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7 ways to gain from returns

By Will Gillingham

There’s a dark humour to retail. It goes a little like this: even after successfully ticking innumerable optimisation boxes, successfully engaging a customer, making a sale, and delivering the item correctly and on time, a retailer still may not make any revenue from the purchase.

Ah, returns. That necessary evil, woefully intrinsic to retail; that universal clamp on profits; that jester conjuring a devastating phantom economy each year. Except they’re not. Returns can not only be the safety net required for customer confidence, but also a brilliant litmus test of your buyers, as well as a rather efficient audience-broadener.

The fact is that in this day and age, technological advancements and data processing power can - potentially, at least - allow returns to be less of a leech on capital and more of a symbiotic companion for retailers. We approached returns experts to get the low-down on modern-day returning and how best retailers can turn the practice to their advantage. Here’s what they had to say.

The State of Play

Before ducking into the best ways to approach and mould returns, it’s worth outlining current attitudes towards the practice, from both the customer and delivery provider perspective.

Returns aren’t quite as simple as putting the product back in the post, for the retailer to unwrap and put back on their shelves. There’s an enormous process in the middle of all that, which is adeptly outlined by Peter Louden, Business Solutions Director, Clipper Logistics.

Louden: ‘For logistics providers such as Clipper, dealing with returns is a complex operation, involving numerous processes from identifying items to sorting and grading them, re-packaging, testing or re-labelling, repairing, redistributing and reselling them. All of which need to be done at speed, working to strict performance SLAs, to get these items back into Grade A condition, and in turn back into stock for sale during a very short sale season. If you take too long, the retailer experiences losses as a result, and items may need to be discounted, impacting on profitability.’

This is made all the more significant by the sheer volume of returns, also noted by Louden: ‘Returns are a real and growing challenge, with overall online returns rates of 30%, compared to the average return rate for merchandise bought in stores of 8%.’

It’s an extensive – and understated – aspect of retail. And this understatement is reflected in customer attitudes towards returns.

Tobias Buxhoidt, Founder and CEO of parcelLab, shares data from their 2019 shipping study: ‘The UK Ecommerce Shipping Study 2019 by parcelLab, which monitored the UK’s largest 100 online retailers, found that a fifth (22) do not provide a returns label with their orders, instead expecting customers to sort this out themselves, while 16 ask customers to download the label.

Although almost half of the retailers studied do include a returns label, this was not always postage-paid, and for the many that do charge for the service, the average cost was high at £8.42 per item sent back. Including a postage-paid returns label with your orders will help set you apart.’

If making a return is difficult (as, according to the parcelLab shipping survey, they can be), there’s a good chance it will drive away customers, as evidenced in data provided by ReBOUND Returns.

Charlotte Monk-Chipman, Marketing Director, ReBOUND Returns: With 85% of shoppers saying they won’t make a repeat purchase if returns are complicated or inconvenient, it’s in a retailers best interest to make sure their returns process doesn’t leave shoppers with a sour taste. The obvious first step is to impress the 67% of shoppers who consult a return policy before making a purchase, so the policy message needs sharpening up to become a conversion tactic and not a deterrent.’

And so, how exactly can a purchase rewind ever hope to impress a customer, and, in the long run, potentially even boost revenue gained? Here are seven key strategic measures to implement into your returns policy.

Delivery

1) Put Returns on a Pedestal

Returns are, in a sense, delivery reversed. However, while their outbound counterpart has a slew of convenience options available to a customer, returns are far less flexible. And this needs to change. That is, delivery and returns should be weighted equally by retailers.

This is the perspective of Dan Ennor, Commercial Director at Global Freight Solutions, who explains further: As part of our joint research with IMRG into UK consumer delivery, we discovered that 78% of customers are satisfied with their delivery as opposed to just 60% with returns. In order for returns to be turned into an advantage for retailers, the service offerings have to improve. Just as with delivery, consumers want as much choice as possible to find a returns policy that is convenient depending on their circumstances be it returning the product in store or having it collected from their doorstep.

Today’s consumers review the returns policy of a brand in the same way they do a brand’s delivery policy, which is why we’re increasingly seeing returns as a reason for cart abandonment. Retailers are focussed on ensuring they have a breadth of options and a competitive pricing for delivery, but that same effort needs to be put into returns policies as well.

‘The challenge for retailers is figuring out how they deliver a wide selection of options in their returns policy that doesn’t put unnecessary strain on their business.’

One returns option which could be given greater backing is that of returning in-store (for those retailers who can afford such a luxury and have the store portfolio - and order management processes - to enable it efficiently).

pedestal

2) Encourage Customers to Return to Store

There’s a list of benefits to encouraging a customer to return items in-store: there’s no return delivery cost to the retailer, the customer is refunded immediately, and there’s always a chance that the customer may make a subsequent purchase while they’re in the store.

This is elaborated upon by Natalia Zakel of FACT-Finder, who describes research FACT-Finder have been undertaking in the omnichannel arena.

Zakel: We have been looking into ROPO, Research Online Purchase Offline, and analysing why customers choose to take part in this growing purchase behaviour. We found that among the top three reasons shoppers ultimately buy in-store over online is due to easier exchanges or returns. We know from ROPO that customers are research-driven out of desire to pick the "best" product and avoid making a purchase mistake. Leniency towards returns can improve business by eliminating customers' fear of purchasing an item they know they cannot return. Moreover, leniency aligned with an omnichannel strategy presents retailers with an opportunity to capitalise on these returns by blending online and offline.

Physical stores can be assets and retailers should encourage online shoppers to return and exchange products in their brick-and mortar locations. 56% of shoppers are "much more likely" to shop with online retailers that allow for in-person returns, another 26% were "more likely". It's time and cost effective to handle returns in-store - it’s free, refunds are immediate, and there’s no printing necessary. An additional benefit is that customers may make incremental purchases when they come in. It’s a win-win.’

This thought process is also upheld by Kris Taylor, Head of EMEA Customer Success, Magento, an Adobe Company, who notes returns as a vital part of online retail particularly, owing to not being able to test the product prior to the purchase.

Taylor: ‘Returns are an inescapable reality for today’s merchants, especially in the case of purchases made digitally where the consumer doesn’t get to try-on, touch or see the product in real life before they buy it. Hence, the returns experience should be just as good as the buying experience.  Omnichannel is no doubt the winning approach, as it is with sales - a channel-agnostic returns strategy reduces friction along the customer journey and keeps customers coming back.

‘Additionally, encouraging a customer to return an online purchase in store is a great tactic to turn the experience around and potentially entice them to buy an alternative item. Retailers should view returns as an additional opportunity to interact with a customer: by making the process as easy as possible and offering flexible options, merchants can secure the loyalty of a customer who otherwise might never shop there again. This is also a sure-fire way to help cut down the cost of shipping unwanted items back to the warehouse – which most shoppers expect to be free of charge.’

However, even if you aren’t able to offer in-store returns, returns can still be a benefit to the business in whichever guise they crop up in: not from a revenue-increase or a customer-satisfaction standpoint, but rather from an information-gathering position.

Store

3) Use Returns as an Information Gathering Tool

Returns can tell you a lot about the performance of your business, the types of products which are (ultimately) successful, and the customers you have in your midst.

If a product is bought excessively but then mostly returned, that product isn’t a success. Returns can give you insight on the products that are almost working (but need attention), as well as those customers who are using their lounges as stay-at-home fitting rooms.

In essence, by monitoring returns, a more detailed picture of a company can become clear – one that can expose any unnecessary leakages, and lead to greater profits.

This is outlined by Mike Richmond, Chief Commercial Officer at Doddle. He says, ‘Turning returns from a headache into an opportunity is all about flipping perceptions.  It’s about seeing them as an opportunity to understand what’s working in retail. 

‘Too many retailers treat all returners and all returns in the same way.  If data is used more imaginatively, the opportunity for a more dynamic type of online retailing opens up. You could flash sale things on a no-return basis, you could have different returns channels for high value products, you could treat VIP (Very Important and Profitable) customers differently to the mass market ones.

‘Rather than focusing on the short-term pain returns bring, retailers need to focus on the insights those returns can give and on the long-term value and potential of the customer making them.  That’s when game changing new engagement and selling opportunities can be revealed.’

This perspective is shared by Mel Tymm, Industry Principal at Maginus, who references the greater view of their customers retailers can acquire through returns.

Tymm: ‘Returns are an opportunity for retailers to hone their offering and improve business processes. Many retailers are tapping into the fact valuable customer data can be harvested, to understand what the issue is and therefore how to prevent it.

‘For example, retailers may learn that certain customers perennially over-order. Gathering insights can help deliver personalisation, by suggesting the best product from the start, reducing the risk of returns. This tailored approach also encourages cross-selling, as a customer persona is built up more and more.

‘Returns can also help with procurement and cost control. Customer feedback can inform whether faulty manufacturers should be avoided, or whether customers who buy and return at an unsustainable, suspicious rate need engaging about the subject – as ASOS recently introduced. Intelligent information can help drive a business forward, and while it may seem like a lost opportunity, actually it can help fill in gaps and tighten operations.’

Through this data gathering, you may alight on a slightly concerning realisation: that a good deal of your customer base are often returning products. And if this appears to be the case, perhaps it’s time to construct separate returns options by segment, instead of a one-size-fits-all approach.

Data

4) Don’t Ignore the Serial Returners

Serial returning is an industry buzz-term which has cast a rather negative (and undeserved) light across the culture of returning. However, that’s not to say that those customers who buy racks of clothing only to try it on and return it shouldn’t be segmented and addressed.

This is the feeling of Sam Kellett, Head of Content, Exponea, who identifies these types of returners as the ‘wrong’ type of customer.

Kellett: Most retailers are constantly working on acquiring new customers and retaining the ones they have. But sometimes the thing that’s holding you back isn’t a lack of the right customers, it’s a surplus of the wrong ones. 

‘Customers who cost you more in returns than they spend in your store fall into the “wrong one” category. If you don’t fix the problem, you’re literally paying for the privilege to retain bad customers.

‘The solution? Clearing your database of the customers that are losing you money, either by changing their behavior, changing the way you treat them, or even cutting them off entirely. Try the less extreme approaches first:

‘Changing customer behavior: create a segment of high-return/low-profit customers and set a limit on the number of free returns they can make each month.

‘Changing how you treat the customer: stop offering free returns at all to this segment.

‘Cutting off the customer: stop communicating with the segment entirely.

‘Are you going to lose a few customers? Almost certainly. But those aren’t the customers that add value to your brand.’

A hardline approach, perhaps, but one which has every capability of administering a healing serum to any potential returns black hole eating away at your profits. However, it’s worth bearing this piece of advice in mind alongside another: the fact that you should never underestimate a good customer experience.

Boxes

5) Never Underestimate a Good Experience

Good experiences are exponential in nature. Not only do they cultivate customer loyalty, but they also have the chance of finding their way into anecdotes, which, in turn, may bring three more customers to your shores, entailing three more separate good experiences, and so on.

This is explained by Flora Frichou, Senior Content Strategist at Trustpilot: ‘Product returns are often seen as a painful process which can incur significant costs. But today, many firms ignore that customer returns are a great opportunity to engage and bond with customers. A company’s willingness to cooperate and deliver a great experience after a customer return can influence the attitude and behaviour of the customer. 

‘Indeed, customers are more likely to refer a company to friends and family if the company’s delivered a great customer service. Keep working hard to deliver great customer experiences, even after a return, and never underestimate the power of word-of-mouth marketing. Treat every customer as a brand advocate, no matter the outcome of their purchase, and you’ll see your online reputation grow in no time.’

The idea of returns generating revenue (rather than diminishing it) is supported by Shayne Burgess of AsiaPay, who notes that incremental purchasing may even take place online.

Burgess: ‘Studies from companies have shown that when customers experience a great product return process, it encourages the customer to spend more money at the store. For example, Zappos, an ecommerce retailer, has found that their smooth return process has led to a 75% repeat customer rate.

‘With a seamless return process, customers are willing to order a replacement and often additional items. Many companies would argue that returns are part of the customer experience, and that most customers feel more comfortable shopping with an online retailer that offers great customer service. This trusted connection with your buyers can be your store’s advantage ahead of your competitors.’

In light of this, Matthew Robertson, Co-CEO of NetDespatch, proffers his three top tips for retailers when optimising returns.

Robertson: ‘In a recent report, 95% of online shoppers said that they would shop again with a retailer that provided a satisfactory returns process, so there are clearly opportunities to elicit customer loyalty through a seamless returns process.

‘My three top tips for retailers would be:

  • Firstly, ensure you create or review and update your return policy. Make sure it’s easy to find, concise, and easy to understand. Customers should know what, why and how they can return products.
  • Secondly, simplify the returns process. Right behind free-shipping, customers want a hassle-free policy. As retailers, you should consider making the returns process as simple as possible.
  • Thirdly, give shoppers options for returns. Even beyond the ease of pre-printed shipping labels is giving customers multiple options for where to return their items.

‘If customers have had a good experience when returning an item, they are more likely to become a loyal customer and return to shop there, buying more and fuelling revenue back to the retailer. The answer is simple: retailers need to create a good returns policy and service to stay competitive, build customer loyalty and generate more revenue in the long run.’

Happiness

6) Consider the Alternatives

Returning isn’t as restricted as it may at first seem: that is, only allowing the customer to post the package back or return in-store, or, on the flipside, having the return land in the warehouse for processing. There are other options available.

One such option is the use of parcel lockers. For those retailers looking to limit the expenditure associated with returns, inviting their customers to instead return the item to a designated return point could provide the answer.

Jason Tavaria, CEO, InPost UK: The question is not about the merits of providing an excellent returns service, but rather about creating an economically viable model to do so.

‘Available at any time of the day or night, automated parcel lockers provide an affordable way for retailers to ensure their returns policy suits the needs of the consumer, for whom time and attention are finite resources.

‘It’s also important that retailers work towards liberating the consumer from unnecessary menial and repetitive tasks, such as queuing at the parcel depot. Through the integration of parcel lockers, retailers can capitalise on the popularity of lenient returns policy and the call for ease.’

And for retailers, items that are returned partially damaged don’t have to be discarded: the delivery provider may be able to shift the product on your behalf.

Clive Murphy, MD, iForce Marketzone: ‘Brand owners can sometimes have a concern over repaired or returned items: it may not fit with their policy or the brand image they’re looking to put across. However, having the item repaired, tested and refurbished and then resold by the logistics partner can protect the brand, as well as regain as much lost value as possible created by the return.

‘Not only this, but having branded items resold can open the products up to audiences which won’t necessarily have been reached by the brand themselves. The items can be featured on large marketplaces for a reduced price, unlocking an audience which may not otherwise consider the brand.

‘It’s in this way that real value can be regained from returns, rather than lost.’

Finally, there’s the question of the cross-border return: how can international retailers look to make an advantage of returns?

Warehouse

7) Make Cross-Border Returns as Attractive as Domestic Returns

Returning across borders is, foreseeably, more complex than domestic returns. But the mindset of the customer isn’t going to change simply because there’s a border between themselves and the retailer, and for this reason, it’s paramount for international retailers to have a rigorous returns policy.

Scott Lindsay, Head of Marketing, EMEA, eShopWorld, gives his thoughts on this matter, as well as six ways international retailers should rejuvenate their returns policy.

Lindsay: When shopping across borders, the risks are amplified further for a shopper. The cost of returning an international order, along with the chance that duties and taxes might not be refunded are huge deterrents to cart completion. The length of time it can potentially take for a refund to be processed only exacerbates this risk.

‘Building trust with consumers that are shopping from another part of the world is therefore crucial, and key to doing this is having a clear, unambiguous returns policy. Retailers shouldn’t be afraid of displaying their returns policy upfront rather than hiding it away behind several clicks. Furthermore, when done right it can become a valuable asset for retailers.

‘A great international returns experience should include:

  • A customer-friendly, onsite approach to sizing, according to local standards;
  • Use of packaging that is re-usable - easy to open and re-seal for return;
  • In-country return centres to speed up the returns process, issue refunds and get shoppers back to shopping
  • Full refunds, including duties and taxes where they can be reclaimed from local authorities;
  • By analysing and understanding return rates, cost of returns can potentially be built into product/shipping prices, allowing for free or subsidised returns; consolidating inventory and inspection at an in-country returns centre can also lead to lower cost returns, and the ability to take advantage of re-import exemptions
  • Online returns portal, to simplify the returns process, and provide a mechanism for shoppers to track their return and drive communication’

Map

In Summary

Returns aren’t the anchor they may at first seem. Handled correctly, returns can equip a retailer with the information required to optimise their business, as well as passively assuring customer loyalty through the safety net returns provide.

Looking at the bigger picture, the perception on returns needs to alter: from perceiving them as a lesser aspect of the customer journey, necessarily tacked to the purchase policy, to raising them to stand on the same platform as outbound delivery (complete with all the optimisation associated with logistics’ favoured half).

Like them or loathe them, returns are an established (and growing) aspect of retail, particularly ecommerce. For retailers who are looking to gain a deeper view of their business and minimise losses, refining your returns policy may be the place to begin.

Will Gillingham, Content Manager, IMRG

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