In France and Germany, Ecommerce a Matter of Trust

Jul 31, 2014 12:00 PM  By

Merchants who want to conduct cross-border ecommerce into France and Germany have to grapple with a common issue – trust in the online channel.

Speakers on a France and Germany panel at Multichannel Merchant’s recent Growing Global conference agreed that unlike other places like the UK and the Nordic countries – or the U.S., for that matter – consumers in France and Germany were more wary of ecommerce and thus merchants had to work harder to establish trust.

“If you go cross-border to France, it’s a great country to do business, but like in Germany it’s 100% about trust,” said Henning Heesen, global sales director for ecommerce services firm Salesupply AG. “If something isn’t right, if there’s no number for returns or customer service or no logo on your site, they’re not buying on your store.”

Alex Golshan, vice president of omnichannel and international ecommerce for fashion retailer BCBG, said margins in France and Germany are very attractive based on the high prices brand retailers can command, even after factoring in cross-border fees and shipping.

“If you sell a dress in the U.S. for $200 and price it at 200 Euros, the margin is higher (in Europe), because of the weak dollar,” Golshan said. “You can use a lot of that (difference) to subsidize freight and provide more services. And because prices are higher in Europe, you can match the MSRP of your brick and mortar channel. Compared to net margins in the U.S. it’s still attractive, even if you are subsidizing.”

Golshan added this was true of items sold at full price, but discounted items had significantly lower margins.

Panelists said the effect of the recently enacted EU consumer rights directive – which sought to harmonize things like product returns and warranty policies across the member states – was a mixed bag as enforcement varies from country to country.

“The directive views Europe as being one large market, but it’s not,” said Uwe Bald, vice president of international business development for ecommerce service provider Hermes NexTec. “It was put in place, but each country has to put it into local law and enforce it accordingly.”

Bald said even before the EU directive, Germany already had a 14-day “cooling-off period” allowing consumers to return an item in that period for any reason – sending return rates “through the roof.” The directive set this policy across the EU but does allow merchants to charge consumers the return shipping fees.

Golshan said his company is seeing higher return rates in Germany than France, 25% vs. 10%, even though ecommerce sales volumes are higher in France. “The average order values are lower in France (than Germany) because the French are very price-conscious,” he said. “In Germany we see higher units per order, so you have to do some next-level analysis to see if it’s because they’re ordering multiple colors and sizes. This is especially true if they qualify for free shipping.”

Golshan advised “adding a little friction” to slow down the returns rate in France and Germany by using tactics like not including return labels with the original shipment, requiring consumers to at least make a phone call to request a return.

Panelists said one thing that is fairly unique to Germany among European markets is the practice of invoicing – buying items on 30-day terms. This also allows consumers to purchase just what they want and return the rest. Installment plan payment is also popular in Germany, panelists said.

Bald said merchants can lose money through invoicing, so he recommended using a local credit rating agency as well as a payment service provider to avoid fraud.

“A lot of Germans pay on installments,” Heesen said. “It is a bubble, but it gets you more sales.”