E-retailers selling internationally are bound to have returns and figuring out how to handle them can prove challenging.
One of web-only camera retailer Goja LLC’s best-selling products on Amazon.com Inc.’s marketplace is a lens filter accessory kit for the Canon EOS Rebel digital camera. The kit sells for $14.99 and is the top seller in Amazon’s Camera Lens Filter Sets category.
While Goja sells a lot of those kits, some of those kit buyers have second thoughts about their purchase. The retailer seeks to accommodate those shoppers by offering a 90-day money-back guarantee on all its products, even for international shoppers. But when a consumer outside the United States clicks to initiate a return, the retailer will likely tell her to keep the kit. Why? It would cost more to ship the product back to the retailer’s U.S.-based fulfillment facility than it would to eat the cost of the product, says Goja president Walter Gonzalez. That reasoning doesn’t hold true for more expensive items; if that same customer wanted to return a $939.99 lens she bought for her Canon digital camera, the retailer would require her to ship it back.
These two scenarios represent a prime challenge for many online merchants selling internationally. More retailers than ever before are interested in selling beyond their borders, but doing so—or even thinking about doing so—introduces fulfillment challenges. Getting products to international consumers is one thing. Getting those items back from shoppers who want to return them is another thing. And there’s no solution that works for all e-retailers.
“Fulfillment and returns are probably the biggest impediments to international shipping, but it’s something that needs to be solved because it’s such an important growth opportunity for retailers,” says Nikki Baird, managing partner at research firm Retail Systems Research LLC.
It’s clear that interest in appealing to international consumers is growing as shoppers around the globe are increasingly buying online. For example, web sales in Argentina, Brazil and Mexico are forecast to grow 135% from 2013 to 2018, according to Forrester Research Inc. That helps explain why 14% of U.S. e-retailers who participated in Shop.org and Forrester’s “The State of Retailing Online 2014” survey said investing in international sales was one of their top four priorities for 2014.
Goja has sold to international shoppers since its 2008 launch, Gonzalez says. Those sales provide a significant revenue stream. Selling exclusively through the online marketplaces operated by eBay Inc. and Amazon, Goja now reaches consumers in 123 countries.
The retailer, which sold $8.6 million worth of merchandise last year, according to Internet Retailer’s Top500Guide.com, says international orders account for about 20% of its orders.
For every item it sells internationally, Goja calculates whether it wants a customer to send the item back. Goja offers free return shipping, which means it has to foot the bill. “If the product is $20, $25, $30, we’ll just let them keep it,” Gonzalez says.
It also considers an item’s return rate before deciding whether to sell it internationally. That gives the company a good idea of how many returns it can expect, Gonzalez says, particularly because international customers tend to return the same items as domestic customers. (However, international orders typically have a lower return rate than domestic orders, he says.)
A high return rate generally reflects on the product itself or the way the company is marketing that particular item. For example, if one out of every three lenses is returned, Goja will not sell that item internationally and will examine why the return rate is so high domestically. But if one out of every 100 items is returned, a product gets the green light to be sold internationally. The threshold is different for every product, Gonzalez says, but the lower the return rate, the better.
Goja also invests heavily in customer service and employs eight staff members who man customer service channels seven days a week. That helps ensure customers order the right product, which reduces returns. A lot of products on Goja are sold as sets—for example, a lens and lens kit. If a shopper wants to return the lens but not the kit, a customer service employee can talk her through the process, which also means Goja keeps the sale of the kit.
Goja ships about 40% of its orders directly from its Miami warehouse. It also works with Fulfillment by Amazon (FBA), an Amazon service that allows merchants to use Amazon’s warehouse space, with FBA also handling fulfillment and delivery. FBA charges a retailer based on the product type, weight and size of the item fulfilled.
It’s an option that’s growing, too. Amazon won’t say how many merchants use its service but says the number grew more than 65% year over year worldwide during 2013. Returns for international orders are handled the same way returns for domestic orders are handled, an Amazon spokesman says, which varies from retailer to retailer.
For Goja, the occasional international return hassle is worth it, Gonzalez says. That’s because international sales are up to 30% more profitable than domestic orders. Gonzalez says it’s possible to make a small profit on shipping costs alone because many online retailers are reluctant to ship internationally, especially those in a specialized market such as cameras and camera accessories.
E-commerce return rates vary, although many retailers anecdotally say their rate is lower for international orders than domestic orders. The median return rate for U.S.-based e-retailers in the 2014 Top 500 Guide was 3.00%, though that varied from 0.01% at jewelry and accessories retailer Alex and Ani LLC to 26.00% at apparel retailer Coldwater Creek Inc. Newgistics Inc., an online order fulfillment and returns services provider, says the average U.S. e-commerce return rate is closer to 7.00%.