How to Master Global E-Commerce Returns to Achieve Profitability

Valued at $785 billion in 2021, the B2C international online shopping market is projected to grow tenfold by 2030, reaching $7.9 trillion. International markets present brands a key opportunity to drive growth and revenues. But selling overseas does bring about numerous complexities which, if not taken into account, can hinder growth and dig into profit margins.

Different markets have their own currencies, tax and import regulations, buying behaviors, and cost preferences, each of which brands must weigh carefully in order to build a viable global online sales strategy.

One potentially costly challenge which brands must think about carefully is their return policy. Since shopping cultures differ from place to place — including habits around product returns — brands must craft intelligently priced e-commerce return policies that reflect country-specific consumer tendencies to avoid unwanted expenses and poor customer experiences.

Keep it Simple

To grow international e-commerce sales, merchants should adjust the buying experience to the market and offer shoppers a seamless experience. By localizing the customer journey, from currencies and payment options to tax and duty and delivery proposition, merchants can overcome the many barriers that prevent shoppers from buying from an e-commerce website outside their market and grow their global customer base.

An unclear return policy is one of the foremost causes for cart abandonment for international consumers shopping online. An Accenture report found that 75 percent of consumers say that easy return policies are an important factor that influences their online purchasing decisions. Moreover, a recent study from PayPal found that over 80 percent of consumers check a retailer's return policy before making a purchase with a retailer for the first time.

To overcome this hurdle, brands must offer seamless return processes, such as pre-paid returns, and display a feasible and transparent policy for shoppers. But that's only the beginning. Brands must also configure strategic return strategies and pricing that meets shoppers’ expectations in a way that's also profitable and sustainable for the brand.

Pricing for Profitability

Between inbound and outbound courier fees, international returns can be costly, and neither party wants to bear the full cost of such shipping. Brands should therefore determine a returns price that online shoppers will find acceptable or feel comfortable paying — it can’t be so high that it precludes customers from finalizing purchases, but neither can it be so low that it harms a brand’s global e-commerce profit margins and bottom line.

By leveraging market intelligence, brands can strategically price their returns policy on a market-by-market basis and in accordance with vertical best practices. Understanding the return rate in each international market gives brands the insights they need to charge customers appropriately and determine the percentage of the returns cost they should subsize.

Consider Europe and APAC. According to data gathered by our company, Global-e — which facilitates billions of transactions from over a thousand merchants worldwide — German consumers return apparel 19 percent of the time, whereas in Japan, return rates for that same purchase category hover around 4 percent. With this kind of knowledge at hand, companies can understand what kinds of online shopping behaviors to expect from the countries they’re selling into and wisely calculate and adjust the price of their e-commerce return policies to balance customer behavior with the cost of returns.

Access to market intelligence can help brands determine strategic return policies. The more data available regarding any given global market, the better a brand can set the optimal proposition to drive conversion and sales while preserving margins and propelling profitability.

Return to Sender

Entering overseas markets successfully hinges on strategic market-specific pricing capabilities — and return policies are a critical aspect of that.

Brands that leverage a deep understanding of best practices, costs and shopper expectations and tailor their global e-commerce proposition — from browsing all the way to return options — for every market will likely not only drive customer conversion and loyalty but potentially sustainable profitable growth as well.

 Matthew Merilees is the CEO of North America at Global-e.