If your ecommerce business has ever shipped internationally, you have probably heard of two different shipping terms: “DDP” and “DDU.” When it comes to your company’s profitability and shipping customer experience, it is important for you to understand what these terms mean and how each one will impact your business.
The key difference between these terms has to do with which party – either your business or your customer – will be responsible for paying the taxes and duties on an imported product. These fees are calculated based on the declared value of a specific product being shipped from one country to another, and they have to be paid in order for your business to successfully deliver an item to any of your international customers.
DDU, which stands for “Delivered Duty Unpaid,” is a shipping method that requires your customer to bear the responsibility for any taxes or duties owed on an item. Your customer will be contacted by customs upon delivery, and has to settle these fees for customs to release the shipment.
DDP, or “Delivered Duty Paid” shipping, puts the onus on your business to pay these fees upfront, and factor them into the prices of your products or shipping charges.
While the differences between these terms might seem slight, each method can have a significant impact on your ecommerce business and the experience you offer to your customers.
DDU vs DDP shipping
When it comes to cross-border parcel delivery, the shipping method you choose to use is vital. Here are two factors that you should keep in mind when you are deciding between using DDP or DDU shipping for your ecommerce business:
If your business uses DDU shipping, your customers will have to pay any required taxes and duties for their parcel once the shipment arrives. While this might make things easier for your business on the front-end, it can result in decreased customer satisfaction and extra costs for your company.
One of the biggest reasons why customers abandon products in their carts or refuse to make repeat purchases from an ecommerce business is because of unexpected fees. It is not uncommon for European customers to be completely surprised by additional duties that they have to pay for their products.
DDU shipping adds costs on top of the purchase price already paid, so when a customer learns they have to pay more than they expect, they are likely to be upset. Who can blame them? If you use DDU shipping, your customers will not be able to receive their goods until they pay the taxes and duties they owe, and this might lead to them ditching their purchase at customs or losing trust in your business.
On the other hand, DDP shipping will allow your business to calculate and collect all of the landed costs upfront, so that your customers will know exactly what they have to pay at checkout. This eliminates the frustration that leads to poor customer satisfaction.
If you want to make sure your customers avoid unpleasant surprise fees from customs, you should consider using DDP shipping.
When you are deciding whether to use DDP or DDU shipping for your international shipping, it is important for you to factor in the cost of each method and focus on your bottom line.
Sending shipments via DDU shipping appears cheaper because it does not include processing fees and other costs that are added on top of the tax and duty, but it can actually be rather expensive.
Customs generally collects taxes and duties by forwarding packages to independent brokers for warehousing and processing. This can become costly, as these independent brokers can charge different fee structures for various aspects of the process. There may be brokerage fees, late payment fees, and storage fees to contend with, and it is nearly impossible for a vendor to be able to accurately predict the final costs a customer will be faced with before they can secure delivery.
With DDU shipping, all of these additional costs are charged to the customer on top of the purchase price they already paid. When these fees are higher than expected, many customers will choose to abandon the product in customs, resulting in significant return costs for your business.
Although DDP shipments appear to be more expensive up front, DDP accounts for all of the additional fees that a customs broker will charge to process customs payments on behalf of the shipper. The difference here is that those fees are fixed, predictable, and are typically anywhere from three to four times cheaper than DDU brokerage fees.
Upfront collection of these additional fees from your customer ensures that your shipment will clear customs with no delays, and without your customer having to pay more than they expected.
In order to save money, simplify the checkout process, and make sure your customers are pleased with your delivery service, you should use DDP shipping for your cross-border ecommerce.
Choosing Zenda for international shipping
If your ecommerce business sells products from the United States to Europe, Zenda can handle all of your shipping needs. Zenda, a sister company of British Airways, is a Delivered Duty Paid shipping solution that will provide your business with fast and reliable shipping to 25 European countries.
When you use Zenda, you will have access to a taxes and duties calculator that will give you accurate, real-time landed costs, enabling you to provide your customers with transparent total costs at checkout. With Zenda, you no longer have to worry about customers becoming upset or abandoning their goods due to unexpected fees upon delivery.
In addition to offering your business the benefits of DDP shipping, Zenda provides 4 to 8-day international shipping, door-to-door tracking for shipments, and affordable shipping options. Contact us to learn more about how Zenda can help your business ship products to Europe.