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Customer Returns: Cost of Doing Business or Opportunity to Drive Loyalty?

Some retailers might instantly shrug their shoulders when hearing the word 'return' from a consumer. However, this is far from bad news: a product return offers a fresh touchpoint in the customer's journey and creates the possibility of developing a stronger relationship with them, adding more trust. This experience should be positive - especially when we consider that 33% of German customers returned clothing bought online in the last 12 months.


What Are the Return Challenges (and How to Avoid Them)

Returns represent a significant challenge for e-commerce retailers - not only in terms of profitability, but also in terms of logistics and management. Online retailers might be selling more than ever, but the high costs of product return management can have a negative impact on the financial balance. According to The Financial Times, returns can cost retailers more than 70 billion euros per year - they cost the companies' supply chain three times more than the original process.

In some sectors, this problem is even more evident than in others: fashion, textiles and shoes, along with similar product groups, can experience return rates of up to 80%. Zalando, one of the top three online retailers in Germany, has a return rate of nearly 50% across all of its markets.

How Can Retailers Reduce the Return Rates?

The secret to reducing return rates is to improve points within the online retailers' reach: everything considered 'avoidable'. That means sending customers wrong items, protecting products so they are not damaged during shipping and more - as described below:


Make It Visually (and Metrically) Accurate

Providing accurate visual representations and detailed product descriptions should make a considerable difference.


Zalando, for example, uses technology as a major driving force in reducing avoidable returns. By giving personalized size recommendations, the German fashion retailer has cut size-related returns by 4%. The returns data was used to attribute more value to the customers. If an online fashion retailer knows which items were returned by specific customers because the pieces were too big or too small, they can give personalized size suggestions for them.  A great way of making the business more efficient and delivering valuable advantages to them, improving loyalty as well.

Helping the customer to make an accurate purchase decision can be done with the help of product descriptions, pictures and videos. Partial body and 360-degree views, plus new augmented reality technologies (such as body scanners and virtual changing rooms) will also give companies a greater competitive advantage and support the reducing of return costs.


Size guides are also incredibly important, especially for fashion online retailers that sell cross-border. Make sure to have a size guide table with converted measurements for all the regions you are selling to.


Listen to What Customers Have to Say

Although customers are not lawfully required to do so, online retailers should ask the reasons why the return has been requested - providing specific products or categories for the return reason. The reason for returning a TV might be very different from returning a shoe, and still we notice that most online retailers will use a one-size fits all approach regardless of their category range. This is an opportunity for the customer to provide feedback and for the companies to find places for improvement, so why not be as specific as possible?


Customer feedback in general is a great source of information for retailers. Allow and encourage customer reviews and you will quickly find out if your descriptions were accurate enough. What other information could the customer add, if they were allowed to? Where did retailers do well, where did they fail? It's also worth having a look at the competition's customer reviews, if they are publicly available.


High Return Rates Are Not Normal

Returns might be the new normal but high return rates… Not so much. Look at the highest numbers and identify the products that are coming back to you more often. Are there quality issues that should be addressed? If there are, resolve them as soon as possible: don't be responsible for your own profit leak!


The Ideal (and Successful) Product Return Experience

Online shopping is all about convenience - and returning the products bought on e-commerce retailers should be equally convenient. Remember: this is a critical opportunity to drive customer loyalty! What steps should online retailers take to make sure they are creating an ideal (and successful) product return experience?


The Effort Is On You, Not On the Customer

On the never-ending quest for providing excellent service and customer satisfaction, most of the effort of a return process should come from the online retailer - returning a product should be as easy as possible. The secret lies in being proactive.


Sending pre-printed address labels designated for future returns might seem like a good solution; however, it means retailers have to print these labels and put them in every box. Not only is this expensive (around an extra €0.25 expense for each box), but it's also wasteful. If only 10% of items are returned, this label will cost €2.50 for every return received, and 9 out of 10 times it will end up as waste.


In fact, paperless returns are a sustainability measure that can save money and improve the retailer's carbon footprint. Online retailer ASOS, for example, has switched to 100% online returns. They estimated that they were sending about 64 million return forms (in paper) and the switch could save 8,450 trees (around 320,00kg of paper, according to the Environmental Paper Network’s paper calculator). That cuts the emissions of 312 tonnes of CO2. Software like 8returns allows retailers to offer an on-demand solution, where customers can print a label when they need it or even choose a mobile shipping label. Fewer costs and more flexibility for the customer - not to mention better for the planet as well.


Also, it's important to make sure there is easily accessible content (on social media, newsletters, in the order confirmation email and on the website ) on how to send products back. And why not let customers decide which return method is most convenient for them? If the product is bulky and they cannot bring it to a parcel shop themselves, a pickup service is perhaps the best option.


A customer-focused return policy that is effortless will make your customers remember you, having a positive effect on brand reputation and customer loyalty.


If the Return Process Is Difficult, How Does That Affect Retailers?

A difficult return process might look like it won't affect retailers, but it surely will - both short- and long-term. Being unfriendly or offering inefficient solutions will impact any retailer negatively, and not only from a customer loyalty perspective. Here are some points to keep in mind to improve the returns process:

  • The slower a return cycle is, the more issues a retailer will have with inventory management, keeping saleable products off circulation. This is particularly relevant for categories like apparel, outdoor, and home decor. Seasonal items are also affected, such as special editions or limited colour availability (for cosmetics, for example). No retailer wants to end up with dead stock.
  • If the return process is complicated or inconvenient, 85% of customers said they will not repeat a purchase with the retailer. First impressions matter! This is important considering that recurring customers generate 3 to 7 times more revenue per visit (making up up to 40% of all e-commerce transactions), according to the Adobe Digital Index.
  • Keep it transparent: if the customer is kept blind about their return and refund process, that means more online enquiries and call centre costs. Keep customers informed! Treat the returns process the same way as the order delivery, communicating proactively about the return status with tracking services too. Increasing customer satisfaction scores (CSAT) by 10-15% will drive about 5-10% of higher return to website rates and reduce transport costs by 20-30%, according to data from the Narvar Industry.
  • Real-time visibility will allow retailers to identify trends in the returns and, consequently, act on opportunities and fix possible communication issues. If 10 jackets are coming back in a specific size, for example, they might not need to be ordered as soon as previously expected. Are you receiving a product return in a warehouse, but need the same item in another? Redirect the return to the correct place and save time and money with the shipping costs. Is an item being returned for being too small or too large? Inform the fitting adjustment on the product description. Every data received from the return process can be used in the retailers' advantage in terms of optimization along the whole supply chain.
  • In terms of customer acquisition, its costs can be 5x higher than focusing on satisfying existing ones. By optimizing customer retention along with customer loyalty (by 5%, for example) retailers can increase their revenue around 75%, according to a Bain study.


Are You Ready To Start Optimizing Your Return Process?

Treating the returns process like a reverse checkout might be overwhelming, but the efforts are worth the initial struggle. It is also possible to partner up with third-party companies to ensure an efficient return process.


Make returns your priority as well! Use them as a strategic advantage over competitors to keep your customers loyal and satisfied. Data from product returns are extremely valuable. How can you as a retailer create a seamless and frictionless return experience? 8returns is here to help you.


Despite its challenging appearances and financial restraints, a seamless return policy can significantly improve the relationship between customer and online retailer. If you don't know where to start, 8returns can help you set up a branded, self-service returns center that delivers a seamless returns experience for your customers and automates your returns management. Get started now!


Sources

https://www.statista.com/forecasts/998730/returns-of-online-purchases-by-category-in-germany

https://corporate.zalando.com/en/newsroom/en/stories/returns-zalando

https://corporate.zalando.com/en/newsroom/en/news-stories/ahead-curve-returns-management-zalando

https://www.asos.com/men/fashion-feed/2020_02_3-mon/how-to-do-paperless-returns/

https://online-shipping-blog.endicia.com/package-returns-infographic/

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