Solving the Profitability Challenge in Cross-Border E-Commerce

A key pain point for e-commerce merchants expanding their sales to cross-border markets is dealing with international customer returns.

However, handling unwanted products from foreign customers does not have to be a deal breaker for expanding sales. E-commerce marketing platforms can help retailers solve fulfillment and manage returned products.

Cross-border returns management firm ReturnBear offers an ideal remedy. It optimizes the entire lifecycle of retailers’ international e-commerce returns, giving customers a localized return experience while reducing merchants’ logistics costs.

Expanding your customer base into foreign markets is worth the effort of lining up logistical support. Why leave that potential revenue growth untapped?

Globally, the cross-border e-commerce consumer market is valued at US$793 billion and has compounded an annual growth rate of 25.1% since 2022. A significant portion of that market resides in Europe, valued at $631 billion and rising, with over 540 million mostly affluent consumers.

According to ReturnBear CEO Sylvia Ng, Canada’s e-commerce market hit $82 billion last year, while Australia and the U.K. reached $30 billion and $196 billion, respectively.

While merchants can try to solve reverse logistics problems on their own, a lack of visibility prevents many of them from succeeding, she offered.

“You can’t optimize what you can’t see. So it all comes down to solving the lack of visibility in returns,” Ng told The E-Commerce Times.

She added, “Expanding into new markets is not only about revenue. It is also about brand evolution, diversification, and gaining a competitive edge.”

Optimizing Cross-Border Returns to Maximize Profits

How much annual revenue can a company lose by not optimizing its cross-border returns? Ng’s short answer is telling: “A lot!”

Shipping is expensive, especially when it is cross-border, she continued. The typical express shipping label back to the U.S. from Canada, the U.K., or Australia is more than $20.

Many brands lose their margin from the original sale at that expense. If they choose to cover the cost of return shipping, they could end up at a net loss, she noted.

Plus, retailers might not be able to sell the returned product again. If the sale was a seasonal or fad item, inventory value may also be lost.

Ng noted that addressing this costly issue requires monitoring and optimizing reverse logistics. The first step is for merchants to create a comprehensive return journey map and consolidate data in a central system.

“They will want to track the full return journey, including when the customer requests the return, when the customer drops the item off or gets it picked up, when the item is in transit, and when it arrives back at the store or warehouse,” she explained.

Once this map is available, merchants can focus on using the insights gathered to identify optimization points.

How It Works

To simplify the optimization process, merchants can use an end-to-end solution like ReturnBear. Otherwise, according to Ng, they’ll be patching together various solutions and having to invest a lot of effort on the data front to collect all necessary information.

ReturnBear’s process automates returns and exchanges through a portal that eliminates manual review and approval for every return request. A vendor needs only set its return policies; ReturnBear does the rest.

The system helps retailers reduce refunds by encouraging customers to exchange purchases or opt for store credit and bonuses to keep them shopping.

Ng explained that this solution covers both software and logistics, letting retailers avoid the hassle of putting together their own systems.

Better CX, More Sales

ReturnBear becomes a merchant’s single contact for all returns needs, from customer service to optimization insights.

Other solutions focus solely on the financial impact of returns, such as reducing costs or retaining revenue. ReturnBear optimizes for an improved customer experience (CX). It provides package-free, label-free, instant refunds at staffed drop-off locations.

This framework results not only in improved CX but can also increase sales. The consolidation at the locations and hubs cuts costs by over 40% and reduces emissions for a greener planet.

It is a simplified, efficient, and sustainable solution for managing product returns for cross-border clientele, maintained Ng.

Combating Cross-Border E-Commerce Abuse and Fraud

Ng warned that managing costly product return hassles is not the only potential barrier to selling across borders. Abuse and fraud by purchasers can also be deadly for unprepared retailers.

According to the National Retail Federation, those two realities resulted in $101 billion in losses in the U.S. alone last year. Dealing with fraud is especially difficult when goods have to cross an international border, said Ng.

“This presents a pressing challenge as more online merchants begin to sell abroad, she cautioned.

For example, last October, the FTC reported that 30 years ago, less than 1% of fraud reported was cross-border. In 2022, more than 11% of reports were cross-border.

Accuracy Matters

There is no single secret to success in cross-border selling. Merchants must get many things right to succeed.

What works well in the merchant’s base country of operation may create conflicts across borders. Sellers must address different cultural expectations and norms. For example, lockers are prevalent in the U.K. for returns but are not used as much in North America.

Taxes, duties, and compliance requirements demand precise accuracy. Different markets have different regulations.

“Brands need to understand these to become profitable. I encounter many retailers who do not make a lot of sales in Canada until they figure out how not to burden consumers with duties because nobody wants to do drawback paperwork if they need to make a return,” Ng offered, noting her company is headquartered in Toronto.

Managing Costs, Customs, Competition in Global Markets

Deciding to attract more sales by offering free shipping can erode profits. Depending on a country’s population density, shipping costs can be much higher than what is customary in the U.S.

For instance, Canada’s average package of a few clothing items costs 9 to 14 Canadian dollars to send across the country. In the U.K., it is significantly less, maybe 1 or 2 pounds, observed Ng.

“Brands will have different competition in certain foreign locations. It is important to understand those well,” she added.

For example, FIGS sells scrubs for doctors and nurses. In some markets, health care institutions provide scrubs, while in other places, doctors and nurses purchase them for themselves.

Language and localization can also be tripwires. For example, in Canada, there are areas where French is the predominant language. Ng advised that serving customers in their local language will improve sales.

Best Practices Bring Better Profits

Ng recommends that merchants start by doing their homework to understand the intricacies of international markets. That includes researching cultural nuances and consumer behavior.

For instance, Canadian consumers might prioritize eco-friendly products. U.K. shoppers might be more inclined toward faster shipping options.

“This research can help merchants inform their strategy and tailor offerings to meet the specific needs of each market,” she observed.

Ng also suggested merchants adopt a test-and-learn approach by iterating based on feedback and performance. Many merchants find it effective to start by selling on established marketplaces to gauge local preferences before investing in direct-to-consumer channels.

For example, a Chinese retailer might test the waters on Amazon in the U.S., or a U.S. retailer might begin on Walmart in Canada. This method allows for gradual adaptation and learning.