E-commerce grew 20% for Costco in fiscal 2015—20 times faster than store sales.
Studies show consumers will buy more often and buy more when they’re confident that they can return goods. Return policies take on more importance with new European Union rules taking effect next month requiring e-retailers to permit shoppers to return goods in 14 days.
When it comes to international e-commerce, consumer trust is all-important. The ability to return products to a location in the e-shopper‘s country—or have free international returns—is a key element in creating trust, as it offers e-shoppers peace of mind when making purchases. They do not have to worry if the product does not fit or live up to their expectations. They can simply return it.
Policies concerning returns vary widely worldwide. In the United States, for example, the handling of returns differs from merchant to merchant, as consumer rights regarding returns are not regulated by law. Inside the United States, returns are generally free; however, free shipping on international returns is rare.
The European Union (EU) will take an important step toward harmonizing distance-selling rules across Europe when the EU Consumer Rights Directive goes into effect on June 13, 2014. It includes a provision requiring a uniform return period of 14 days after goods receipt wherein consumers may return purchases without explanation. At the same time, the Directive also allows merchants to charge a return fee, something sellers were not allowed to do before. It is generally believed that European consumers, who are accustomed to free returns, will not willingly pay for returns. In fact, respondents to an E-Commerce-Center (ECC) Handel Köln survey indicated they would rather purchase items from another online store where there is no charge for returns. To avoid losing customers to competitors, most major European retailers have already announced they will not charge for returns.
What the data reveal
A study, conducted by ECC Köln in collaboration with Hermes, provided some interesting insights on the importance of returns policies to consumers. In Germany, 87 percent of survey respondents said that an easy returns process is important or very important to them. Notably, invoicing e-commerce purchases is common practice in Germany, where the average apparel return rate is 40 percent. French consumers, too, expect reliable returns—and fast refunds of the purchase price. Here, consumers typically pay in advance and apparel return rates are significantly lower (around 10 percent).
ComScore, a U.S. Internet technology company, conducted a survey in Europe that concluded that a simple return process leads to loyal, repeat customers and generates new customer referrals. When a retailer offers an uncomplicated returns policy, some 61 percent of European customers will increase their average order value (AOV) and 59 percent will recommend such a retailer to their friends. The effect was greatest in Germany, where 72 percent of customers increased their AOV and 69 percent referred the merchant to a friend. Other countries where e-shoppers appreciate an easy return policy include Italy and France, where 66 percent increased their AOV and 68 percent gave referrals and 58 percent increased AOV and 62 percent gave referrals, respectively.
In China, trust issues and poor return policies are holding back e-commerce growth. According to Acquity Group, 59 percent of its respondents said it was not easy to return goods to online stores. Like their counterparts around the world, e-shoppers in China place a high priority on return processes that are user friendly and simple. Interestingly, some package delivery carriers in China will wait while customers try on their orders. In this way, they can collect the unwanted merchandise immediately.
Other important considerations
Just as the “last mile”—or delivery to the recipient’s address—is critical to consumer satisfaction, a local return address is important to e-shoppers when returning merchandise. It suggests a faster refund process. That is, the closer the retailer is to the customer, the faster the processing time and the refund credit.
Many distributors and fulfillment service providers are now establishing return hubs in their main international markets. This approach allows them to collect returns locally and then forward them to a central location for goods evaluation. Implementing this model also supports sustainability, an issue that is becoming increasingly important in light of growth in e-commerce.
Last, but not least, conducting business in the local language is important. Customers expect to deal with customer service representatives in their native tongue, even when they order abroad.
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The cost of acquiring a new customer is said to be five times greater than the cost of retaining an existing one. As retailers seek to take their products global, implementing measures that increase customer loyalty makes economic sense. With 63 percent of online shoppers saying that they look at a retailer’s return policy before making a purchase and 85 percent reporting they would not purchase again from a retailer who had an inconvenient return policy, the case for simple, fast and free international returns seems obvious.
Hermes provides internationalization services to Europe, Russia, China and Brazil. Uwe Bald can be reached at 213.915.8430 or via e-mail at Uwe.Bald@hermes-ws.com.