Why a good return policy is so important in international e-commerce

For many e-commerce sellers, the thought of returns, especially international returns, is a true headache. They cut into profit margins and can cause a lot of logistic and administrative hassle. A well-streamlined policy and logistical execution is needed and it demands creating processes that are transparent for the customer on the one, and feasible for the seller on the other hand. Here is why streamlining a return policy in e-commerce is vital for success:

An unclear or inflexible return policy may result in lost sales

From a customer perspective, shopping online means sacrificing the ability to see, touch and try an item in exchange for other advantages, such as convenience,  a better price or availability of a certain good. Despite of that, the idea that the product might either not be as imagined or might arrive damaged creates the demand with the customer to know exactly how to return the products and receive their money back. An unclear return policy is the second most occurring reason for shopping cart abandoning  according to a survey by ComScore in March 2015[I].

A clear returns policy increases customer satisfaction

Research by UPS and ComScore recently revealed that 53 % customers were satisfied when the return  policy and procedure was clear and transparent.

The higher the value of  shopping basket, the higher is the desire of the consumer to be offered a smooth after sales service, including customer care and return management.  According to a recent report published by eBay Enterprises[ii], after sales services including customer service and returns handling, is especially important to shoppers of the luxury and specialized segments:  72 percent of those high-end consumers highly value these services:

 When selecting a retailer, shoppers value return policies that offer convenience and money-saving initiatives. A pre-printed return label that comes in the box, the possibility to return items to a store and – above all-cost free returns are factors increasing the purchase intent [iii].
 

However, retailers still have a lot of ground to gain when it comes to return procedures in e-commerce: ComScore[iv] found that consumers still encounter problems with shipping costs, lengthy return forms, or long delays waiting for their refund.




For customers shopping cross-border, transparency and comprehensiveness of the returns procedure is maybe even more relevant: As evident from the Consumer Scoreboard[v] of the European Commission, three out of the ten most relevant concerns when shopping from a foreign online seller relate to returns: Consumers are worried about high return costs, they fear that sending the products back and receiving their money back is going to be complicated and that arranging replacement and repair might not be easy:

The retailer’s perspective

A bad return policy costs sales, a good return policy costs money- this is what many retailers might fear. Handling the products, sending them back to the warehouse which is often abroad, communicating with the clients, combined with taxes and re-export administration in non-EU countries can be a substantial challenge for retailers. The European Commission’s consumer scoreboard (2013) shows that retailers still see many obstacles to cross border selling, including compliance with different consumer protection rules, higher delivery-related and after-sales costs, and increased costs due to geographic distance. All of these concerns are in close correlation with the issue of returns and returns management.

There are several ways to deal with (international) returns. They include:

In-house returns handling

Larger players like e.g. ASOS  (UK) and ModCloth (US)- both fashion sellers naturally faced with a high number of item returns- have ‘in-sourced’ their returns. ASOS has built a network of distribution centers all over the world in order to manage returns more effectively. ModCloth operates from its US distribution centers.

Outsourcing Returns to an international logistics provider

Many retailers selling to international audiences use third party providers in order to handle returns. . The German Zalando has three logistics hubs in Germany and uses a big international  logistics partner, DHL, to handle its (free) delivery and (free) returns throughout  its 14 European target markets.

Outsourcing Returns to a local partner

For smaller companies, working with a (smaller or more specialized) local partner for returns management can be a solution here: The customers can send back their unwanted merchandize to an address in their own country. The seller can choose whether to include a label for free returns or let the consumer pay for the return himself: As it is a local shipment, it will be cost efficient. The local partner than handles the return and does all necessary administrative steps. Shipments back to the foreign warehouse of the seller are bundled in order to reduce costs. In this way, The seller can offer the customer more convenience without raising the price of the return in the first place.

Conclusion:

Returns are a vital success factor for international online retailing. Customers include the return policy in they purchase decision, and the return experience is an important part of the impression the retailer makes on the buyer. For retailers, international returns demand a good deal of  strategic planning in order to minimize costs, maximize trust and convenience for the customer and make the whole project feasible in the light of profitability. The decision whether to handle and manage returns in-house or outsourcing them to a central logistics provider or a local partner depends on the scale of a company’s international business and the available resources.