Derek Lossing’s Post

Last Summer, Cirrus Global Advisors, Inc started modeling & forecasting the various scenarios on how final mile, air cargo, and the overall parcel industry could be impacted by de minimis & other regulatory changes. Fast forward nine months, and over 20 versions of our models later, and we have a very different view of the world. But, One of the biggest impacts to our early on modeling that we shared with clients was around, what we called, customer friction. This was evident from our meetings with various groups in Washington DC. Of course, increased customs costs, delays at the borders, new duties, new tariffs, etc. all play a role. Most clients brushed aside or even ignored "customer friction" bucket. Investor clients wanted to know: If De Minimis goes away and tariff/duty rates of 35% hit, for instance, how many less parcels will be delivered. This is fairly simple modeling between increased price and decreased demand that we are confident. Stack this on customer friction, and the modeling accelerates declines in cross-border volumes. But the more accurate answer, to me, has always been around customer friction. Being both an online consumer and leader from Amazon, the power of one-click checkout and avoidance of shopping cart abandonment, is powerful. When you shop on Temu, for instance, it was very easy to checkout. As easy as any domestic website. Low friction today. However, since April 5th, we have seen the suspension of informal entry for $800-$2,500 shipments. These informal entries required more paperwork (commercial invoice, HTS Codes, Duty Payment), but not much impact to the consumer. Retailers needed to do more work, but the consumer didn't. However, as this informal process isn't available going forward, and presumably may not be available for sub $800 from China, how comfortable will US online consumers be to provide more, personal sensitive information to shop on a Chinese website, to facilitate a customs declaration for a B2C shipment? Our modeling, which at current tariff rates and de minimis cancellation already is driving $22B in impact to the air cargo industry over the next three years, will impact even more parcels if incremental e-commerce checkout friction is introduced to the consumer. This friction is a major contributor to a decline in cross-border parcels, whether we want to admit it or not. Overall, this will force all companies to create and implement B2B2C clearance models... Because asking for sensitive customer information at checkout is a nail in the coffin. #crossborder #ecommerce #deminimis #china #amazon