Reducing the financial strain of returns
Dave Field, founder and Chief Operations Officer of Coll-8 Logistics, explains that failing to stay on top of VAT and duties on e-commerce shipments is proving a costly headache for leading retail brands.
“It wasn’t so long ago that retailers and their logistics partners approached the annual peak season with their eyes firmly focused on outbound shipments.
The emphasis was very much on achieving first-time deliveries and ensuring that purchases made their way to the consumers who had bought them without a hitch.
Every order which failed to arrive punctually was – and still is – regarded as potentially affecting repeat business as well as possibly damaging brands’ reputations.
In recent years, however, everyone playing a part in e-commerce fulfilment knows that, for all the effort invested in successful deliveries, as much dedication is required to manage the considerable proportion of returns.
Many pieces of research have underlined the kind of impact which a well-managed returns process can play in building customers’ trust in retailers.
Having the right systems, personnel and partners in place involves no small thought or expense. Yet despite developing an effective and efficient infrastructure, the sheer volume of returns can still hobble even large and very capable brands.
Over the course of the last six months, a number of UK-based retailers have issued profit warnings, admitting that a rise in ‘boomerang’ purchases – especially following the surge in online shopping during the pandemic – has impacted their balance sheets.
Dealing with subsequently unwanted orders has been compounded by several notable factors – the additional paperwork and duties associated Brexit and the introduction of new EU VAT rules relating to e-commerce sales – which have made returns not just a logistical but a significant financial challenge.
It’s certainly true for brands shipping goods to Ireland, one of Europe’s fastest-growing e-commerce markets.
The standard rate of VAT charged by the Irish Revenue on e-commerce shipments sent to the country is 23 per cent.
That means that for every £1 million of online sales to Ireland racks up VAT payments of £230,000. Duties can add a further 14 per cent to the cost of delivery.
Those extra costs have caused some brands to deliberate about whether selling to consumers in the Republic is really viable.
For some of those who have decided to do so, there is still an important cost complication but one which – critically – can be overcome.
Many retailers have fielded returns from their Irish buyers without actually realising that they can reclaim both VAT and duties.
Some have recognised that they can do so but not gone ahead with a claim because it seemed too much of a hassle.
Nevertheless, Coll-8 has created a system specifically to make reclamation not only possible but simple for retail clients who deliver to Ireland using the award-winning drop2shop platform which is already available to more than 500 online retailers
Using the data which we have for outbound shipments, we can process rebate requests on their behalf easily.
The sums involved have been substantial. We secured a seven-figure rebate for one client.
Unsurprisingly, we are now working with many more brands eager to grow sales in Ireland without being weighed down – financially and logistically – by the prospect of returns.
Tax and duties are an unavoidable part of being a big e-commerce brand. We have shown that they really don’t have to be taxing.