Despite the endless possibilities that e-commerce provides to every industry, there are undoubtedly global challenges. Increased competition, goods scarcity, expensive payment solutions, unclear transparency, and pricing differences are just a few of the hurdles e-commerce businesses need to factor into their operational strategy.
Another major challenge that seems to be put on the back burner is currency risk. A smooth refund process is essential to maximize customer experience, improve retention, and thwart competition; however, typical return rates still hover around 12-30%.
Let’s analyze how FX volatility is plaguing the e-commerce industry and the steps you can take to ensure your business has a smooth refund process.
Understanding the current situation and challenges of e-commerce
The e-commerce industry is projected to continue growing, with annual market volume expected to reach $6.35 trillion by 2027. However, the industry isn’t expected to grow without restrictions. In fact, there are numerous new challenges that e-commerce businesses will need to work through.
First, retention will be at the forefront of e-commerce initiatives as 2023 barrels on. CEOs and CFOs understand the power of retention, with a 5% increase in customer retention having the ability to increase the organization’s revenue by 25%-95%. Prioritizing retention can help e-commerce businesses maintain their market cap and decrease the risks associated with new competitors.
Working hand-in-hand with retention is customer service. Providing excellent customer service sets the foundation for generating a loyal customer base. Fast shipping, convenience, personalized service, and easy returns are all on the growing list of consumer expectations.
Bouncing off consumer expectations, currency volatility can heighten the risk of financial losses for e-commerce companies and lead to poor customer experiences with difficult refund processes. Customers want a seamless return experience, regardless of the currency used. Inadequate cross-border payment processes can make this challenging for global e-commerce businesses.
How e-commerce companies are fighting FX related challenges
E-commerce companies are fighting many of these challenges by integrating multiple currencies into single payment gateways. Research shows that customers that are able to shop using their local currency will be more likely to stay on e-commerce platforms for a longer duration, increasing the number of products purchased, and reducing cart abandonment by up to 50%.
E-commerce businesses see stark benefits from leveraging single payment gateways, such as higher conversion rates, fewer abandoned carts, access to real-time data, reduced bank fees from currency conversion, and clarity into the financials.
The secret weapon to smooth refunds and returns
Altering the refund and return processes will be essential for e-commerce businesses in 2023 for a variety of reasons, including:
Improved customer satisfaction – A hassle-free return experience builds trust and brand loyalty, improving customer satisfaction.
Repeat business – If customers know they can easily return a product, they will be more likely to purchase items from your e-commerce company in the future.
Compliance with legal requirements – Most countries have laws in place that require e-commerce businesses to issue refunds for defective products. Noncompliance can result in fines and penalties.
Company differentiation – Distinguishing your company from competitors is done through excellent customer service, which relies on effective controls in your refund and return processes.
Despite the growing list of advantages of offering a smooth refund and return process, there are challenges. Currently, e-commerce businesses face a lack of accessible solutions for cross-border payments. When customers return a good, they are often refunded the original purchase price of the currency used. If their local currency appreciates, the e-commerce business might need to foot the difference, impacting their financial statements and ultimately, harming their bottom line.
To promote a positive customer experience, e-commerce companies have begun implementing different proactive approaches. First, e-commerce organizations are clarifying their refund policies to include detailed information on the process, timeline, and conditions. This keeps everyone on the same page in case there are currency changes.
Next, e-commerce businesses are streamlining the refund process, allowing customers to initiate the refund process. On the other end, e-commerce companies are managing refunds through automated tools and software.
One of the tools that e-commerce companies are navigating toward is embedded FX solutions. This type of resource acts as insurance on FX losses on refunds, minimizing the financial statement impact of a strengthening customer currency. Solutions, like Grain, fully protect merchants and e-commerce companies from footing the refund difference during cross-border returns and refunds. This ensures that customers receive a seamless refund experience, while e-commerce companies effectively lower their FX currency risks.
Other actions being taken by e-commerce companies include minimizing fraud, providing on-demand customer support, and giving customers multiple refund options, such as in-store credit or full refund.
An innovative solution to enhance refunds
Enhancing the refund process should benefit both the customer and the e-commerce company. This is why many companies are turning toward embedded FX solutions, which add transparency to each step of the refund and return process.
How it works:
The e-commerce platform automatically displays prices in the customer’s local currency - sans customary refund disclaimers and free of expensive markups.
When the customer makes a purchase, the currency rate is automatically locked.
The customer pays in their local currency, while the merchant gets paid in their functional currency at a guaranteed exchange rate.
In case of a return, the merchant can refund the customer the full amount with absolutely no FX risk to the business.
Embedded FX solutions have the ability to eliminate FX currency risks with access to accurate exchange rate calculations, real-time exchange rate updates, multiple currency support, and lower costs associated with conversion fees and administrative expenses.
By utilizing an embedded currency solution, e-commerce businesses can provide a seamless and efficient refund and return process for their customers, bolstering customer loyalty, retention, and satisfaction.
The solution and future outlook for the e-commerce industry
Overall, the future of cross-currency management in e-commerce is likely to be shaped by these emerging trends and technologies, providing businesses with more streamlined and efficient ways of managing their cross-currency operations.
At Grain, we create value for your business through our embedded FX solution. With Grain on your side, your business can eliminate FX risk, improve satisfaction, increase conversion, differentiate itself from competitors, and enjoy zero integration fees. Book a demo today to learn more.
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