In Returns, Supply Chain

In 1893, Richard Sears started a revolution in shopping, creating a means for people to buy almost anything from anywhere: the Sears catalog.

Fast-forward to today, e-commerce looks like we’ve come full-circle. In the evolution from catalogs to department stores to shopping malls to big box efficiency to online product availability, one very interesting trend has developed to a tipping point: In more than a century of making it easier to get products to people, very little attention has been given to the experience and efficiency of getting them back. Yes, the “R” word — returns.

Returns are no longer an after-the-fact possibility and potential cost — they are a customer-confidence factor in the purchase itself and a new factor in loyalty. Without the ability to touch, try on or see a product up close in online shopping, the ease of returning products has become part of the buying decision.

By now, most online sellers are well aware of the “buy three/return two” mentality common to apparel, shoe and home decorating categories, but how prevalent is that? A recent study from Brightpearl indicates that a full 25% of online shoppers in the U.S. and U.K. have bought multiple items with the intention of sending them back. Of those, around 45% have done so with two to three items.

With online purchase returns as high as 30%, that can take a big bite out of any sales growth you may hope to get from selling online. If you’re experiencing 13% compound gross sales growth per decade, a return rate of 30% can knock net sales down to 8%. Thirty-eight percent of your growth could be wiped out by a 30% return rate of online sales.

Today’s customers are demanding

The sense of urgency driven by today’s digitally driven “culture of instant gratification” has created a demanding customer sentiment. They want free shipping on returns, prepaid return labels in the box with online purchases, and they often decide who they’ll buy from based on which seller makes returns the easiest.

Rushing to meet those demands and compete for those shoppers’ loyalty has driven fulfillment costs to around 18 cents of every dollar (EKN Research, 2016). When you take that 18% fulfillment cost and apply it to Cyber Monday sales alone, that’s $1.2 billion that retailers spent on one day just to get their products into consumers’ hands.

By comparison, relatively little has been spent on the customers’ return experience. Where 86% of consumers say they want a retailer to provide them with a prepaid return label for online purchases (UPS, Rethinking Online Returns, 2015), only 14% of top online retailers provide a return label of any kind (RetailDive.com, 2016).

The reality is that some of what customers demand is pretty expensive. On top of the loss of retail value for a product comes shipping cost, processing cost, repackaging cost, and in worst-cases, costs for destruction, recycling or reduced value retention in liquidation.

However, in the online shopping landscape where people habitually buy three versions of a product with the intention of returning two, you can’t sustain that. When you combine such purchasing habits with liberal return policies, the cost-to-value ratio declines quickly with liberal return policies. As a result, the rush to meet the online consumer demand for free, easy returns is being replaced by a new reality that looks like a more limited, 15-day window for returns with the customer paying a fee.

So where’s the balance? When returns are part of the purchase decision, how do you compete to delight customers and earn their loyalty without giving away the farm?

Here are five ways to optimize your customers’ experience with returns:

1. Start with a solid overall strategy

Returns must be a key component of your customer satisfaction strategy.

A good strategy is informed by visibility into return rates, high-return categories, trends by season, store, market or channel, cost-per-return and what tactics or policies you can realistically afford. Keep in mind that you bear different fulfillment and return costs / challenges for online than for in-store. Without an eyes-wide-open strategy, rushing into the marketplace with new, progressive customer satisfaction efforts will cost you more than they make you in the long run.

2. View all returns, across all channels, through one pane of glass

Track the processing, shipping, transportation and final disposition of all returns in every channel, and use software that gives you access to all of it. With the right visibility, good data paints a better big picture and vice versa. With too many balls to juggle, one is always bound to hit the floor. With your strategy in mind, make sure you have visibility that allows you the capability of monitoring, adjusting and evolving your tactics and adapting your strategy as the marketplace changes.

3.  Make the customer return experience seamless and pleasurable

The people have spoken: 92% of consumers will buy again if returns are easy (Invesp). Moreover, retailers tell us their customers will spend 50% more when they buy again following an easy return. The return process should be as easy as the purchase. Make them even happier by offering a discount on their next purchase, crediting their refund speedily, or whatever you can afford to do to feel cared for in the process. Customers want to know you have their needs handled. Make returns just another transaction with their trusted merchant, and you’ll win them over.

4. Use returns data to inform merchandising decisions

Pay attention. Information on seasonal overstocks, return reasons, expiration trends, damage data, and information on category, product, SKU and store performance can make a huge difference in what you do going forward. One simple example comes from a retailer whose merchandisers continued stocking the same level of a particular food product, in spite of seeing millions of dollars’ worth of short-dated overstocks going into liquidation for sale at pennies on the dollar. A look at the returns data would have saved those millions.

5. Use social media to promote your awesome customer journey

Tell people you’re awesome and that they’ll love shopping with you. That’s what advertising has been all about for 150 years. Social media is an inexpensive, easy and effective way to meet people online, where they are — and where they’ve forged their path to demanding the best business practices from you. In a marketplace where shoppers have brought returns policies into their buying decision, tell them you’ve got their back.

Besides, you should have their back anyway. That’s all they’ve ever wanted.

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