We have grown up in cross border logistics and we have a very different viewpoint because our mission is to make every brand a global brand.”
– Rathna Sharad, FlavorCloud co-founder and CEO
FlavorCloud’s platform allows customers to easily pay customs and duties up front, as well as streamlines the process of moving goods through global shipping networks. The company works with over 200 carriers and has deep integrations with top providers including FedEx (NYSE: FDX) and UPS (NYSE: UPS).
“International became the number one growth driver for … brands, so that was an accelerant for our cross-border [growth],” Sharad told Modern Shipper, adding that FlavorCloud saw four times revenue growth in 2020 over 2019, and three times the customer growth.
Sharad said that globally, there is no dominant provider. FedEx, UPS, DHL, Pitney Bowes and a number of other providers offer services to handle the tariff and customer complexities, but few are integrated directly into the brands like FlavorCloud. That connection allows FlavorCloud to provide the end customer with the necessary information to make an informed shipping decision.
“We have grown up in cross-border logistics and we have a very different viewpoint because our mission is to make every brand a global brand,” Sharad said.
Sharad is an engineer who worked with trade customs organizations, designed cross-border optimization programs and built Microsoft’s ad platform that became Bing Ads. The company describes its platform as “anywhere to anywhere” technology and handles everything from the customs paperwork to the tariff collection to regulatory compliance to labeling, documents and shipment tracking. It also offers guaranteed landed costs so companies and customers know exactly what they will pay for shipments. Returns management, automated pickup and warehouse services are also part of the platform.
“We’re finding for brands in different parts of the world, thanks to Amazon (NASDAQ: AMZN), there is the same shipping expectation [regardless of where they are in world],” Sharad said.
FlavorCloud utilizes artificial intelligence (AI) to ensure its landed cost estimates are accurate – as much as 99% of the time, the company said. Sharad said algorithms also help generate accurate shipping costs so customers can see what the difference is in three-day vs. 10-day shipping for instance.
Sharad said companies can be stuck with expensive customs bills when products get tied up at borders. Customers will cancel the order – usually due to a lack of transparency on the delay – and the company foots the bill. To illustrate, she noted that 40% of orders not placed are due to shipping costs. With more accurate insight into these costs, companies can turn those drop-offs into sales.
“Our algorithms are integrated into the ecommerce experience behind the scenes … so, for instance, the customer would see $8 shipping options in 10 days or [other options such as $15 three-day shipping],” Sharad said.
The other key differentiator for FlavorCloud is its extensive knowledge of the commodities. Understanding what makes up the product – such as a cotton shirt versus a linen shirt – can change how that item is classified when moving through customs. A more accurate product description leads to more accurate customs charges, allowing brands to more accurately reflect the correct pricing to the customer. Sharad said FlavorCloud works to ensure goods are properly classified, leading to reduced and more accurate customs and duties costs.
“FlavorCloud also understands commodity and the different values of that commodity,” she said. “We fully understand the landed costs end to end. It is through our customs experience … that we can offer better margins to consumers.”
FlavorCloud is able to deliver to more than 200 countries and has relationships with parcel air networks as well as first-mile and last-mile providers. Sharad said 75% of the new funding will be used to build employee scale as the company builds out its customer teams. The remainder will be used to continue innovating on its AI and machine learning technologies to continue improving the overall experience.