Small Chinese e-commerce businesses will be hit hard by the United States’ change in membership with the Universal Postal Union.
The 144-year-old United Nations run program offers global discounted shipping between its 192 members. The U.S. claims the UPU gives foreign companies, an unfair advantage in shipping costs. According to the South China Morning Post, it costs about US$20 to mail a 2kg parcel from one state to another, yet a 2kg package from China costs only US$5 to ship from state to state under the UPU.
Packages delivered under the UPU were done free of charge, but in 1969 that changed when terminal dues began to be issued. The dues were dependent on how developed a country was; the more developed, the more dues they had to pay. Currently, China is still classified as a developing nation.
In 2006, the United States entered into a bilateral agreement with China Post that gave sellers first class tracking and delivery confirmation for low rates as long as an item weighted less than 4.4 lbs (ePackets), according to The Atlantic.
The volume of ePackets more than doubled from 2014 to 2016, according to the United States Postal Service (USPS). This brought in about $493 million in revenue for the USPS, but also added some costs. Specifically, because it’s so expensive to send an unclaimed ePacket back to China, undeliverable packages cost the USPS anywhere from 20 cents to 57 cents each, according to The Guardian.
Eshopworld.com estimates there are currently 223 million people shopping online in North America, with 30 million new users expected to shop online by 2021.
This will represent 85% of the total population with revenues reaching US$513 billion in three years. The bulk of goods being purchased are electronics, toys, and fashion.
According to TechCrunch, Amazon (the biggest online retailer in North America) is set to clear $258.22 billion in US retail sales this year, which works out to 49.1% of all online retail spending in the U.S., and 5% of all retail sales.
The majority of Amazon’s growth, according to TechCrunch comes from its Marketplace – the platform where Amazon allows third-party sellers to use its retail and logistics infrastructure to sell and deliver items.
Amazon Business, the marketplace where Amazon combines more than 30,000 sellers, had US$1 billion in sales in its first year and is growing 20% every month, according to Absolunet.
Second place to Amazon is eBay with about 6.6% of the U.S. e-commerce market, followed by Apple with 3.9%, and Walmart with 3.7%. Following the top four are Home Depot, Best Buy, QVC Group, Macy’s, Costco, and Wayfair, respectively.
The Atlantic is reporting that American e-commerce sites, such as Amazon, are applauding the Trump administration’s move as it would limit counterfeit goods from being shipped into the U.S. and help small businesses better compete against Chinese merchants.
For now, it will take a year for the U.S. to fully withdraw from the UPU, but it is willing to stay in the agreement if certain expectations are met.