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If you are seeking new ways to increase your ROI on marketing with your commerce platform, or you may be an entrepreneur who wants to grow your team and be more efficient with your online business.
Talk Commerce with Brent W. Peterson draws stories from merchants, marketers, and entrepreneurs who share their experiences in the trenches to help you learn what works and what may not in your business.
Keep up with the current news on commerce platforms, marketing trends, and what is new in the entrepreneurial world. Episodes drop every Tuesday with the occasional bonus episodes.
You can check out our daily blog post and signup for our newsletter here https://talk-commerce.com
Brent (00:01.614)
Welcome to this episode of Talk Commerce. Today I have Matthew Merrilees and I forgot to clear Matthew's last name with him before we started. hope I usually put your last name. Matthew is CEO of Global-e Go ahead, Matthew, do an introduction for yourself. Tell us your day to day role and one of your passions in life.
Matthew Merrilees (00:20.696)
Yeah, sure, Brent. Thanks for having me. Not an easy last name for sure to ever pronounce. So Matthew Merrilees is CEO for the North America business here at Global-e And yeah, passion. Let's just say my passion right now is coaching softball for my 11 year old, eight year old and soon to be T-ball and four year
Brent (00:44.632)
Wow, that's a big job. That's great. Wow, that's fantastic. My kids are a little bit older than yours. And I do remember going to T-ball practice. That was always fun. All right, Matthew, before we get started today, we're going to talk a little bit about tariffs and some of those items. But before we get started, you will volunteer to be part of the Free Joke Project. I'm going to tell you a joke. And all you have to do is give me a rating, 8 through 13. So here we go. What happened?
Matthew Merrilees (00:46.598)
You
Matthew Merrilees (01:12.614)
You got it.
Brent (01:14.21)
What happens when a microscope crashes into a telescope? They kaleidoscope.
Matthew Merrilees (01:21.188)
Yeah, nine and a half.
Brent (01:23.566)
Yeah, it's good for your kids. You can tell your kids that one.
Matthew Merrilees (01:27.333)
I love it.
Brent (01:29.278)
Alright, so let's tell us a little bit about Global-e before we get started and give some background on Global-e and what it does and then let's kind of dive into the tariff talk.
Matthew Merrilees (01:40.58)
Yeah, sure. So Global-e is a cross-border enablement platform. So helping brands expand their reach from a digital to consumer footprint on a global scale. So breaking down barriers for international trade on your online store. Think everything from localized currency to localized payment methods to duty and tax tariff fun, which is I know what is one of the hot topics for today.
all the way through to merchant of record responsibilities and end to end shipping, which is all the way through downstream to end customer doorstep and through to return. So barriers that stand in the way of buying online internationally is where we come into play and help brands do that on a global scale.
Brent (02:26.73)
So anybody that is selling over the border, across border, Canada, Mexico, even Europe, any country, right? That's what you're looking for. And of course, one of the things we talked about in the green room is just the challenge of tariffs right now. Tell us a little bit about how you're helping customers get through some of those challenges.
Matthew Merrilees (02:48.452)
Yeah, for sure. think when we look at and the number one conversation is tariffs, I would say with a number one A conversation around profitability, right? Which I think the two tie in together. But when you think about selling internationally and about how to localize your web store for a seamless international transaction, there's a lot of unforeseen costs that tie into tariffs, tie into duties and taxes that are much different than merchants just selling to.
their home domestic market. So, you know, without a doubt, you know, the administration and what we've seen this year has thrown a few curve balls for many of the brands right now trying to navigate, you know, how do I continue to scale my international business, but do it in a responsible and profitable way? And I think when you think about the impacts, no matter where you manufacture your goods, but that's usually step one.
Right? Where today am I manufacturing my goods and where am I bringing in those goods to? And what's the tariff impact that I have when I want to be able to sell it to an international consumer? So when I think about the broad spectrum, every brand has their own strategy. It typically begins with just that. Where do I manufacture my goods and do I have some sort of diversity in that overall approach that will help, you know, give me an advantage as landscape of tariffs shift?
And then the second piece really becomes around understanding the profitability and the overall price strategy on how those tariff impacts impact your international customer and how to really load up an experience on your web store to make sure that when you do sell that product, you don't have to think about, did I just lose my shorts? Or did I actually make a profit? Or, you know, am I breaking even and what's my overall goal and strategy? So I think it's about where your inventory sits, where you manufacture it today. Is it?
dispersed throughout the world or is it central in a single location where you may have some high impacts? And then how to account for what that overall profitability and pricing strategy looks like as you position your pricing strategy and market on a global scale without risk. So I'd that's where the journey begins. Would love to get any input or questions from you on that so far before we keep that moving.
Brent (05:05.058)
Yeah, I think, you know, one thing people always thought that Canada, Mexico are kind of safe zones for tariffs and they're not safe zones anymore. But I think one thing like tariffs, people are worried about tariffs coming in. But if you're selling cross border, there's a potential of tariff being leveraged by the company you're selling, your country you're selling into, right? So it really is a two pronged net that you have to manage. How do you manage some of those things?
Matthew Merrilees (05:34.372)
No, you're right. In Mexico, and I think we heard, at least for the past several years, many, many US brands moving inventory directly into Mexico, leveraging what was called Section 321 and being able to bring goods into Mexico, have some duty advantages in doing that, and then really playing the de minimis game, serving the US market below 800 duty free and benefiting from a profitability perspective on what was
an active live and compliant channel for many of the brands that they tapped into. And I think when you think about the impact of now, call it Chinese made goods, goods made in Hong Kong and Macau. And you start to think about, now that strategy shifts because it went from 150 % tariff, which became an immediate shock to the entire world, right? And then it leveraged its way down to 30%.
As you think about the percentages and the impacts and more importantly, what that means to a brand, those duty advantages of bringing goods into a certain market like Mexico, where you may have had these advantages in these lanes of trade, they shut pretty quickly. So I think that was the first step is brands will quickly understand, okay, if I'm bringing goods into a market and I have a 30 % tariff and I plan on selling that worldwide, what does that mean to the profile of what I currently do? Do I need to just
uplift my prices by 30 %? The answer is no. The answer is let's understand what the overall mix of profile it is that you're selling on your web store today. Let's understand and build out an average so that yes, you're keeping your business whole. You're running the same profitability figure that you had in the past prior to the
know, the tariff uncertainty or change, should I call it that we've had, and let's continue to grow the business. So I think for many brands, whether you were importing directly from China to the US, China through Mexico to the US, China through Canada to the US, there was always a strategy and a cost impact that we needed to look after with the brands. And that's something that we micromanage together to make sure they continue to scale and grow in a profitable manner.
Brent (07:38.638)
And some of these items aren't, you can't really plan because some of them just happen within a week, right? So this is like instant and you have to be ready with your platform to either really leverage or load up on inventory or be able to pivot or just lose money. Is there, you had mentioned like having to raise your price or eat the cost. there a balance that you do and are you seeing a lot of people just load up on inventory still?
Matthew Merrilees (08:07.854)
No, and it's a good question. think when you think about just the overall strategy, it began changing much more frequently than I think anyone anticipated. And Global-e we run a duty and tax engine that needs to be kept up to date with every change that's happening on a worldwide basis because we insulate our brands from those changes. So let's just say we met a bit more frequently than we have in the past as a group to make sure that the engine was always kept up to.
date with the latest regulation and change, but in short, there's two different pricing strategies brands take, right? One is a dynamic US to local buying currency conversion that needs to be up to date with the tariff impact of what's happening. The other one is that brands sell in a market today where they have distribution, they have sell through, they have stores, they have, you know, price books that are MSRP driven that are a bit.
less flexible than a dynamic engine where a brand's selling completely D2C and they have full flexibility to do whatever they want in an instant. So there were two different pricing strategies. Both had a different approach to how they managed it. as far as losing money, I can tell you that both those strategies did not involve that. And that is one that brands just really relentlessly worked together. And our team members did the same, both on an engine perspective, but a pricing strategy perspective. Because
You can't react to your customer in the market and be changing your prices every single day, which everyone recognized and understands. But you also can't be running a digital to consumer, a direct to consumer model internationally and be losing money. So I think there's a balance that was had. There were some patients that was held throughout the ever so changing landscape. But to do it with a data informed decision, knowing that you had a predictive profitability model behind it was where a lot of brands relied on us and we relied on them together.
to make those informed decisions.
Brent (09:58.304)
I know that there's APIs available for tax within the United States to just get your tax for your local area. Do you see for the next at least three and a half years this availability of an API for tariffs where whatever good you have, mean, maybe from the ERP side or from the front end side where you're going to have more real time updates on costing.
Matthew Merrilees (10:05.813)
yeah.
Brent (10:23.956)
and pricing them depending on what that different I mean makes is super complicated, right? This is not easy stuff.
Matthew Merrilees (10:30.188)
It certainly is not easy. Otherwise we would not exist. I think number one, it's international, right? And I put the lens on of a US customer, right? Where typically the US market is the home market for a lot of these brands and does get a lot of the focus, right? So off the bat, you're almost starting at a bit of a disadvantage from an international lens because it's not getting the priority or the focus that a lot of the domestic market would get here in the US specifically.
But when I think about the overall pricing strategy and what brands are doing, I don't think it's something that is as simple as let's look at a product, let's uplift it by X percent, and then let's put it for sale on the site. Because when you look at every single market that you sell into, every single country worldwide has a different approach to de minimis, to what is a duty-free versus dutyable product versus average order value versus freight included in that calculation versus not.
In my view, don't think that that's something that ever gets automated. I think the overall engine itself and what, from a country of origin and an origin and a destination combination can certainly be automated. And that's lot of honestly what we're doing today because in order to calculate and generate a guarantee duty and tax calculation for a shop or a checkout, you need to have those certainties in place, but you're looking at a cart. You're not looking at an individual product, you're looking at a cart in an overall order.
heading into a market, is typically how many of these countries are regulating what's do-de-able and what's not based off of a value threshold and also a commodity threshold, which has a pairing as well.
Brent (12:09.228)
Are you seeing in the whole supply chain that there are parts of a manufacturing process that just not available? And I can point to a friend of mine who has a manufacturing business. They were getting some particular chemical from China for a foam product and the company decided not to sell it. So he's got to find a new supplier now for that. And I think batteries are another great example of where
Some of the tariffs have been eased or there's been some negotiation around getting batteries for the US again from China. Are there particular items like that that are really challenging to manufacturers where there's just no product or there's no parts to put in to make the thing that you want to build in the United States?
Matthew Merrilees (12:55.398)
Yeah, I would say the biggest eye opening and it hasn't been one that's been immediate since the changes. It's been one that I've been seeing even prior to the tariff changes, which is brands are looking for, let's just say a bit more of a diverse supply chain strategy, right? The days of having single source in China or the days of having single source in, you know, Vietnam or you think Mexico or you think wherever it is,
are over, think brands are now looking at that strategy and really diversifying a bit on the manufacturing strategy to find one or two or three regions to be able to pull inventory and products from. So I think that was the first kind of approach that brands either accelerated through the tariff changes, or I would say really began that strategy, which is something that needed to happen. The other thing that I'll point out that's been a shifting change for us is
Traditionally, you see many, many brands have a single warehouse in a single country and they trade cross border worldwide. Right. And then you see as brands hit scale, they consider, do I put inventory in a certain market? And then start to level, lay out a dual inventory strategy where, you know, the U S serves, let's just call it, you know, the America's region, whereas the European footprint serves the European region. You know, now what we're starting to see is brands say, well, with the changing landscape of tariffs,
I don't know that I want to put inventory into that market, but I still want the efficiencies and the economies of scale of having inventory in that market. So what does that mean? We've essentially, and we've seen this product really accelerate, we call it 3B2C. And 3B2C, what it essentially is, is it allows brands to bring goods into a market as they would at wholesale price today. So instead of actually holding inventory in that market,
It's essentially a B2B transaction between the brand themselves and importing the goods as the brand themselves. And then instead of me buying the goods here in the US and transacting as merchant of record for that cross border transaction, I'm taking title to goods at that destination country, which is then becoming a domestic transaction on their books, which obviously allows them to not have to go through the full setup of an international warehouse in all of these markets, but still gain the efficiencies.
Matthew Merrilees (15:14.414)
with the tariff changes that they continue to see happening. So I think for me, it was about summarizing the overall strategy and the supply chain shifting, becoming a bit more veritable as you get out into the market. And then the second piece, 3B2C, just really taking off in a world where profitability is king.
Brent (15:35.086)
In that 3PL market, or as you said, 3P to C, I think is what you said. 3B to C, right. Okay. Yeah. Are there more businesses that are choosing to just keep that product, or maybe that was made in the US and they would ship it to the EU to make sure that it's in their warehouse and in that region. And now they would source that product somewhere outside of the US so they don't worry about the retaliatory tariffs that might happen between
Matthew Merrilees (15:40.038)
3B, 3Bs, the three businesses,
Brent (16:04.29)
the EU and the US and it skips the US from manufacturing altogether.
Matthew Merrilees (16:09.914)
Yeah, I mean, you've got brands today that will import directly into, you know, into Europe, right? You've got brands, very popular, you know, regions without within the EU, such as Netherlands within Belgium, we see quite a bit. But brands will bring goods right into those regions directly, right? warehouse stock inventory directly there without bringing to the US. And then when you think about serving an international shopper from that region, you have free circulation within, you know, the EU, you have the ability to serve the UK in a bit more of an efficient fashion, but
Not every brand has the scale to do that becomes the challenge, right? So to manage two different inventory pools to have two different, you know, three PL strategies is just you need to have the scale to do that, which is typically what we end up seeing across our portfolio. And then that's where the brands come in and say, well, what if I just continue to do it out of the U S but brought those goods in bulk or in single parcel to that market, cleared it, exported it, imported it. And then we took it from there from a personal import perspective. And obviously
transacted with that final customer in market. So I think there's more creative paths we're seeing for brands that don't have the scale. But to answer your question directly, Brent, yes, people are bringing goods directly into different geographies today. And I've seen that strategy accelerate for sure.
Brent (17:23.394)
Do you think our trading relationship with Canada will get back to normal in a couple of years? Or do think this is a long-term thing that's going to happen?
Matthew Merrilees (17:33.988)
Now I think this will continue to improve. think, you know, even as we study the data in every market on a regular basis, and I think when we look at Canada, you know, initially without a doubt, consumer sentiment was one that was down for all the reasons that we see in the press. But I think we've began to see an improvement in Canada trade and Canada sentiment. And I think we expect to see that continue as well, right? So I think it was a bit of a turbulent.
first quarter, if I could call it that, from a sentiment perspective. But no, think brands are resilient. I think consumers are resilient. I think that we all recognize that this is much bigger and broader than that. And cross-border trade is certainly not going away. And we think it's here to stay. We think it will recover and we'll continue to show improvements and growth. And we're seeing it already.
Brent (18:28.398)
I'm Matthew. We have a few minutes left. As I close out the podcast, I give everybody a chance to do a shameless plug about anything they'd like or would you like to plug today?
Matthew Merrilees (18:36.998)
I'd like to say if you're not partnering with Global-e, give me a call. We are happy to help. We are here. We are thriving, I think, long term this tariff situation. And we look at it and we kind of scratch ourselves, pinch ourselves, but this is the business that we're in, which is removing uncertainty and insulating brands from all of this change. So short term pain, but I think it'll be long term gain here at Global-e. And we're excited for the future of cross border and nationally commerce. So thanks for the time, Brett.
Brent (19:05.836)
And do you have an ideal customer profile that you look for?
Matthew Merrilees (19:10.276)
I'd say if you're looking to reach an international shopper, we're here to talk.
Brent (19:17.742)
That's perfect. how would they get a hold of you, Matthew?
Matthew Merrilees (19:20.698)
hit our website and we will literally respond to you within 24 hours. So we will get back to you, hit our website, let's chat, fill out your info and we'll be contacting you the second you hit us, we'll be waiting.
Brent (19:34.606)
That's awesome. Matthew Merilis, I think I got it right that time with Merilis. Geez. Yeah, Merilis. All right. Well, thank you so much. Thank you much for being here today. Matthew is the CEO of Global-e North America. Thank you so much.
Matthew Merrilees (19:38.022)
Closer, Merrily. Third time's the charm, I love it.
Matthew Merrilees (19:51.526)
Thank you, Brett. Have a wonderful weekend.