For Jack Ma, executive chairman of Alibaba Group Holdings, today is an extremely busy and lucrative day because the company he founded 15 years ...
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FULLeCOM, an Ontario, Calif.-based end-to-end service provider, has warehouses in Germany, Austria and the United Kingdom. FULLeCOM customers can have their product shipped in bulk to these foreign distribution centers, then shipped locally to customers. The system also works in reverse to the U.S. That model, says FULLeCOM EVP of Global Sales and Marketing Dina Marie Schon, will reduce shipping time and shipping costs. An item can arrive at the customer’s door in a matter of days, as opposed to weeks when coming from the U.S., she says. “Without startup costs, for most merchants to support what we support for backend services, they are looking at 20-30% cost per order,” she says. Her company’s end-to-end care is about 15.5%, she says.
For those e-retailers or providers like FULLeCOM, REI and Lands’ End that have a physical presence in a foreign country, handling returns is similar to doing so in the U.S. But for others, it can be a nightmare.
Returned items from foreign destinations are often a complete loss, Fox says. Of the items returned, 55% are destroyed on the ground because it is more expensive to put them back into inventory and attempt to resell them. “You damn well better control your returns,” Fox says. “If they are at 12-14%, you will never see the light of day or a profit.”
“Retailers face the exact costs and complexities in getting the product there in the first place, but in reverse,” Wilk says of foreign returns. “Not only do they have to pay the taxes, tariffs and shipping costs in return, but often there are government bureaucracies at play.” Those can take the shape of additional paper work or special shipping arrangements, he says. “It’s just far more complex than simply dropping it in the mail.”
Shen says, “Once you’ve paid a government, it is a big task to get that money back. A lot of times the cost of getting that money back is greater than the cost of the item.” Huff agrees that returns can be a problem if they are not classified as a return. “You have to treat it as a return and pass it through the same way, or it may end up getting counted as two independent shipments,” Huff says. That would mean double the duties and taxes. “There are cases where it will be more costly to return it.” But that is true also for low-cost items sold domestically.
With a physical presence, Lands’ End and REI find it easier to handle returns. Since it opened its catalog business in Japan, REI has maintained a service desk that accepts returns. REI ships some items back to the U.S., but others were sold online as discounted items.
Lands’ End customers send returns to the distribution center from where the item came. German customers can take or send items to the phone center in Metlach, which then ships them in bulk back to the UK distribution center. The cost per piece of returns for international sales is about the same as it is for domestic sales, Lease says. German returns cost more because of the return transit fees. Lands’ End does not provide free return shipping to customers.
FULLeCOM also handles returns from its foreign distribution centers. The company’s clients decide if the items are to be destroyed-almost always where food is involved-or refurbished for sale, Schon says.
Indicators point to the international market as the place for e-retailers to be in the coming years. And a well-devised backend can make global e-commerce as smooth and pleasing as a porch-side version of “Dueling Banjos.”