While the calendar has turned to the New Year, the considerable spike in retail sales over this recent holiday season remains. According to Adobe Digital Insights, Americans spent more than $5 billion on Black Friday alone, an almost 17% increase from 2016. With the holidays over, retailers are finally free from the chaos, right? Wrong! Now comes the next step in the yearly process: returns. For retail and brand executives, items coming back to the warehouse can place a microscope on areas where operations can improve.
The National Retail Federation estimates the cost of returns is equal to about 8% of total yearly retail sales. Part of this is because the actual cost of sending an item back usually falls on the retailer. An added economic factor is that only half of returned items can be immediately sold, according to estimates from Optoro.
Sure, many people send back items just because they don’t fit or simply changed their mind, but a significant amount of returns are based on damages or malfunctions. Though this process is inevitable, especially in the fashion and beauty industries, that doesn’t mean it has to be grueling and an end to the customer experience. Here are some suggestions to improve returns that can benefit consumers, as well as retailers and brands.
Taking a proactive approach can ultimately save time and trouble. What can be returned? How long does a buyer have to complete a return? Will he or she get their money back or a store credit? Answers to all these questions should be easily found via a retailer’s return policy.
With the holidays in mind, brands can also look to adopt special-edition return policies for the season. Because shoppers often buy gifts for friends and family far in advance, the typical 30-day window may not be enough time. Extending the deadline will contribute to a positive customer experience with a brand. Another common policy is to only allow exchanges or store credit when products are returned with gift receipts. Being able to pick something to replace the unwanted gift may convert first-time shoppers to repeat customers.
Whatever the policy does include, it should be easy to find and understand. Customers may become unhappy to learn that they can’t return an item or won’t receive their preferred form of compensation, especially at the time of return. It is wise to make it as easy as possible to locate the conditions so everyone is privy to them, but don’t take our word for it—a recent UPS survey discovered that 66% of shoppers checked a brand’s return policy before making a purchase. If they see something they don’t agree with or understand, they may take their business elsewhere, as indicated by the 15% of shoppers who abandoned carts when they believe a policy is unclear.
In addition to keeping customers informed and happy, a quality return policy may also decrease the risk of return fraud from occurring. According to Appriss Retail, U.S. retailers lose more than $3 billion from falsified returns during the holiday season. Sellers should keep this in mind when adjusting return policies to minimize further costs and headaches.
Returns can yield some benefit in the form of valuable data that can be used to recognize problems. Etailers should always understand why products are being returned to determine the root of the problem and correct it. For example, if a fashion brand receives an inordinate amount of returns because gifts don’t fit correctly, they should consider revamping their sizing charts. If packages arrived damaged or opened, this is likely an issue that needs to be addressed with the carrier or shipping partner. Maybe a product looks different on a monitor or tablet than in person. If that’s the case, the website or mobile experience needs to be improved. Poor product quality means retailers need to re-evaluate suppliers, as it’s likely to recur with more customers, potentially causing unwanted complaints. Analyzing the reasons customers are sending items back can help brands identify issues with the goal of improving future order fulfillment.
Retailers must ensure a convenient process to maintain customer satisfaction. Simply because a shopper decided to purchase an item from a brand doesn’t mean he or she will continue to be a customer. According to Dotcom Distribution’s 2017 eCommerce Study, 55.1% of responding shoppers value easy returns. This means that providing a convenient experience can build trust and loyalty with customers. While many shoppers likely won’t care about the specifics of a retailer’s reverse logistics process, they will care about the convenience it provides them.
One common practice is including prepaid return shipping labels inside packages. This allows eCommerce customers to simply place the item into a package, attach the prepaid label and bring it to their local carrier’s office. A more trendy and cost-effective method would be to use scan-based labels. Unlike prepaid shipping labels, these returns aren’t pre-paid when the label is created, but rather postage is deducted from your postage account when the return label is scanned into the mail stream. Brands looking to outsource their logistics should confirm that their third-party logistics (3PL) partner has this more cost-efficient capability.
Another solution involves allowing shoppers to buy online and return in-store, part of an increasingly important omnichannel strategy. This creates a win-win scenario in which the retailer benefits from eliminating the costs associated with shipping and restocking, and the customer is presented with a simple method to bring merchandise back and receive immediate credit. An added value of this approach is that customers who visit stores have more opportunities to see items in person, potentially making more purchases as they return gifts. Brands should aim to immediately credit customers for returns in order to maintain a level of satisfaction and increase the likelihood that these customers use this refund while in the brick and mortar location.
While there may be best practices for processing holiday returns, each e-tailer faces different issues that require unique solutions. Brands taking their first steps toward minimizing the number of returns and creating a more convenient experience should reference our return policy tip sheet for creating bulletproof return policies.