The thought of offering free international returns can fill ecommerce businesses with dread. Essentially, you’re paying for a product to be shipped overseas, handled by a customer and then returned free of charge – and one co-founder said it “sounds like madness”.
However, online shoppers are beginning to expect free returns, with several businesses we spoke to mentioning they had made changes to their policies after customers raised the issue. It’s also possible that the increase in conversion will cover the logistical costs - offering international returns could actually increase your margin.
When should you start looking at your returns policy?
Many founders stress that getting their returns policy right is a key part of their international offering. However, Derek O'Carroll, CEO of retail management system Brightpearl, says business owners often leave it too late to implement changes when a business is growing rapidly.
“When small online retailers plan for international growth, they start thinking about the systems, processes and people they’ll need to deal with an increase in order volumes, but product return operations are generally an afterthought. This can be a crippling error for small retailers who may become plagued by a mountain of returns and out-of-stocks,” argues O'Carroll.
Not only could not having a suitable returns policy create unnecessary cost, but it could be a key cause of shopping cart abandonment for international customers.
Clifton Vaughan, director of Natural Baby Shower, worries about how complicated its returns policy is. Right now, it runs to around 1,200 words and he’s about to offer free domestic returns as one way to simplify it.
“My next policy, which we haven’t got yet, is to go to free returns. It’s such a barrier to trade. When a customer comes on to the site, the first thing they’re concerned about is delivery charges, which are free on orders over £45. The next question is what can we do with returns,“ he says, adding the team will start with domestic returns and then look to international deliveries.
Like a lot of ecommerce startups, Natural Baby Shower started as a kitchen table business. However, it has now scaled to 20 employees, including a bricks-and-mortar shop and a warehouse for picking and packing. The growth has been driven by the introduction of logistics systems and spending on AdWords, and it’s the latter that could offer a saving.
What’s the true cost of offering free returns online?
An increase in conversion could justify the extra spend on international returns, although it’s difficult to get a definitive answer. This is particularly true if you’re driving sales using cost per click advertising like Google AdWords or Facebook adverts.
Vaughan expects the move to introduce free returns to boost sales by 5-10%, increasing its margin by providing a better rate of conversion on ad spend.
“If our conversion rates go up I’m spending less on advertising,” he says. “It might cost me £2.50 to £5.00 to get the product back. But conversion values on AdWords are 2.5% to 3.0%, sometimes at £3.00 per click. If you’re spending that and those AdWords aren’t converting, there’s margin to be made up.”
Simplifying your returns policy
A no quibble returns policy may be daunting, but it significantly reduces the barriers for your customers. Max Robinson, marketing manager of baby accessory supplier PreciousLittleOne, stressed that simplicity is the key whatever route you take.
“We've tried to keep our international returns policy as similar to our standard returns policy as possible, purely to avoid discouraging international customers to shop with us. For this reason, we don't actually explicitly have an international returns policy - it all falls into the same bracket,” he says.
Roller blinds manufacturer Bloc Blinds has 90 employees and is in the middle of a £4m expansion programme. Because of its scale and the bespoke nature of its products it has implemented an insurance product, MeasureProtect, which allows international customers to return blinds that do not fit due to a mistake by the customer, re-sizing them at no extra cost.
“We would see this as part of providing an excellent level of customer service, as it also builds trust and buyer confidence to encourage repeat custom,” says managing director Cormac Diamond.
Phew Cycling, a startup with two employees, has a different method. Its award-winning gloves are sent to Australia, New Zealand, Canada and the US. As a small company they don't want to pay for returns (it would cost about £15 a unit, they say), so if there is a size issue they encourage the customer to give away or sell their wrong size gloves to a friend and offer them the correct size at a reduced price.
PR and marketing manager Andrea Sexton says they also work as hard as possible to avoid issues by providing advice and sizing charts on the website, and inviting them to get in touch if they have any questions.
“We make a lot of good friends and loyal customers who go out and tell their cycling buddies. We have good word of mouth PR and marketing. It's very cost effective for a small company," adds Sexton.
The points about recommendations, customer trust and loyalty are a re-occurring theme for the businesses we spoke to: a good returns policy can boost business. Natural Baby Shower’s Vaughan also added that its international customers, who range from Saudi Arabia to New Zealand, tend to have bigger basket values.
How can your business cope with international returns?
Businesses that offer international returns can use their logistics provider to enable the service. For example, Parcelforce Worldwide allows retailers to generate a label from its shipping system and email it to the consumers overseas. In some cases it’s possible to include a pre-paid label when you send the goods too.
Darren Fiander, chief marketing officer of the brilliantly named bespoke shoe retailer Solely Original, says it’s crucial to get the right process in place.
“International returns can 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 not only transparent for the customer, but also feasible for the organisation,” he says.
Whatever route you take to offering international returns, the entrepreneurs we spoke to see it as a key opportunity to improve customer experience and conversion. It does require careful thought about the logistical implications, but there’s also a big opportunity.
Parcelforce Worldwide has over 25 years of experience delivering parcels in the UK and overseas. Reaching 99.6% of the world’s population, your parcels are in expert hands with a choice of speed and options including a Global Priority Returns service from 24 countries. Find out more about Parcelforce Worldwide here.
About Christopher Goodfellow
Journalist and editor with nine years' experience covering small businesses and entrepreneurship (ChrisGoodfellow.net). Follow his personal twitter account @CPGoodfellow and his events business @Box2Media. He has written for a wide range of publications in the UK, Ireland and Canada, including The Financial Times, The Guardian, The Independent and Vice magazine.